Q1 2024 NOV Inc Earnings Call

Okay.

Operator: Good day, ladies and gentlemen, and welcome to the NOV First Quarter 2024 Earnings Conference Call. At this time, all participants are listening only. Later we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Amy D'Ambrosio, Director of Investor Relations. Ms. Amy

Speaker Change: Good day, ladies and gentlemen, and welcome to the <unk> first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: We will conduct a question and answer session and instructions will follow at that time.

Speaker Change: As a reminder, this conference call is being recorded.

Speaker Change: I'd now like to introduce your host for today's conference Mr. Andy Dambrosio Director of Investor Relations Ma'am. Please go ahead.

Amy D'Ambrosio: Thank you. Welcome everyone to NOV's First Quarter 2024 Earnings Conference. With me today are Clay Williams, our Chairman, President, and CEO, and Jose Bayardo, our Senior Vice President and CFO. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities law. They involve risks and uncertainty, and actual results may differ.

Andy Dambrosio: Welcome everyone to <unk> first quarter 'twenty 'twenty four earnings conference call with me today are clay Williams, our chairman, President and CEO and Jose Bayardo, Our senior Vice President and CFO.

Andy Dambrosio: Before we begin I would like to remind you that some of today's comments are forward looking statements within the meaning of the federal securities laws. They involve risks and uncertainty and actual results may differ materially.

Amy D'Ambrosio: No one should assume these forward-looking statements remain valid later in the quarter or later in the year. For a more detailed discussion of the major risk factors affecting our business, please refer to our latest forms, 10-K and 10-Q, filed with the Securities and Exchange Commission. Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release, available on our website. On a U.S. GAAP basis, for the first quarter of 2024, NOV reported revenues of $2.16 billion and a net income of $119 million, or $0.30 per fully diluted share. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA as defined in our earnings release. Later Please limit yourself to one question and one follow-up to permit more participation.

Andy Dambrosio: No one should assume these forward looking statements remain valid later in the quarter or later in the year.

Andy Dambrosio: For a more detailed discussion of the major risk factors affecting our business. Please refer to our latest forms 10-K, and 10-Q filed with the Securities and Exchange Commission.

Andy Dambrosio: Our comments also include non-GAAP measures.

Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

Andy Dambrosio: On a U S GAAP basis for the first quarter of 'twenty 'twenty four and over your reported revenues of $2, one $6 billion and a net income of $119 million or <unk> 30 per fully diluted share.

Andy Dambrosio: Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA as defined in our earnings release.

Andy Dambrosio: Later in the call we will host a question and answer session. Please.

Andy Dambrosio: Please limit yourself to one question and one follow up to permit more participation.

Clay C. Williams: Now, let me turn the call over to Amy. In the first quarter of 2024, NOV generated revenue of $2.16 billion, an increase of 10% compared to the first quarter of 2020. The company generated fully diluted earnings of $0.30 per share.

Andy Dambrosio: Now, let me turn the call over to clay. Thank you Amy for.

Andy Dambrosio: For the first quarter of 2024, <unk> generated revenue of $2 $1 6 billion, an increase of 10% compared to the first quarter of 2023. The company generated fully diluted earnings of <unk> 30 per share for the first quarter down <unk> <unk> compared to the prior year first quarter.

Clay C. Williams: Pre-tax profit increased 14% year-over-year, but a higher effective tax rate and lower income from our post-Alpine joint venture in the first quarter led to lower earnings per share year-over-year. Adjusted EBITDA was $241 million, or 11.2% of revenue, a $46 million increase from the first quarter of 2023, representing 24% leverage year-over-year. In OV's first quarter, EBITDA and EBITDA margin were its highest in nine years, and overall, it was a solid start to 2020.

Andy Dambrosio: Pre tax profit increased 14% year over year, but a higher effective tax rate and lower income from our folks to helping joint venture in the first quarter led to lower earnings per share year over year, adjusted EBITDA was $241 million or 11, 2% of revenue of $46 million increase from the first quarter of 2023, representing 20.

Andy Dambrosio: 4% leverage year over year.

Andy Dambrosio: These first quarter, EBITDA, and EBITDA margin, where its highest in nine years and overall it was a solid start to 2024, we began the year with several new business leaders across our organization and began operating under two new segments energy products and services and energy equipment.

Clay C. Williams: We began the year with several new business leaders across our organization and began operating under two new segments, energy products and services, and energy. Revenue from energy products and services grew 8% compared to the pro forma first quarter of 2023. Despite lower global rig count, the segment continued to realize good adoption of its portfolio of technologies and a rising demand for the tools and consumables it manufactures, particularly in the international year-over-year top-line growth was broad-based as all but one of its businesses posted increased Completion Tools, Drill Pipe, and Rig Instrumentation, in particular, posting strong, double- Our new energy equipment segment revenues grew even more.

Andy Dambrosio: Revenue from energy products and services grew 8% compared to the pro forma first quarter of 2023, despite lower global rig count year over year.

Andy Dambrosio: The segment continued to realize good adoption of its portfolio of technologies and a rising demand for the tools and consumables that manufacturers, particularly in the international and offshore markets.

Andy Dambrosio: Year over year top line growth was broad based as all but one of its business has posted increased sales with completion tools drill pipe and rig instrumentation in particular, posting strong double digit gains.

Andy Dambrosio: Our new energy equipment segment revenues grew even more up 12% year over year on a pro forma basis rising offshore activity fueled demand for equipment tied to deepwater developments at <unk> and drilling rig reactivation and re certifications, which enabled the segment to overcome lower sales of pressure pumping equipment to North America year over year.

Clay C. Williams: Rising offshore activity fueled demand for equipment tied to deepwater developments, FPSOs, and drilling rig reactivations and resources, which enabled the segment to overcome lower sales of pressure pumping equipment to North. As part of our new structure, we are reporting a March 31, 2024 backlog for the energy equipment segment of $3.96 billion, which is comprised of NOV's contracted longer cycle manufacturing and projects. Backlog declined 5% through the quarter as bookings of $390 million represented a book to bill of $77 million.

Andy Dambrosio: As part of our new structure, we are reporting a March 31, 2020 for backlog for energy equipment segment of $3 96 billion.

Andy Dambrosio: Which is comprised of <unk> contracted longer cycle manufacturing and project work.

Andy Dambrosio: Backlog declined 5% through the quarter as bookings of $390 million represented a book to bill of <unk>, 77%.

Clay C. Williams: We nevertheless see strong demand and have started the second quarter off with some big orders. For Energy Equipment for Offshore Work in Latin America, a required technical clarification delayed the signing of the contract. Capital Equipment Orders are typically, We feel confident in the outlook and strength of the market. Solid and stable commodity prices and expiration successes in new basins provide a foundation for growing offshore. Foundation, which is expected to drive offshore FIDs over $100 billion per year for the next 50% Plus Uplift in FPSOs.

Andy Dambrosio: We nevertheless, see strong demand and have started the second quarter off with some big wins, while we won a $250 million plus order.

Andy Dambrosio: Our energy equipment for offshore work in Latin America during the first quarter a required technical clarification delayed signing of the contract until April <unk>.

Andy Dambrosio: Capital equipment orders are typically lumpy, but we feel confident in the outlook and strength of the market solid and stable commodity prices and exploration successes in new basins provide a foundation for growing offshore activity.

Andy Dambrosio: Foundation, which is expected to drive offshore <unk> over $100 billion per year for the next few years and at 50% plus uplift in <unk> ordered in the next five years compared to the previous five in spite of Saudi Arabia, trimming or postponing its maximum sustainable capacity ambitions in the offshore.

Clay C. Williams: Despite Saudi Arabia trimming or postponing its maximum sustainable capacity, we are also optimistic about onshore international developments, particularly in the Middle East, where dozens of rigs are being tendered and a couple of national oil companies are pursuing unconventional development. Our optimism and confidence continue. That's why last night we announced a significant expansion of our return of capital, including our plan to increase our base dividend by 50% and a $1 billion dollar share repurchase program. Jose will go into more details of the program.

Andy Dambrosio: We are also optimistic about onshore international developments, particularly in the middle East where dozens of rigs are being tendered and a couple of national oil companies are pursuing unconventional developments in earnest.

Andy Dambrosio: Our optimism and confidence continued to grow that's why last night, we announced a significant expansion of our return of capital program, including our plan to increase our base dividend by 50% and a $1 billion share repurchase authorization Jose will go into more details of the program in a few minutes.

Clay C. Williams: Our investments over the past several years in new digital edge compute, optimization fueled by artificial intelligence, mechanization and automation, software control systems, and remote monitoring. Equipment electrification, and emissions reduction. Drill Cuttings Processing, Artificial Lift, and Downhole Drilling Technologies are leading to new, promising customer conversations and a growing number of users of the. Together with the recovery of oil field activity in key offshore and international markets, new NOV products and businesses underpin our buoyant future for the next decade and our plan to substantially ramp up our return.

Andy Dambrosio: Our investments over the past several years and new digital edge compute optimization fueled by artificial intelligence mechanization and automation software control systems and remote monitoring equipment electrification emissions reductions.

Andy Dambrosio: Drill cuttings processing artificial lift of downhole drilling technologies are leading to new promising customer conversations and a growing number of users of these new products together with the recovery of oilfield activity in key offshore and international markets, New <unk> products and businesses underpin our outlook for the next decade, and our plan to substantially ramp our return of capital to our shareholders.

Clay C. Williams: After a challenging few years, we expect to continue to improve our profitability to drive EBITDA margins into the 14-15% range as we exit 2024 and to generate more cash as working capital moves past first quarter seasonality and normalizes through the remainder. Continued cost reductions are an important part of our plan, too, and our new segment structure is facilitating additional efficiency improvements as we consolidate more manufacturing locations. Centralize certain supply chain functions, engage engineering talent more collaboratively, and benefit from greater marketing coordination across business units.

Andy Dambrosio: After a challenging few years, we expect to continue to improve our profitability to drive EBITDA margins into the 14% to 15% range as we exit 2024 and to generate more cash as working capital moves past first quarter seasonality and normalizes through the remainder of the year.

Andy Dambrosio: Cost reductions are an important part of our plan too and our new segment structure is facilitating additional efficiency improvements as we consolidate more manufacturing locations centralized certain supply chain functions engaged engineering talent more collaboratively and benefit from greater marketing coordination across business units and segments, we expect the $75 million cost reduction.

Clay C. Williams: Expect the $75 million cost reduction initiative we announced last July to continue to roll out through the remainder of the year, having achieved about 30% so far. Strategically, through the last decade, NOV has reinvented itself with new products and technologies that I mentioned earlier, recognizing that organic innovation occasionally supplemented by targeted acquisition here was the most capital efficient way to reposition our franchise to meet the evolving needs of oil.

Andy Dambrosio: Initiative, we announced last July to continue to rollout through the remainder of the year, having achieved about 30%, so far and expecting it to accelerate during the second quarter.

Andy Dambrosio: Strategically through the last decade, <unk> has reinvented itself with new products and technologies that I mentioned earlier, recognizing that organic innovation occasionally supplemented by targeted acquisition here or there was the most capital efficient way to reposition our franchise to meet the evolving needs of the oilfield.

Clay C. Williams: The two acquisitions we closed during the first quarter are good examples of this. Notably, these acquisitions were made at multiples well below the multiple of our second quarter sale of our pole products business, and below multiples were NOV trades, in effect reallocating capital across our portfolio to improve profitability. In the first quarter, we acquired Hellenist, which brings us the technology underlying our InnovaTherm cuttings process.

The two acquisitions, we closed during the first quarter are good examples of this approach.

Andy Dambrosio: Notably these acquisitions were made at multiples well below the multiple of our second quarter sale of our pool products business and below multiples, where <unk> trades and affect reallocating capital across our portfolio to improve profitability and returns.

Andy Dambrosio: During the first quarter, we acquired <unk>, which brings us the technology underlying <unk> cuttings processing unit. This technology works in concert with dryers and <unk> technologies, we developed internally to process drill cuttings for safe environmental disposal, we've deployed edge compute and condition based monitoring to optimize this onsite process.

Clay C. Williams: This technology works in concert with dryers and centrifuge technologies we've developed internally to process drill cuttings for safe environmental use. We've deployed edge compute and condition-based monitoring to optimize this onsite project, dramatically lowering greenhouse gas emissions for offshore operators who are experiencing high. We expect our fleet of units on rent to grow from four in the first quarter to seven by the end of the year. Our acquisition of the Extract Electric Submersible Pump business brings an opportunity to deploy our organically developed MaxEdge computing platform for artificial lift and production. As operators extend their well profiles from 2-mile laterals to 3-mile laterals, their initial gross volumes produced through each individual wellhead will increase significantly.

Andy Dambrosio: Which dramatically lowers greenhouse gas emissions for offshore operators, who are expressing high demand. We expect our fleet of units on rent to grow from four in the first quarter to seven by the end of the second quarter, our acquisition of the extract electric submersible pump business brings an opportunity to deploy our organically developed Max edge computing platform to artificial lift and production optimization.

Andy Dambrosio: <unk> as operators extend their well profiles from two mile laterals to three mile laterals. There initial gross volumes produced through each individual wellhead will increase significantly to a market trend that we expect to provide additional tailwind to ESP demand. It also complements our existing artificial lift choke separation pumping and processing products and we believe we can leverage.

Clay C. Williams: It also complements our existing artificial lift, choke, separation, pumping, and processing. We believe we can leverage NOB's scale. We're delighted that these two strong businesses are now part of the NOV family and should benefit from complementary technologies developed organically within. The MaxEdge platform also provides the foundation for other new products as well, like MaxCompletions, which has been adopted by dozens of companies and thousands of individual users.

<unk> scale and footprint to grow this business.

Andy Dambrosio: We are delighted that these two strong businesses are now part of the <unk> family and should benefit from complementary technologies developed organically within <unk>.

Andy Dambrosio: The Max Edge platform also provides the foundation for other new products as well like Max completions, which has been adopted by dozens of companies and thousands of individual users in fact revenues from the Max family of products increased 35% sequentially in two and a half full from the first quarter of last year.

Other new technology developments range from new products like our positive track torsional vibration mitigation tool to our atom, our T X rig robotic system and our downhole broadband solutions to our investments in startups like Keystone Tower systems, where we aim to revolutionize onshore wind tower construction.

Clay C. Williams: In fact, revenues from the Max family of products increased 35% sequentially and two and a half times from the. Other new technology developments range from new products like our Positrack torsional vibrational mitigation tool to our Atom RTX rig robotics system and our downhole broadband solutions to our investments in startups like Keystone Tower Systems, where we aim to revolutionize onshore wind towers. Innovation takes time and, frankly, startup costs, which vary across. Nevertheless, our success and innovation are what will continue to differentiate our business and drive improved profitability over the next several years.

Andy Dambrosio: Innovation takes time, and frankly startup costs, which vary across these initiatives. Nevertheless, our success and innovation are what will continue to differentiate our business and drive improved profitability over the next several years.

Andy Dambrosio: We expect improving margins in our backlog to contribute to higher profitability as well, particularly in 2025 and beyond as lower margin frame agreement signed during the pandemic Lowe's expire for instance, one of our energy equipment business units foresees, a roughly 800 basis point improvement in margins from 2024 to 2025 due to its steady.

Clay C. Williams: We expect improving margins in our backlog to contribute to higher profitability as well, particularly in 2025 and beyond, as lower margin frame agreements signed during the pandemic lows. For instance, one of our energy equipment business units foresees a roughly 800 basis point improvement in margins from 2024 to 2025 due to its steady high grading of contracts with improved inflation risk. We've been systematically working towards higher margin, lower risk contracts, walking away from opportunities where we see insufficient margins or too much. The key to success for NOV is to demonstrate value, as it always has been.

Andy Dambrosio: High grading of contracts with improve inflation risk protection, we've been systematically working towards higher margin lower risk contracts walking away from opportunities, where we see insufficient margins were too much risk.

Andy Dambrosio: The key to success for <unk> is to demonstrate value as it always has been our new technologies do that and our customers programs and developments are evolving to benefit even more from this value. That's what's changing international and offshore operators are going back to work and they want operational efficiencies obtainable with new technologies they own.

Andy Dambrosio: To reduce their environmental impact they want to drive better safety. We can help consolidation in North America is being led by operators, who value technology and are focused on continuous improvement again, we can help competitive pricing dynamics and inflation continued to be a headwind for margin improvement, but as our technologies rollout day by day customer.

Clay C. Williams: Our new technologies do that, and our customers' programs and developments are evolving to benefit even more from this value. International and offshore operators are going back to work, and they want operational efficiencies obtainable with new NOVs. They want to reduce their environmental impact.

Speaker Change: By customer I value proposition becomes clearer and Thats, a great place to reset pricing discussions before I hand, it over to Jose I want to say, thank you to all our employees listening today.

Speaker Change: <unk> continues to transform this industry in so many ways and that is directly due to your ingenuity and your hard work. We appreciate you.

Clay C. Williams: They want to drive better safety. We can help. Consolidation in North America is being led by operators who value technology and are focused on continuous improvement. Again, we can help. Competitive pricing dynamics and inflation continue to be a headwind for March. But as our technologies roll out day by day, customer by customer, our value proposition becomes clearer. That's a great place to reach.

Speaker Change: Jose.

Jose A. Bayardo: Thank you clay Nov's EBITDA increased 24% year over year to $241 million with margins, improving 131 basis points to 11, 2% of sales cash flow used by operations was $78 million during the first quarter driven primarily by seasonal build in working capital and annual payments made in the first quarter.

Jose A. Bayardo: Working capital increased $395 million sequentially due primarily to the decrease in accrued liabilities associated with the annual payments made during the first quarter and the two acquisitions, we completed which accounted for $106 million of the $127 million increase in inventory.

Clay C. Williams: Before I hand it over to Jose, I want to say thank you to all our employees listening. NOV continues to transform this industry in so many ways, and that is directly due to your ingenuity and your hard work. We appreciate it. Thank you, Clay.

Jose A. Bayardo: NOV's EBITDA increased 24% year over year to $241 million, with margins improving 131 basis points to 11.2%. Cash flow used by operations was $78 million during the first quarter, driven primarily by seasonal bills and working capital and annual payments made in the first quarter. Working capital increased $395 million sequentially due primarily to the decrease in accrued liabilities associated with the annual payments made during the first quarter and the two acquisitions we completed, which accounted for $106 million of the $127 million increase in inventory.

Jose A. Bayardo: While operations consumed cash use was well below what we consumed in the first quarters of the last two years, which reflects the turn in our business that gives us confidence in our ability to generate a substantial amount of cash flow over the next several years.

Jose A. Bayardo: We believe <unk> is well positioned to deliver strong performance as the cycle matures from a nascent recovery in evolves into an environment, where later cycle equipment and technology businesses will outperform.

Jose A. Bayardo: As clay noted an improved market environment differentiated technologies that we've developed over the last several years and our focus on operational efficiencies will continue to push margins and cash flow throughout 2024 and beyond.

Jose A. Bayardo: Our base forecast contemplates a sustainable multi year period with modestly improving industry activity led by the international and offshore markets. We expect soft activity in the U S through 2024, but anticipate a recovery in 2025 aided by increasing gas exports. However, we expect improvements in.

Jose A. Bayardo: While operations consumed cash, the use was well below what we consumed in the first quarters of the last two years, which reflects the turn in our business that gives us confidence in our ability to generate a substantial amount of cash flow over the next several years. We believe NOV is well-positioned to deliver strong performance as the cycle matures from a nascent recovery and evolves into an environment where later cycle equipment and technology businesses will outperform.

Oil directed activity in the U S to be modest with international and offshore activity, providing most of the incremental supplies required to fuel the growth of the world as economies. As a result, we expect a little less volatility in NOC and IOC drilling activity over the next several years versus what we've seen from North American independents over the.

Jose A. Bayardo: As Clay noted, an improved market environment, differentiated technologies that we've developed over the last several years, and our focus on operational efficiencies will continue to push margins in cash flow throughout 2024 and beyond. Our base forecast contemplates a sustainable multi-year period with modestly improving industry activity led by the international and offshore markets. We expect soft activity in the U.S. through 2024, but anticipate a recovery in 2025 aided by increasing gas

Jose A. Bayardo: The past decade.

Jose A. Bayardo: Against this backdrop, we anticipate generating high levels of free cash flow on an annual basis for each of the next several years I want to stress the word annual when I talk about free cash flow because of the seasonality we experienced during each year and the fact that we view our capital allocation activities on an annual multiyear basis.

Jose A. Bayardo: Our priorities for capital allocation remain consistent one defend the balance sheet to maintain our asset base three invest in organic growth opportunities that drive superior risk adjusted returns for pursue M&A that accelerate strategic growth initiatives at attractive returns and five return capital to our shareholders.

Jose A. Bayardo: However, we expect improvements in oil-directed activity in the U.S. to be modest, with international and offshore activity providing most of the incremental supplies required to fuel the growth of the world's economy. As a result, we expect a little less volatility in NOC and IOC drilling activity over the next several years versus what we have seen from North American independents over the past. Against this backdrop, we anticipate generating high levels of free cash flow on an annual basis for each of the next several years. I want to stress the word annual when I talk about free cash flow because of the seasonality we experience during each year and the fact that we view our capital allocation Our priorities for capital allocation will remain consistent. One, Defend the balance, to Montana. 3. Invest in organic growth opportunities that drive superior risk-adjusted returns. 4. Pursue M&A that accelerates strategic growth initiatives at attractive returns. And 5.

Jose A. Bayardo: Our balance sheet is currently in solid shape with gross debt to EBITDA below our target level of two to one we intend to continue to use a portion of our free cash flow to return our net debt to EBITDA ratio below one times.

Jose A. Bayardo: We have appropriately invested in our assets and expect a base level of investment to maintain and modernize our existing asset base over time of between 200 and $250 million per year.

Jose A. Bayardo: Incremental to this base level of spend our attractive organic investment opportunities primarily related to the commercialization of many of the technologies. We have deployed over the last several years, which could range from $50 million to $150 million per year. All of this is consistent with our expected $330 million capital expenditure plan for 2024.

Jose A. Bayardo: We will continue to look for compellingly valued strategic acquisitions that can accelerate our growth initiatives. We anticipate we will complete occasional small bolt on transactions similar to what we've done over the last several years, while the likelihood of larger acquisitions remains low we intend to maintain the flexibility to pursue such a transaction.

Jose A. Bayardo: Return capital to our shareholders. Our balance sheet is currently in solid shape, with gross debt to EBITDA below our target level of 2 to 1. We intend to continue to use a portion of our free cash flow to return our net debt to EBITDA ratio below one. We have appropriately invested in our assets and expect a base level of investment to maintain and modernize our existing asset base over time of between 200 and 250 million per year.

Jose A. Bayardo: With a healthy balance sheet, well maintained asset base, the expectation of smaller rifle shot acquisition and a high level of confidence in our outlook. We're nov's capital light business model will generate substantial amounts of free cash flow, we're ready to increase the return of capital to our shareholders.

Jose A. Bayardo: Last night, we announced the plan to return at least 50% of our excess free cash flow defined as cash flow from operations less capital expenditures and other investments to our shareholders going forward.

Jose A. Bayardo: The interest of all <unk> stakeholders, our framework utilizes a steady base dividend opportunistic stock buybacks and a supplemental dividend to true up returns to our shareholders on an annual basis.

Jose A. Bayardo: Incremental to this base level of spend are attractive organic investment opportunities primarily related to the commercialization of many of the technologies we've deployed over the last several years. This could range from $50 to $150 million per year. All this is consistent with our expected $330 million capital expenditure plan for 2020. We will continue to look for compellingly valued strategic acquisitions that can accelerate our growth. Additionally, we anticipate we will complete occasional small bolt-on transactions similar to what we've done over the last several years. While the likelihood of larger acquisitions remains low, we intend to maintain the flexibility to pursue such a transaction.

Specifically, we intend to return this capital through a combination of the following one we expect to increase our quarterly dividend from five to seven and a half cents per share a 50% increase beginning in the second quarter of 2024, resulting in an annual dividend payment of roughly $118 million going forward we.

Jose A. Bayardo: Believe base dividends provide an immediate direct benefit to all shareholders too we plan to opportunistically repurchase shares under our new $1 billion 36 month share repurchase authorization with our share price trading below what we consider a fair value. We believe using some of our excess free cash flow to repurchase our shares will drop.

Jose A. Bayardo: <unk> long term value.

Jose A. Bayardo: With a healthy balance sheet, a well-maintained asset base, the expectation of smaller rifle shot acquisitions, and a high level of confidence in our outlook, where NOV's capital-light business model will generate substantial amounts of free cash, we're ready to increase the return of capital to our shareholders. Last night, we announced a plan to return at least 50% of our excess free cash flow, defined as cash flow from operations, less capital expenditures and To balance the interests of all NOV stakeholders, our framework utilizes a steady base dividend, opportunistic stock buybacks, and a supplemental dividend to true up returns to our shareholders on an annual basis. Specifically, we intend to return this capital through a combination of the following.

Jose A. Bayardo: At the end of each year, we plan to utilize a supplemental dividend that would be payable in may starting in 2025 to coincide with our annual shareholders meeting to true up our total annual return of capital to at least 50% of our excess free cash flow generated during the preceding calendar year.

Jose A. Bayardo: We believe this approach serves and balances the interests of all of our shareholders.

Jose A. Bayardo: We will not compromise the health of our balance sheet or our ability to invest in the business, having experienced several routine industry cycles and one recent and very severe pandemic induced cycle, we understand our business can change in a hurry. However, our capital return framework reflects our confidence in <unk> outlook and our commitment to delivering superior returns.

Jose A. Bayardo: Turns to our shareholders five.

Jose A. Bayardo: Finally, acknowledging that none of us can control or accurately predict the future I want to try to frame. What we think is possible over the next four years associated with our base industry outlook, assuming continued operational and financial execution. What we believe is a reasonable EBITDA growth profile and sticking to the minimum level of returns at 50% excess free cash flow.

Jose A. Bayardo: One, we expect to increase our quarterly dividend from $0.05 to $0.075 per share, a 50% increase beginning in the second quarter of 2024, resulting in an annual dividend payment of roughly $118 million. We believe base dividends provide an immediate direct benefit to all shareholders.

Jose A. Bayardo: We estimate the aggregate capital to return to shareholders through 2027 could be in the range of $1 5 billion.

Jose A. Bayardo: Under this scenario approximately 30% or $470 million of shareholder return will be provided through our base dividend and the remaining $1.03 billion would be split between share buybacks and supplemental dividends.

Jose A. Bayardo: Two, we plan to opportunistically repurchase shares under our new $1 billion, 36-month share repurchase authorization. With our share price trading below what we consider a fair value, we believe using some of our excess free cash flow to repurchase our shares will drive long-term value. Three, at the end of each year, we plan to utilize a supplemental dividend that would be payable in May, starting in 2025, to coincide with our annual shareholders meeting to true up our total annual return of capital to at least 50% of our excess free cash flow generated during the preceding calendar year. We believe this approach serves and balances the interests of all of our shareholders.

Speaker Change: I will now move on to segment results.

Speaker Change: Our new energy products and services segment generated revenue of 1.0, $1 7 billion in the first quarter, an 8% increase compared to the first quarter of 2023, EBITDA increased $20 million to $174 million or 17, 1% of sales representing flow through of 26% compared to the first quarter of <unk>.

Speaker Change: <unk> thousand 23.

Speaker Change: Revenues for the segment are comprised of service and rentals sales of consumable products and sales from generally shorter lived or consumable capital assets, such as drill pipe composite products conductor pipe and solids control equipment that tend to see demand rise and fall more or less with activity.

Speaker Change: Sales mix for the segment during the first quarter was as follows service and rental 49% product sales, 20% and capital equipment sales 31%.

Jose A. Bayardo: We will not compromise the health of our balance sheet or our ability to invest in the business. Having experienced several routine industry cycles and one recent and very severe pandemic-induced cycle, we understand our business can change in a hurry. However, our capital return framework reflects our confidence in NOV's outlook and our commitment to delivering superior returns to our shareholders. Finally, acknowledging that none of us can control or accurately predict the future, I want to try to frame what we think is possible over the next four years, associated with our base industry outlook.

Speaker Change: As noted the largest share of our energy products and services segment's revenues come from service and rentals, including rentals of our technologically advanced downhole tools and drill bits coatings and inspection services solids control services and drilling data acquisition analytics and optimization services with the exception of coating and inspection service.

Speaker Change: <unk>, which tend to somewhat move with demand for drill pipe and other tubular goods the remainder of our service and rental revenues tend to move in line with industry activity, plus or minus usually plus changes in market share.

Speaker Change: First quarter revenue for the segment service and repair revenues increased in the low to mid single digits sequentially and year over year with growing demand from offshore and international markets, particularly the middle east more than offsetting lower activity in North America.

Jose A. Bayardo: Assuming continued operational and financial execution, and sticking to the minimum level of returns at 50% excess free cash, we estimate the aggregate capital to return to shareholders through 2027 could be in the range of one and a half billion dollars. Under this scenario, approximately 30% or $470 million of shareholder return would be provided through our base dividend, and the remaining $1.03 billion would be split between share buybacks and supplemental dividends. I'll now move on to the segment.

Speaker Change: Product sales or the segment second category of revenues and are derived from sales of drill bits completion tools composite sleeves, and liners artificial lift products shaker screens and downhole tools among others.

Note that several of these products such as drill bits and downhole tools are also rental items, which I'll cover in a moment.

Speaker Change: Product sales tend to be less volatile less seasonal and track activity a little more closely than revenue from capital equipment. Although sales of products can also lag activity increases as our customers frequently stock inventories of these products.

Speaker Change: While individual sales are typically smaller in frequent each operation can have occasional individually large shipments that may be requested by certain large <unk>, who sometimes take bulk shipments one or two times per year.

Jose A. Bayardo: Our new energy products and services segment generated revenue of $1.017 billion in the first quarter, an 8% increase compared to the first quarter of 2020. EBITDA increased $20 million to $174 million, or 17.1% of sales, representing flow through of 26% compared to the first quarter of 2023. Revenues for the segment are comprised of service and rental, sales of consumable products, and sales from generally shorter-lived or consumable capital assets such as drill pipe, composite products, conductor pipe, and solids control tend to see demand rise and fall more or less with. Sales mix for the segment during the first quarter was as follows: service and rental 49%; product sales, 20%, and Capital Equipment Sales, 31%.

Speaker Change: The segment has steadily increased product sales every quarter over the last year with the first quarter of 2024 up 8% sequentially and 19% year over year, and we expect product sales to increase in the mid to upper single digits again in the second quarter.

Speaker Change: Looking at specific product lines drill bits are capitalizing on increasing activity in the middle East and offshore markets. Our completion tools business is also realizing solid levels of demand in the middle east more than offsetting softness in North America sales.

Speaker Change: Sales of our tubes scope through KOTE sleeves, Zap Lok connections and texture thread protectors have remained solid and we expect to see a significant increase in the second quarter from shipments to customers in the Middle East Western Africa, and Latin America sales of our downhole tools decreased 20% sequentially after large shipments to Asia and Europe in the fourth quarter did not repeat.

Jose A. Bayardo: As noted, the largest share of our energy products and services segments revenues come from service and rentals, including rentals of our technologically advanced downhole tools and drill, Codings and Inspection Services, Solids Control Services, and Drilling Data Acquisition, Analytics, and Optimization Services. With the exception of coating and inspection services, which tend to somewhat move with demand for drill pipe and other tubular goods, the remainder of our service and rental revenues tend to move in line with industry act, plus or minus usually plus changes in more, first quarter revenue for the segment service and repair revenues increased in the low to mid single digits, and year over year, with growing demand from offshore and international markets, particularly the Middle East, more than offsetting lower activity in North America.

Speaker Change: Finally sales of the segments capital equipment offerings, which include drill pipe conductor pipe fiberglass products managed pressure drilling equipment shale shakers and other equipment tend to be seasonal and volatile often lagging activity a bit and.

Speaker Change: In the first quarter of 2024 revenues from capital equipment in our energy products and services segment increased 8% year over year, but declined 23% sequentially due to the seasonal effect of customers, making a big push to receive their equipment at year end.

Our drill pipe business unit experienced a greater than average seasonal decline given outsized fourth quarter shipments to international markets, partially offset by increased U S land deliveries.

Speaker Change: New orders, however had a more favorable international and offshore waiting and included an award for an offshore completion workover riser destined for offshore Brazil.

Speaker Change: Capital equipment sales for our solid controls offerings were down in the mid 20% range sequentially due to the ordinary increase in year end shipments revenues increase in the upper teens percent range year over year on growing adoption of our alpha Shaker and sales of other innovative drilling solutions, such as our tundra Max mud chilling systems are.

Jose A. Bayardo: Product sales are the segment's second category of revenues and are derived from sales of drill bits, completion tools, composite sleeves and liners, artificial lift products, shaker screens, and downhole tools, among others. Note that several of these products, such as drill bits and downhole tools, are also rental items, which I'll cover in a moment.

Speaker Change: Our two most seasonally volatile capital equipment offerings, our conductor pipe and our managed pressure drilling equipment.

Jose A. Bayardo: Product sales tend to be less volatile, less seasonal, and track activity a little more closely than revenue from capital equipment, although sales of products can also lag activity increases as our customers frequently stock inventories of these products. While individual sales are typically small and frequent, each operation can have occasional individually large shipments that may be requested by certain large NOCs who sometimes take bulk shipments one or two times per day. The segment has steadily increased product sales every quarter over the last year, with the first quarter of 2024 up 8% sequentially and 19% year over year.

Speaker Change: After a strong fourth quarter for the two product lines, both realized substantial sequential revenue drops and yet both also have very strong outlooks, resulting from the increase in offshore activity conductor pipe casing orders achieved a book to bill of over 200% with solid demand coming from projects in the North Sea West Africa Gulf of Mexico, and South America, which.

Will allow for a much improved second quarter.

Speaker Change: We're expecting revenues from both conductor pipe in MPD to more than double from the first quarter to the second quarter of 2024.

Speaker Change: Our composite product offerings tend to be our least volatile capital equipment line in this segment due in part to the diverse set of end market served which include midstream oil and gas fuel handling chemical industrial and marine.

Jose A. Bayardo: And we expect product sales to increase in the mid to upper single digits again in the second quarter. Looking at specific product lines, drill bits are capitalizing on increasing activity in the Middle East and offshore markets. Our completion tools business is also realizing solid levels of demand in the Middle East more than offsetting softness in North America. Sales of our Tubascope ThruCoat sleeves, ZappLock connections, and Tektor thread protectors have remained solid, and we expect to see a significant increase in the second quarter from shipments to customers in the Middle East, Western Africa, and Latin America. However, sales of our downhole tools decreased 20% sequentially after large shipments to Asia and Europe in the fourth quarter did not.

Speaker Change: Demand for composite products is still seasonal and sales declined in the low single digit range sequentially, but are up mid single digits year over year outlook for all end markets remains solid with particularly robust demand for oil and gas products in the middle East and a recent pickup for orders for flexible pipe and composite tanks in the Permian.

Speaker Change: For the second quarter, we expect revenues for our energy products and services segment to improve between one and 5% from the second quarter of 2023 with EBITDA in the range of $180 million to $190 million.

Speaker Change: Our energy equipment segment, which is comprised of our longer cycle capital equipment oriented businesses generated revenues of $1 178 billion in the first quarter, a 12% increase compared to the first quarter of 2023, EBITDA was $119 million or 10, 1% of sales up 27% compared to the first quarter of 2023.

Jose A. Bayardo: Finally, sales of the segment's capital equipment offerings, which include drill pipe, conductor pipe, fiberglass products, managed pressure drilling equipment, shale shakers, and other equipment, tend to be seasonal and volatile, often lagging activity. In the first quarter of 2024, revenues from capital equipment in our energy products and services segment increased 8% year over year but declined 23% sequentially due to the seasonal effect of customers making a big push to receive their equipment at year-end.

Speaker Change: Quite covered our bookings for the quarter, but I want to emphasize the capital equipment business is inherently more volatile than other businesses. In this case, despite orders that slipped from the first to second quarter, we foresee a generally bright outlook and now expect an outsized order book in the second quarter as a pure capital equipment business our operations.

Speaker Change: Have two revenue streams capital equipment sales and aftermarket sales and services during the first quarter equipment sales, which includes both revenue out of backlog as well as quicker turning equipment sales that do not meet our criteria to qualify as backlog accounted for 52% of the segment's revenues aftermarket sales and service accounted for.

Jose A. Bayardo: Our drill pipe business unit experienced a greater than average seasonal decline given outsized fourth quarter shipments to international markets, partially offset by increased U.S. land delivery. However, new orders had a more favorable international and offshore weighting and included an award for offshore completion work on a riser destined for offshore Brazil. Capital Equipment Sales for our Solid Controls offerings were down in the mid-20% range sequentially due to the ordinary increase in year-end shares.

Speaker Change: The remaining 48% similar.

Speaker Change: Similar to what we experienced in our energy products and services segment sales and orders for capital equipment tend to be more volatile and are much more affected by seasonality than aftermarket sales. The segment's capital equipment sales were up 7% year over year, but had a seasonal decline from the fourth quarter of 16% due to the typical year end push.

Jose A. Bayardo: Revenues increased in the upper teens percent range year over year on growing adoption of our alpha shaker and sales of other innovative drilling solutions, such as our Tundra Maxx mud chilling, are the two most seasonally volatile capital equipment offerings or a conductor pipe and or managed pressure drilling. After a strong fourth quarter for the two product lines, both realized substantial sequential revenue drops.

Speaker Change: By customers to take deliveries.

Speaker Change: Aftermarket revenues tend to have a little less seasonality and are much less volatile after market revenue improved 18% since the first quarter of 2023 and was off approximately 1% from the fourth quarter. The vast majority of our aftermarket revenue comes from our drilling equipment and intervention and stimulation businesses are.

Speaker Change: Our drilling equipment business generate three quarters of its revenues from aftermarket sales and services and in the first quarter. It's aftermarket revenues improved 27% year over year as the business continued to improve throughput and capitalize on a very healthy level of reactivation and recertification projects and spare part orders.

Jose A. Bayardo: And yet, both also have very strong outlooks resulting from the increase in offshore activity. Conductor Pipe Casing Orders achieved a book-to-bill of over 200% with solid demand coming from projects in the North Sea, West Africa, Gulf of Mexico, and South America, which will allow for a much-improved second quarter. We're expecting revenues from both Conductor Pipe and MPD to more than double from the first quarter to the second quarter of 2024. Our composite product offerings tend to be our least volatile capital equipment line in the segment, due in part to the diverse set of end markets served, which include midstream oil and gas, fuel handling, chemical, industrial, and marine. Demand for composite products is still seasonal, and sales declined in the low single-digit range sequentially but are up in the mid single-digits year over year.

Speaker Change: High levels of activity around the world are increasing the number of <unk> equipped rigs turning to the right requiring more demand for nov's parts and services. Additionally, as we dig deeper into the stack for reactivation and the average age of the operating fleet increases reactivation re certifications and upgrades become more complex during the first quarter.

Speaker Change: A 2024, we saw the total value of projects in execution, having a value of greater than $2 million continue its steady rise now up 175% from the first quarter of 2023, and reaching an average size of $20 million per project up from a $9 million average in the first quarter of <unk>.

Speaker Change: 23.

With robust offshore operator drilling plans and current day rates, allowing drilling contractors to generate significant cash, but not high enough to justify new builds.

Jose A. Bayardo: Outlook for all end markets remains solid, with particularly robust demand for oil and gas products in the Middle East and a recent pickup for orders for flexible pipe and composite tanks in the Permian. For the second quarter, we expect revenues for the energy products and services segment to improve between 1 and 5% from the second quarter of 2023 with EBITDA in the range of $180 to $190. Our energy equipment segment, which is comprised of our longer cycle capital equipment oriented businesses, generated revenues of 1.178 billion in the first quarter of 2019, a 12% increase compared to the first quarter of 2020. EBITDA was 119 million, or 10.1% of sales, up 27% compared to the first quarter of 2020.

Speaker Change: Contractors have incentive to keep their aging assets in good working condition being the OEM with the largest installed base our rig technologies aftermarket business will continue to play a larger role for our customers who rely on <unk> to provide reliable service and quality for these critical assets are.

Speaker Change: Our intervention and stimulation equipment business units relatively stable aftermarket revenues reached 63% of the unit mix in the first quarter of 2024, despite a soft north American market, we expect our aftermarket operations to remain busy providing consumables and replacement components as well as upgrades and refurbishment of equipment, both domestically and over.

Speaker Change: <unk>.

Speaker Change: Moving to the capital equipment side of the business, our drilling equipment capital sales improved in the mid 20% range year over year book to Bill was well north of a 100% led by a 20000 Psi <unk>.

Speaker Change: Of grade four drillship in deepwater Gulf of Mexico.

Speaker Change: This will be the industry's fourth 20000 Psi.

Jose A. Bayardo: Clay covered our bookings for the quarter, but I want to emphasize that capital equipment business, In this case, despite orders that slipped from the first to second quarter, we foresee a generally bright outlook and now expect an outsized order book in the second quarter. As a pure capital equipment business, our operations have two revenue, Capital Equipment Sales and Aftermarket Sales and Services. During the first quarter, equipment sales, which includes both revenue out of backlog as well as quicker turning equipment sales that do not meet our criteria to qualify as backlog, accounted for 52% of the segment's revenue, aftermarket sales and service accounted for the remaining 48, Similar to what we experience in our energy products and services segment, sales and orders for capital equipment tend to be more volatile and are much more affected by seasonality than aftermarket, segment's capital equipment sales were up 7% year over year but had a seasonal decline from the fourth quarter of 16% due to the typical year-end push by customers to take delivery.

Speaker Change: With <unk> building, all four systems, and demonstrating our leadership and cutting edge pressure control technology that allows our customers to reach previously inaccessible reservoirs.

Speaker Change: Utilization for offshore rigs remained high and increased towards the end of the first quarter. The news from the Saudis scaling back their offshore fleet will put some pressure on jackup utilization near term, but we believe those rigs will eventually be absorbed by other projects around the world and will drive more activity into onshore unconventional gas fields. This will.

Speaker Change: Increased demand for our land rig equipment and aftermarket support, which we are very well positioned to provide in Saudi.

Speaker Change: As well as for our intervention and stimulation equipment business, which has already seen an increase in orders for completion and intervention equipment as a result of rapidly improving activity in the defer unconventional field.

Speaker Change: Sticking with our intervention and stimulation equipment business capital equipment deliveries were down in the 20% range from the first quarter of 2023, due primarily to strong deliveries of <unk> and conventional pressure pumping equipment in early 2023 that did not repeat.

Speaker Change: Capital equipment orders declined due to lower demand for new pressure pumping kit, but the units still posted a book to bill greater than one as a result of solid demand for equipment destined for international markets, including the order for Saudi that I just mentioned.

Jose A. Bayardo: Aftermarket revenues tend to have a little less seasonality and are much less volatile; aftermarket revenue improved 18% since the first quarter of 2023 and was off approximately 1% from the fourth. The vast majority of our aftermarket revenue comes from our drilling equipment and intervention and stimulation business. Our drilling equipment business generates three quarters of its revenues from aftermarket sales and service.

Speaker Change: We anticipate bookings for new pressure pumping equipment will remain soft in the second quarter. There continues to be a high level of interest for alternative energy equipment, specifically <unk> and CMG units and the business is backlog remains healthy with meaningful shipments of DGB and if rack unit slated for the second quarter in international markets. The business is seeing solid.

Jose A. Bayardo: And in the first quarter, its aftermarket revenues improved 27% year over year, as the business continued to improve throughput and capitalize on a very healthy level of reactivation and recertification projects and spare parts. High levels of activity around the world are increasing the number of NOV-equipped rigs turning to the right, requiring more demand for NOV's parts and services. Additionally, as we dig deeper into the stack for reactivations and the average age of the operating fleet increases, reactivations, recertifications, and upgrades become more complex.

Speaker Change: And from Africa, and Europe. In addition to strong demand from the Middle East.

Speaker Change: Our offshore wind and construction business achieved year over year revenue growth in the mid 20% range from strong execution on the unit's backlog of offshore wind projects bookings include an inter array cable lay vessel for a Japanese construction company, which will be used to connect wind turbines within an offshore development.

Speaker Change: Outlook for the unit's core markets is positive with improving sentiment in the offshore wind space and the potential for a couple of new wind installation orders later this year.

Jose A. Bayardo: During the first quarter of 2024, we saw the total value of projects in execution having a value of greater than $2 million continue its steady rise, now up 175% from the first quarter of 2023 and reaching an average size of $20 million per project, up from a $9 million average in the first quarter of 2020. With robust offshore operator drilling plans and current day rates, allowing drilling contractors to generate significant cash, but not high enough to justify new bills. Contractors have an incentive to keep their aging assets in good working condition.

Speaker Change: Wellstream processing operations achieved solid year over year revenue growth from strong execution on the operations backlog of processing equipment projects, which continues to grow with increasing opportunities support new fpss. The operation also continues to realize more opportunities to leverage its gas and fluids processing expertise into large scale energy transition.

Speaker Change: <unk> and received an order for a hydrogen dehydration and oxygenation package in Australia. After having completed an engineering study for the customer over the last year.

Speaker Change: Our production and midstream business saw an upper single digit decline in revenue compared to the first quarter of 2023 challenging conditions in North American gas markets impacted demand for chokes and other equipment, but was partially offset by strong international activity, particularly in the middle East.

Jose A. Bayardo: Being the OEM with the largest installed base, our rigged technologies aftermarket business will continue to play a larger role for our customers who rely on NOV to provide reliable service and quality for these critical outputs. Our Intervention and Stimulation Equipment business units relatively stable aftermarket revenues reached 63% of the unit mix in the first quarter of 2020. Despite a soft North American market, we expect our aftermarket operations to remain busy providing consumables and replacement components as well as upgrades and refurbishments of equipment both domestically and, Moving to the capital equipment side of the business.

Speaker Change: Bookings remained robust driven by choke orders in the middle East where demand over the last five months exceeded orders for the preceding 11 months with units quickly improving backlog and ramping deliveries, we expect solid growth from this operation in the second quarter.

Notwithstanding the low level of bookings in the first quarter, our subsea flexible pipe business unit posted solid results and its mid to longer term outlook is very strong.

Speaker Change: The unit posted mid teens year over year revenue growth.

Speaker Change: Despite the large orders slipping out of the quarter the business secured a contract to deliver its first actively heated flexible pipe system for a deepwater gas field development in the Black sea the pipeline of future tenders for subsea flexible pipe is robust with considerably improved pricing.

Speaker Change: We expect lower margin contracts to continue to be replaced by higher margin projects, which will drive significant improvement in margins during 2025.

Jose A. Bayardo: Our drilling equipment's capital sales improved in the mid 20% range year over year, and book to bill was well north of 100%, led by a 20,000 PSI BOP upgrade for a drill ship in the Deepwater Gulf of Mexico.

Speaker Change: For the second quarter, we expect revenues for our energy equipment segment to improve between 1% and 5% from the second quarter of 2023 with EBITDA in the range of $135 million to $145 million with that we'll now open the call to questions.

Jose A. Bayardo: This will be the industry's fourth 20,000 PSI BOP, with NOV building all four systems and demonstrating our leadership in cutting-edge pressure control technology that allows our customers to reach previously inaccessible reservoirs. Utilization for offshore rigs remains high and increased toward the end of the first quarter. The news from the Saudis scaling back their offshore fleet will put some pressure on jack-up utilization near, but we believe those rigs will eventually be absorbed by other projects around the world and will drive more activity into onshore unconventional gas.

Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: So withdraw your question. Please press star one again.

Speaker Change: Could you please limit yourself to one question and one follow up one moment, while we compile our Q&A roster.

Our first question is going to come from the line of Jim Rollyson with Raymond James Your line is open. Please go ahead.

Jose A. Bayardo: This will increase demand for our land rig equipment and aftermarket support, which we are very well positioned to provide and sought. As well as for intervention and stimulation equipment business, which has already seen an increase in orders for completion and intervention equipment as a result of rapidly improving activity in the Jafura unconventional. Sticking with our Intervention and Stimulation Equipment business, capital equipment deliveries were down in the 20% range from the first quarter of 2023, due primarily to strong deliveries of EFRAC and conventional pressure pumping equipment in early 2023 that did not, Capital Equipment orders declined due to lower demand for new pressure pumping kit, but the unit still posted a book to bill greater than one as a result of solid demand for equipment destined for international markets, including the order for Saudi that I just mentioned.

James Michael Rollyson: Hey, good morning, Clay and Jose.

James Michael Rollyson: Good morning, good afternoon first of all.

James Michael Rollyson: And thank you.

James Michael Rollyson: You've talked about free cash flow again in kind of the outlook over the next handful of years.

James Michael Rollyson: You, obviously got the negative quarter out of the way for the year seasonally but is.

James Michael Rollyson: Is that in the past you have talked about this kind of EBITDA to free cash flow conversion rate in the plus 50% range and as you think about just.

James Michael Rollyson: To date that for 'twenty, four but as you think about how that trends over this 24 to 2007 timeframe that you've kind of laid out is that still the right range of conversion rate to use.

Speaker Change: Yes. Thanks for the question Jim first of all yes.

Speaker Change: As it relates to 2024.

We continue to expect that.

Speaker Change: We will convert at least 50% of our EBITDA to free cash flow during the year and if anything with one or more confident about.

Speaker Change: Our ability to achieve if not exceed that and then really I think the bulk of your question is related to the out years, obviously not ready to provide explicit guidance, but did provide.

Jose A. Bayardo: While we anticipate bookings for new pressure pumping equipment will remain soft in the second quarter, there continues to be a high level of interest in alternative energy equipment, specifically EFRAC and CNG units, and the business's backlog remains healthy with meaningful shipments of DGB and EFRAC units slated for the second quarter. In international markets, the business is seeing solid demand from Africa and Europe in addition to strong demand from the Americas. Our offshore wind and construction Bookings include an interarray cable lay vessel for a Japanese construction company, which will be used to connect wind turbines within an offshore development.

Speaker Change: Kind of.

Speaker Change: A little bit of information related to that from the standpoint of.

Speaker Change: Of all return of capital program and plan.

Speaker Change: Bottom line is.

Speaker Change: As we look forward in time with sort of a base case scenario that I laid out where we expect slightly less volatile environment and we've been over the past decade and steady gradual.

Speaker Change: Proving activity levels. There is no reason why we shouldnt be able to maintain that level of free cash flow as a percentage of our EBITDA.

Speaker Change: Got you.

Speaker Change: Just helpful for modeling and how to think about this.

Speaker Change: That takes me just glad to see the framework for the capital return program.

Speaker Change: I think a quarter earlier than you guys had promise so even better but as we look at you mentioned from the share repurchase program of $1 billion that thats going to be Opportunistically, driven maybe how you think about or how the board thinks about.

Jose A. Bayardo: Outlook for the unit's core markets is positive, with improving sentiment in the offshore wind space and the potential for a couple new wind installation orders later this year. Wellstream Processing Operations achieved solid year over year revenue growth from strong execution on the operations backlog of processing equipment projects, which continues to grow with increasing opportunities to support new FPS. The operation also continues to realize more opportunities to leverage its gas and fluids processing expertise into large-scale energy transition projects and received an order for a hydrogen dehydration and deoxygenation package in Australia after having completed an engineering study for the customer over the last. Our production and midstream business saw an upper single-digit decline in revenue compared to the first quarter of 2020.

Speaker Change: Where to allocate capital to that part of the equation versus your kind of supplemental catch up at year end like what drives the decision to move capital between those two means of returning capital to shareholders.

Speaker Change: As you pointed out the program is intended to be opportunistic and as also I mentioned in the prepared commentary.

Speaker Change: Really viewing.

Speaker Change: Return on capital plan, and frankly, just the way that we look at cash flow across the board on an annual and then a multiyear basis and so what we wanted to do was provide a very clear framework and assure our investors.

Jose A. Bayardo: Challenging conditions in North American gas markets impacted demand for chokes and other equipment but was partially offset by strong international activity, particularly in the Middle East. However, bookings remained robust, driven by choke orders in the Middle East, where demand over the last five months exceeded orders for the preceding 11 months.

Speaker Change: Every year, we will return at least 50% of our excess free cash flow and so we intend to be opportunistic we do intend to as we mentioned increased the base dividend and then opportunistically buyback shares throughout the course of the year and then.

Jose A. Bayardo: With units quickly improving their backlog and ramping deliveries, we expect solid growth from this operation in the second half. Notwithstanding the low level of bookings in the first quarter, our subsea flexible pipe business unit posted solid results, and its mid to longer-term outlook is very strong. The unit posted mid-teens year-over-year revenue. And despite the large order slipping out of the quarter, the business secured a contract to deliver its first actively heated flexible pipe system for a deep water gas field development in the Black Sea. The pipeline of future tenders for subsea flexible pipe is robust, with considerably improved prices.

Speaker Change: Depending on as to whether or not we're able to return the entire 50% plus of excess free cash flow. During the course of the year or not we would have the supplemental dividend early the following year to true up that return of capital to our shareholders.

Speaker Change: Some of the other the other variable that goes into the definition of excess free cash flow is.

Speaker Change: Sort of what we're seeing from an acquisition standpoint, and there could be times. So does right. Now there are a couple of small acquisitions that we've sort of factored into what we expect to be our excess free cash flow during the course of the year.

Speaker Change: Acquisitions are never done until they're done until if they don't materialize if they don't they don't.

Speaker Change: Those will have extra capital at the end of the year that we would certainly need to return via that supplemental dividends. So hopefully hopefully that helps.

Speaker Change: Blaine, how we're thinking about things.

Blaine: That does I appreciate the color guys. Thank you.

Jose A. Bayardo: We expect lower margin contracts to continue to be replaced by higher margin projects, which will drive significant improvement in margins during 2020. For the second quarter, we expect revenues for our energy equipment segment to improve between 1 and 5% from the second quarter of 2023, with EBITDA in the range of $135 to $145 million. With that, we'll now open the call to, Transcribed by https://otter.ai. To withdraw your question, please press star 11 again.

Speaker Change: You bet. Thanks, Tim.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Okay.

Speaker Change: And our next question is going to come from the line of Stephen <unk> with Stifel. Your line is open please.

Thanks, Good morning, everybody.

Stephen: Hi, Steven.

Stephen: I think the first question for me is when you think about the announcement of the of the.

<unk>.

Stephen: Return of capital framework.

Speaker Change: What what's changed over the last couple of months that gives you the confidence to put it in place I mean, Jose can you talk a little bit about kind of the visibility on free cash.

Operator: We ask that you please limit yourself to one question and one follow-up. One moment while we compile our Q&A. Our first question is going to come from the line of, Transcription by Transcription Outsourcing, LLC. Hey, good morning, Clay and Jose. Nice morning, first of all, and thank you.

Speaker Change: But it did come earlier than we expected and I'm just kind of curious what sort of drove the decision to announce this today as opposed to after maybe seeing more progress on free cash generation.

Jose A. Bayardo: Jose, you talked about free cash flow again and the kind of outlook over the next handful of years. You obviously got the negative quarter out of the way for the year, season. But, as you think about just, I want to update that for 24, but as you think about how that transcends over this 24 to 27 timeframe that you kind of laid out. Is that still the right range of conversion rate to use?

Speaker Change: Before Jose answers can I, just say Steven.

Speaker Change: Frankly, putting 2023 in the rearview mirror.

Speaker Change: A big plus for US we've been very frustrated here with our supply chain disruptions and lack of free cash flow and got Q1 behind us and.

Speaker Change: I think that really.

Speaker Change: Looking forward, we think our shareholders need to know how we're thinking about return of capital.

Jose A. Bayardo: Yeah, thanks for the question, Jim. First of all, as it relates to 2024, we continue to expect that we'll convert at least 50% of our EBITDA to free cash flow during the year. And if anything, we're becoming more confident about our ability to achieve, if not exceed that. And then really, I think the bulk of your question is related to the next couple of years.

Speaker Change: 90 days.

Speaker Change: Earlier than we had indicated before we'd be better off for all parties.

Speaker Change: Yes.

Speaker Change: Quite summed it up pretty well I think the only other thing that I would really add to that is that.

Speaker Change: Obviously, we had.

Got through the typical ordinary course cash and operating cash flow and free cash flow standpoint in Q1, which is.

Jose A. Bayardo: Obviously, not ready to provide explicit guidance, but it did provide kind of a little bit of information related to that from the standpoint of a return of capital program and plan. The bottom line is, you know, as we look forward in time with sort of the base case scenario that I laid out, where we expect a slightly less volatile environment than we've been in over the past decade and steady, gradual improvement in activity levels, there's no reason why we shouldn't be able to maintain that level of free cash flow as a percentage of EBITDA. Gotcha, that's that's just helpful for modeling and how to think about it.

Speaker Change: Yes.

Speaker Change: Big milestone that we wanted to get through also during the quarter, we had the $243 million.

Speaker Change: We spent on acquisitions and then.

Speaker Change: One of the items that allowed us to really gain additional level of confidence. In addition to just what we're seeing from an operating environment going forward is the fact that we were able to close the divestiture early in Q2 to replenish our cash balance and really allow us to go ahead and start moving forward.

Speaker Change: The capital program, so feeling great about things from operational standpoint, feeling great about the balance sheet and where we sit we're feeling good about where the stock prices that it would be a good.

Speaker Change: Accretive value proposition for our shareholders to buy back shares.

Speaker Change: Great. Thank you that's helpful. And then just one follow up on the free cash side, we've talked historically about kind of working capital.

Jose A. Bayardo: And that makes me just glad to see the framework for the capital return program, I think a quarter earlier than you guys had promised, so even better. But as we look at, you mentioned from the share repurchase program of a billion dollars, that that's going to be opportunistically driven. Maybe how you think about, or how the board thinks about, where to allocate capital to that part of the equation versus your kind of supplemental catch-up at year-end. Like, what drives the decision to move capital between those two means of returning capital?

Speaker Change: As a percentage of.

Speaker Change: Revenue and kind of where that has been historically versus versus in 'twenty three.

Speaker Change: How should we think about that.

Speaker Change: Unfolding over the next year or two.

Speaker Change: Yes, good question Stephen.

Speaker Change: I think last quarter.

Speaker Change: Sure.

Speaker Change: I mentioned that at the end of this year, we expected that working capital as a percentage of our revenue run rate to see some modest improvement basically one to 200 basis points now.

Jose A. Bayardo: As you pointed out, the program is intended to be opportunistic, and as I also mentioned in the prepared commentary, we're really viewing our return on capital plan, and frankly, just the way that we look at cash flow across the board on an annual and then a multi-year basis. And so, what we wanted to do was provide a very clear framework and assure our investors that every year we would return at least 50% of our excess free cash flow.

Speaker Change: <unk> a little bit here with the completion of the recent acquisitions, which had a.

Speaker Change: The acquisition had a.

Speaker Change: A very high load of working capital the quartered out my prepared remarks, the bulk of the increase in the river.

Speaker Change: Inventory that we saw from Q4 to Q1 was a result of the acquisition.

Jose A. Bayardo: And so we intend to be opportunistic. We intend to, as we mentioned, increase the base dividend and then opportunistically buy back shares throughout the course of the year. And then, depending as to whether or not we're able to return the entire 50% plus of excess free cash flow during the course of the year or not, we would have the supplemental dividend early the following year to true up that return of capital to our shareholders.

Speaker Change: And.

Speaker Change: We actually view that as a positive we think that they.

Speaker Change: They like every other manufacturer that had challenges from a supply chain standpoint.

Built up some inventory to work through those challenges and I think we'll be the beneficiary of that as we sort of normalized inventory levels over the over the coming months and quarters.

Speaker Change: Not quite prepared to sort of give you a pinpoint answer as to what the new metric will be at the end of 2024, we've only had this under our belt for a couple of months now.

Jose A. Bayardo: You know, some of the other variables that go into the definition of excess free cash flow is sort of what we're seeing from an acquisition standpoint. And there could be times, such as right now, where there are a couple of small acquisitions that we've sort of factored into what we expect to be our excess free cash flow during the course of the year. But acquisitions are never done until they're done.

Speaker Change: Needless to say, we're more optimistic about converting working capital.

Speaker Change: Cash.

Speaker Change: During 2024 than we were a quarter ago as a result of this item.

Speaker Change: Great. Thank you for the color.

Speaker Change: Yes, Thanks, David.

Speaker Change: Thank you and one moment as we move on to our next question.

Jose A. Bayardo: And so if they don't materialize, if they don't transact, if they don't close, we'll have extra capital at the end of the year that we would certainly need to return via that supplemental dividend. So hopefully, that helps frame how we're thinking about things.

Speaker Change: Okay.

Speaker Change: And our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead.

James West: Hey, good morning, clay or Jose.

James West: Good morning, James.

James West: So.

Jose A. Bayardo: I appreciate the color, guys. Be there. Thanks, Jim. Thank you. And one moment, as we move on to our next question. And our next question is going to come from the line of Stephen Gengaro with Stifel. Your line is open. Thanks. Good morning, everybody.

James West: Good to hear both your perspective is actually on this.

James West: Given that we've got.

James West: An enormous number of offshore rigs that are.

James West: I'm going to turn to the right or alternative right now and we'll be turning to the right. As we go through this year and next year for pretty long term contracts and duration is extending.

Jose A. Bayardo: .. I think the first question for me is, when you think about the announcement of the return of capital framework, what's changed over the last couple months that gives you the confidence to put it in place? I mean, Jose, you talked a little bit about the visibility on free cash, but it did come earlier than we expected. I'm just kind of curious, what sort of drove the decision to announce this today as opposed to maybe after maybe seeing more progress on free cash generation?

James West: We're going to need obviously spare parts, but we're going to need a lot of offshore just equipment to be built whether it's platforms and <unk> all the kind of stuff that you guys do and so how are you thinking about the visibility.

James West: And secondarily, what kind of innovations because you guys are constantly innovating.

Jose A. Bayardo: Can I, before Jose answers, can I just say, Stephen, frankly, putting 2023 in the rear view mirror was a big plus for us. We've been very frustrated here with our supply chain disruptions and lack of free cash flow, and we got Q1 behind us. And in that, I think that really, looking forward, we think our shareholders need to know how we're thinking about return on capital. And we said, you know, 90 days earlier than we had indicated before, we'd be better off for all parties. Yeah, I think Clay sums it up pretty well.

James West: Products as equipment are you introducing to the market to make them more efficient.

James West: <unk> operations et cetera, as we see this long duration cycle play out here or elsewhere.

Speaker Change: Great question James.

Speaker Change: I appreciate you pointing out the fact that Adobe has been a major innovator in the offshore market in a new more than anybody know the outlook for the offshore is very very bright there or lots of discoveries and developments and things going on in multiple basins around the world, including some new exploration.

Speaker Change: <unk> that have emerged in the past few years with discoveries and then maybe in Guyana, and Suriname and places like that that are fueling all of that demand and that's giving rise to a pretty bright outlook for.

Jose A. Bayardo: I think the only other thing that I would really add to that is that, obviously, we got through the typical ordinary course burn of cash from an operating cash flow and free cash flow standpoint in Q1, which is a big milestone that we wanted to get through. Also, during the quarter, we had $243 million that we spent on acquisitions. And then one of the items that allowed us to really gain an additional level of confidence, in addition to just from what we're seeing from an operating environment going forward, is the fact that we were able to close the divestiture early in Q2 to replenish our cash balance and really allow us to go ahead and start moving forward with the return of capital program.

Speaker Change: These are on those projects and much higher level of offshore activity, which has been.

Speaker Change: Pretty much lapping through the last decade, and so just sort of account.

Speaker Change: How we participate in that yes, we do support.

Speaker Change: The bulk of the world's offshore drilling fleet, because we built most of those rigs.

Speaker Change: And there is rising demand for aftermarket support of those were reactivating a number now Jose went through some statistics on that.

Speaker Change: Also pointed out.

Speaker Change: Strong results in the aftermarket in our.

Speaker Change: Our rig business there.

Speaker Change: And we're well known for that those rigs need drill pipe they need.

Speaker Change: Parts.

They need solids control services, they need bits and downhole tools all of those all of which provides and then on the production side I think we're probably less well known for what we do there, but the past 10 to 15 years, we've added a lot too.

Jose A. Bayardo: So, feeling great about things from an operational standpoint, feeling great about the balance sheet and where we sit, and feeling good about where the stock price is, that it will be a good accretive value proposition for our shareholders to buy back shares at this point in time. Great. No, thank you.

Speaker Change: What we sell into <unk> and so.

Speaker Change: The outlook for floating production storage and offloading vessels at Dsos and similarly bright.

Speaker Change: In the deepwater basins, and I think a disproportionate level of offshore activity is going to be focused on the deepwater, which will drive demand for <unk> and there are some industry fought.

Speaker Change: Gas out there that havent been in a range of 50 to 60 vessels needed over the next five years a significant increase.

Jose A. Bayardo: That's helpful. And just one follow-up on the free cash side. We've talked historically about kind of working capital as a percentage of revenue and kind of where that has been historically versus versus in 23. How should we think about that unfolding over the next year or two? Yeah, good question, Stephen.

Speaker Change: Over the preceding five years and and there we provide everything from whole designs in cranes to firewater piping systems, imbalanced piping systems to gas processing and dehydration to chokes to separate it.

Speaker Change: Good morning systems spread mooring systems to flexible pipe that choose to connect those vessels to the wellheads on the sea floor.

Jose A. Bayardo: So I think last quarter, I mentioned that at the end of this year, we expected working capital as a percentage of our revenue run rate to see some modest improvement, basically 1 to 200 basis points. Now, that's changed a little bit here with the completion of the recent acquisitions, which had a very high load of working capital. As I pointed out in my prepared remarks, the bulk of the increase in inventory that we saw from Q4 to Q1 was a result of the acquisition. And we actually view that as a positive.

Speaker Change: And you add all that up it can range anywhere from the $100 million per vessel for these kit all the way up to.

Speaker Change: As much as $700 million.

Speaker Change: So the vessel for these kit and so that's another area, where we can.

Speaker Change: Participate with respect to innovation and kind of the next generation of drilling everything from wire drill pipe high speed data connections to the bottom of the hole to artificial intelligence, that's making meaningful impacts on drilling optimization through our kaizen.

Speaker Change: Offering two rig automation, which.

Jose A. Bayardo: We think that, you know, they, like every other manufacturer, had challenges from a supply chain standpoint and built up some inventory to work through those challenges. And I think we'll be the beneficiary of that as we sort of normalize inventory levels over the coming months and quarters. I'm not quite prepared to sort of give you a pinpoint answer as to what the new metric will be at the end of 2024. We've only had this under our belts for a couple of months now. But needless to say, we're more optimistic about converting working capital to cash during 2024 than we were a quarter ago as a result of this item. Great, thank you for the color.

Speaker Change: Now a couple of large ioc's are used.

Speaker Change: Using our new Adam Rts robotics on offshore rigs.

Speaker Change: In Brazil, we have an offshore drilling contractor. That's now order. The second set they are so pleased with it and a lot of interest really across numerous operators and bringing more automation to that process as well along with digital support.

Speaker Change: And then on the production side, we also continue to innovate and offer a lot in a way of edge compute and condition based monitoring to to optimize production.

Speaker Change: And we're very excited about our new extract ESP products as well as a new place for us to deploy our edge compute capabilities to drive better efficiencies and automation automation in the production process.

Jose A. Bayardo: Yeah, thanks, Stephen. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead.

Speaker Change: Okay. That's great. Thanks, Thanks, Clay and then maybe just a quick follow up for me.

Speaker Change: With the rigs that are.

Speaker Change: Working today and about to go to work.

Jose A. Bayardo: Hey, good morning, Clay, Jose. Morning, James. So, I'd love to hear both your perspectives actually on this, given that we've got, you know, an enormous number of offshore rigs that are going to turn to the right or are turning to the right now and will be turning to the right as we go through this year and next year for pretty, you know, long-term contracts and duration is extending, you know, we're going to need, obviously, spare parts, but we're going to need a lot of offshore just equipment to be built, whether it's, you know, platforms and TLPs, spars, all the kind of stuff that you guys do.

Speaker Change: Clearly over the last decade, it was tough tough times and they.

Speaker Change: Dramatically reduced the number of amount of spare parts and stuff on the rigs are the rigs back up to.

Speaker Change: Kind of the normalized level of spare parts on the rigs that they usually require I think for a deepwater rig $56 million. So the equipment or are they still understaffed.

Speaker Change: Good good question the reason that we are.

Jose A. Bayardo: And so, how are you thinking about visibility and, secondarily, what kind of innovations, because you guys are constantly innovating these products as equipment, are you introducing to the market to make them, you know, more efficient, to decarbonize the operation, etc.

Speaker Change: The reason that we're reactivating.

Speaker Change: We've got close to 30 now that we're working on now part of the reactivation plan will be to replenish those spare parts that they depleted our customers really really good at cannibalizing.

Speaker Change: And going to their unutilized rigs cold stacked and even one stack rigs to source spare parts, both land and offshore and so most of these rigs have been picked over already so part of the reactivation plan for the rigs that were working on now.

Jose A. Bayardo: As we see this, you know, long duration cycle play out here offshore. Great question, James, and we appreciate you pointing out the fact that NOB has been a major innovator in the offshore market. And you, more than anybody, know that the outlook for offshore wind is very, very bright. There are lots of discoveries and developments and things going on in multiple basins around the world, including some new exploration basins that have emerged in the past few years with discoveries in Namibia and Guyana and Suriname and places like that that are fueling all that demand, and that's giving rise to a pretty bright outlook for FIDs around those projects and a much higher level of offshore activity, which has been pretty much lacking in the last decade.

Speaker Change: <unk> replenishing spare parts and.

Speaker Change: So they can go back to work and I guess probably to fill in the rest of the picture too. It's interesting there are a lot of rigs that were delivered.

Speaker Change: 2014, 2015 2016 2017.

Speaker Change: On the back end of the last kind of capital Super cycle. Those rigs, we're facing a 10 year special purpose survey and so they have to come into a shipyard and be inspected and.

Jose A. Bayardo: And so just to recount how we participate in that, yes, we do support the bulk of the world's offshore drilling fleet because we built most of those rigs, and there is rising demand for aftermarket support of those. We're reactivating a number now. Jose went through some statistics on that, and also pointed out the strong results in the aftermarket in our rig business there, and we're well known for that. Those rigs

Speaker Change: That's a pretty major.

Speaker Change: Waypoint in their lives and an opportunity for <unk> to <unk>.

Speaker Change: Again rebuild equipment replace equipment add additional capabilities.

Speaker Change: Maybe the oil and gas.

Speaker Change: Operator customers, one add while those rigs in the shipyards and so we're kind of coming up to that.

Speaker Change: Lot of rigs in the fleet right now.

Speaker Change: Got it thanks a lot.

You bet. Thanks, Jamie.

Speaker Change: Thank you and one woman as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead.

Jose A. Bayardo: They need spare parts. They need solid control services. They need bits.

Thomas Patrick Curran: Good morning, guys.

Jose A. Bayardo: They need downhole tools, hole openers, all of which NOV provides. And then on the production side, I think we're probably less well known for what we do there, but through the past 10, 15 years, we've added a lot to what we sell into FPSOs, and so the outlook for floating production and storage and offloading vessels, FPSOs, is similarly bright in the deepwater basins, and I think a disproportionate level of offshore activity is going to be focused on the deepwater, which will drive demand for FPSOs, and there's some industry forecasts out there that have them in the range of 50 to 60 vessels needed over the next five years, a significant increase over the preceding five years, and there we provide everything from hole designs and cranes to firewater piping systems and ballast piping systems to gas processing and dehydration to chokes to separators to turret mooring systems to spread mooring systems to flexible pipe that's used to connect those vessels to the wellheads on the seafloor.

Thomas Patrick Curran: Hi, Don.

Thomas Patrick Curran: Clay with within that masterful expansive refresher you just gave us on.

Thomas Patrick Curran: All of the exposure in areas that <unk>.

Thomas Patrick Curran: Participating from from growing all the way through down to production.

Thomas Patrick Curran: Infrastructure capital equipment services.

Thomas Patrick Curran: If we were to see.

Thomas Patrick Curran: A significant step up in offshore orders coming out of 2024 into 2025.

Thomas Patrick Curran: Where would you most.

Thomas Patrick Curran: Likely expect it to come from what it would it be do you think on the.

Thomas Patrick Curran: Offshore drilling front in the form of upgrades or cold stack reactivation is would you expect it to be.

Thomas Patrick Curran: The ramp in S DSO projects maybe.

Thomas Patrick Curran: Subsea infrastructure like flex a pipe and other subsea hardware could you just give us an idea of sort of what the sequence of acceleration could look like to the extent, we get something I get the the difference with this recovery slower steadier, but if we get an acceleration within offshore would you expect it.

Jose A. Bayardo: And if you add all that up, it can range anywhere from $100 million per vessel for NOV's kit all the way up to as much as $700 million per vessel for NOV's kit, and so that's another area where NOV can participate. With respect to innovation and the kind of next generation of drilling, everything from wire drill pipe high-speed data connections to the bottom of the hole to artificial intelligence that's making meaningful impacts on drilling optimization through our Kaizen offering to rig automation, which now a couple of large IOCs are using our new Atom RTX robotics on offshore rigs in Brazil.

Thomas Patrick Curran: First the rig reactivation offshore is underway as I mentioned, we're reactivating a lot of rigs right now.

Thomas Patrick Curran: Although.

Thomas Patrick Curran: Never say never in this industry at some point in the future we will see a new round of rebuilding that is not in our near term forecast what I think is more likely to surprise to the upside is all the other more production related.

Thomas Patrick Curran: Offshore kit that we can provide to the Fps shows, including the flexible pipe and all the things that I just went through.

Jose A. Bayardo: We have an offshore drilling contractor that's now ordered their second set. They're so pleased with it, and there is a lot of interest, really, across numerous operators in bringing more automation to that process as well along with digital support. And then on the production side, we also continue to innovate and offer a lot in the way of edge compute and condition-based monitoring to optimize production, and we're very excited about our new Xtract ESP products as well. It's a new place for us to deploy our edge compute capabilities to drive better efficiencies and automation through the production process. That's great. Thanks. Thanks, Clay.

Thomas Patrick Curran: And we have a very large and meaningful opportunity there and thats a little bit later with these companies.

Thomas Patrick Curran: Pull the trigger on their <unk> the projects.

Typically move to <unk> for more detailed.

Thomas Patrick Curran: Ladies and drawings and purchasing and so.

Thomas Patrick Curran: The awards are a little later in that and Thats, where the cycle and I think that's kind of what's next for <unk>.

Speaker Change: But I also want to say it.

Jose A. Bayardo: And then maybe just a quick follow up for me. With the rigs that are working today and about to go to work, clearly, over the last decade, it was a tough, tough time. And they dramatically reduced the number and amount of spare parts and stuff on the rigs. Are the rigs back up to kind of the normalized level of spare parts on the rigs that they usually require? I think for a deepwater rig, it's $50, $60 million worth of equipment. Or are they still understaffed? Good question.

Speaker Change: Shifting over to renewables, we have a fantastic opportunity that we haven't talked much about in the past, but it's around floating wind in particular in the North Sea, where we're working closely with.

Speaker Change: Kind of a partner over there to a party that is pursuing development and that's a multibillion dollars kind of opportunity for <unk> and then has implications for floating wind.

Speaker Change: Deepwater areas in Asia, as well, so not in the traditional oil and gas space, but in renewables.

Speaker Change: We could see some some help from that that area as well and that's on top of the wind turbine installation vessel in shallow waters, the fixed wind installation vessels.

Jose A. Bayardo: The reason that we're reactivating, we've got close to 30 now that we're working on now. Part of the reactivation plan will be to replenish those spare parts that they have depleted. And our customers, as you know, are really, really good at cannibalizing and going to their unutilized rigs and cold-stacked and even one-stacked rigs to source spare parts, both land and offshore. And so most of these rigs have been picked over already. So part of the reactivation plan for the rigs that we're working on now includes replenishing spare parts so they can go back to work. And I guess I should probably fill in the rest of the picture too, it's interesting.

Speaker Change: Dave mentioned, we wouldn't be surprised to see a couple of orders for <unk>.

In 2024, plus sort of growing demand for cable lay vessels that also support those offshore shallow water installations as well so there's a lot happening offshore and that's really good for <unk>, given our high mix and high level of participation and expertise in that in that area.

Speaker Change: Got it got it.

Speaker Change: Thanks for highlighting what's happening on the renewable side as well just as a follow up here then.

Speaker Change: You had mentioned.

Speaker Change: Jose has some stats with regards to where youre at currently with reactivation recertification and upgrade projects I believe your backlog around this time last year stood at <unk>.

Jose A. Bayardo: There were a lot of rigs that were delivered in 2014, 2015, 2016, 2017 at the back end of the last kind of capital supercycle. Those rigs are facing their 10-year special purpose survey, and so they have to come into the shipyard and be inspected.

Speaker Change: 83 projects could you just give us an update.

Speaker Change: Where youre at.

Speaker Change: Yes, I think I mentioned, just a moment ago 30 offshore rig reactivation projects. Those are those are all that are north of the two 2 million.

Speaker Change: No.

Jose A. Bayardo: And that's a pretty major waypoint in their lives and an opportunity for NOV to, again, rebuild equipment, replace equipment, add additional capabilities that maybe their oil and gas operator customers want to add while those rigs are in the shipyards. And so we're kind of coming up to that for a lot of rigs in the fleet right now.

Speaker Change: There are a lot smaller rigs that we also do work on that we also logged in this project.

Speaker Change: Thanks for taking my questions.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Scott Gruber with Citigroup. Your line is open. Please go ahead.

Jose A. Bayardo: Thanks, Clay. You bet. Thanks, James. Thank you. And one moment, as we move on to our next question, and our next question is going to come from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead.

Scott Andrew Gruber: Yes, good morning.

Scott Andrew Gruber: Good morning, Scott.

Scott Andrew Gruber: I'm curious are the Saudi capex shift impacts <unk>.

Scott Andrew Gruber: Imagine when these jackets go down there is there is a virtue.

Speaker Change: Uh huh.

Jose A. Bayardo: Good morning, guys. Hi Don. Morning. Dope. Clay, within that masterful, you know, expansive refresher you just gave us on all of the exposures and areas that NOV participates in, right, from growing all the way through down to production, you know, infrastructure, capital equipment services. If we were to see, you know, a significant step up in offshore orders coming out of 2024 into 2025. Where would you most likely expect it to come from?

Speaker Change: Hit the grant <unk> and potentially some other product lines, but then you have a greater quantum of onshore rigs going to work.

Speaker Change: Over the next few years, which all required new pipe et cetera that startup.

Speaker Change: So if you put the new builds.

Side, which are largely contracted.

Speaker Change: How should we think about this.

Speaker Change: The Saudi Capex shift towards onshore in fact again.

Speaker Change: Yes, it's a good question Scott.

Speaker Change: We would prefer that we keep both sets of rigs running but that doesn't fit their plans we understand.

Jose A. Bayardo: Would it be, do you think, on the offshore drilling front in the form of upgrades or cold stack reactivations? Would you expect it to be, you know, the ramp in FPSO projects? Maybe, you know, subsea infrastructure like Plexapipe and other subsea hardware? Could you just give us an idea of sort of what the sequence of acceleration could look like to the extent that we get some?

Speaker Change: The energy ministries.

Directing the aramco to back off adding 1 million barrels per day given that.

Speaker Change: Natural gas liquids coming from the gas developments are going to add liquids to the kingdom and as well they will displace black oil that they were burning for electricity generation over there and so it makes sense I guess.

Jose A. Bayardo: I get the difference with this recovery, you know; it's slower and steadier. But if we get an acceleration with an offshore, where would you expect it to be? First, the rig reactivation offshore is underway. As I mentioned, we're reactivating a lot of rigs right now. Although, never say never in this industry, at some point in the future, we will see a new round of rig building.

Speaker Change: That has led us as.

Speaker Change: As you know.

Speaker Change: The suspension of I think they've announced 'twenty.

Speaker Change: Jackups contracts suspended maybe a couple of more to come the good news is <unk>.

Six of those that have been suspended so far have either secure the work elsewhere or very close to securing elsewhere coupled.

Speaker Change: The Arabian Gulf couple in India one.

Speaker Change: In Africa, one in the Asia Pacific area. So they are finding homes elsewhere and so we're hoping will continue to support those rigs as they move to other other other markets on the on the positive side of that leisure, though we.

Jose A. Bayardo: What I think is more likely to surprise on the upside is all the other more production-related offshore kit that NOV can provide to the FPSOs, including the flexible pipe and all the things that I just went through. We have a very large and meaningful opportunity there.

Speaker Change: Continue to be very excited about the kingdoms.

Speaker Change: Goal to lift the gas production, two and a half Bcf per day.

Speaker Change: Mostly coming from your unconventional before yes.

Jose A. Bayardo: These companies pull the trigger on their FIDs. The projects then are typically moved to APCs for more detailed planning, drawings, and purchasing. The awards are a little later in that cycle.

Yes field development.

Speaker Change: Back in 2020.

Speaker Change: Rig count there has continued to grow.

Speaker Change: They are securing new rigs for both debt as well as I think additional gas production out of <unk> and <unk>.

Jose A. Bayardo: I think that's what's next for NOV. I also want to say that, by shifting over to renewable energy, we have a fantastic opportunity that we haven't talked much about in the past. It's around floating wind, in particular in the North Sea, where we're working closely with a partner over there, a party that's pursuing development. That's a multibillion-dollar opportunity for NOV. This has implications for floating wind in deep-water areas in Asia as well.

Speaker Change: Just a couple.

Speaker Change: A couple of weeks ago celebrated 23, new rigs are bringing into the kingdom.

Speaker Change: And that's in addition to the rigs that we're building in the Kingdom.

Speaker Change: Person on that are ongoing.

Speaker Change: Going to work.

Speaker Change: What's interesting to us about that there are a couple of things first of all the rigs that they are bringing in.

Speaker Change: Are all AC powered or all of it.

Available to be more closely controlled with electronics and software.

Speaker Change: It's really a step up in technology, and I think that speaks to <unk> desire as well as other season around the team around the Gulf. We are seeing the same desire to bring in better technology rigs and to help sort of bridge the performance gap between our rig fleet that they have versus the rig fleet.

Jose A. Bayardo: Not in the traditional oil and gas space, but in renewables. We could see some help from that area as well. That's on top of the wind turbine installation vessel in shallower waters, the fixed wind installation vessel that Jose mentioned.

Speaker Change: They can do and so that's I think a good development for us.

Speaker Change: And then the other way.

Speaker Change: We can.

Speaker Change: Is participating in that as through the supply of all of the production.

Jose A. Bayardo: We wouldn't be surprised to see a couple of orders for WTIBs in 2024, plus growing demand for cable-lay vessels that also support those offshore shallow-water installations. There's a lot going on offshore, and that's really good for NOV, given our high mix and high level of participation and expertise in that area. Got it, got it.

Speaker Change: Equipment and kit that I mentioned earlier, we manufactured.

Speaker Change: <unk> in the Kingdom, we're the largest provider of production chokes worldwide, the largest provider of composite piping systems worldwide.

Speaker Change: We're seeing big orders and a lot of demand in the key to support gas production in both of those areas. In addition to separate those two.

Jose A. Bayardo: And thanks for highlighting what's happening on the renewable side as well. Just as a follow-up here, then, you mentioned that Jose has some stats with regard to where you're at currently with reactivation, recertification, and upgrade projects. I believe your backlog around this time last year stood at 83 projects. Could you just give us an update on where you're at? Yeah, when I think I mentioned just a moment ago, 30 offshore rig reactivation projects, those are all that are north of the $2 million number. Huge.

Speaker Change: Our gas dehydration technologies again, we're the largest provider of that and so there's a lot of ancillary kit the pull through those gas developments that will benefit.

Speaker Change: <unk> as well.

Speaker Change: And then the Jackups go back to work.

Speaker Change: Is that seating upgrades to equipment.

Speaker Change: The $1 12 week MTV as those rigs mobilized elsewhere.

Speaker Change: It may it depends on what their operator in these new markets once.

Jose A. Bayardo: We have a lot of smaller rigs that we also do work on that we also log in as projects. Thanks for taking my question. Do that.

Speaker Change: Say most upgrades to drilling equipment today are really prompted by the operator customer requiring that theres not a lot of <unk>.

Jose A. Bayardo: Thank you. Thank you, and one moment as we move on to our next question, and our next question is going to come from the line of Scott Gruber with Citigroup. Your line is open. Please go ahead.

Speculative investment by offshore drilling contractors, given what most of them just went through.

Speaker Change: Around around adding equipment, but the operators.

Jose A. Bayardo: Yes, good morning. [inaudible] Well, I'm curious how the Saudi CapEx shift impacts NOV. I imagine when these jackets go down, there's eventually a hit to Grand Pride Co and potentially some other product lines. But then you have a greater quantum of onshore rigs going to work over the next few years, which all require new pipe and bits, etc. at startup.

Speaker Change: Our stepping up and helping them out by paying higher most of these were paying for new equipment to the day rate and are also offering longer terms I think for both jackups and floaters youre seeing fixture.

Speaker Change: Fixtures extend out to be one of their contracts. So that both parties have have a shot at getting payback on these new capital investments in new capabilities, and that's kind of the dynamic at work there. So it depends on what the operators in these new markets.

Jose A. Bayardo: So you put the new builds to the side, which have long been contracted. How should we think about the Saudi CapEx shift towards onshore impact again in the VEA? Yeah, it's a good question, Scott.

Speaker Change: I got it I appreciate the correctly. Thank you you bet.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: Okay.

And our last question is going to come from the line of Kurt <unk> with benchmark. Your line is open. Please go ahead.

Jose A. Bayardo: We would prefer they keep both sets of ridges running, but that doesn't fit their plans. We understand the energy ministries directing Aramco to back off adding a million barrels per day, given that the natural gas liquids coming from the gas developments are going to add liquids to the kingdom, and, as well, they'll displace black oil that they were burning for electricity generation over there. And so it makes sense, I guess.

Kurt: Hey, good morning, everybody.

Kurt: I couldnt occurred.

Kurt: I always appreciate the color and the answer is very informative. Thank you.

Kurt: So so I got one big picture question and then one one financial question. So let me hit the financial question on first right.

Jose A. Bayardo: That's led, as you know, to the suspension of, I think they've announced 20 jackups, contracts suspended, maybe a couple more to come. The good news is six of those that have been suspended so far have either secured work elsewhere or are very close to securing work elsewhere, a couple in the Arabian Gulf, a couple in India, one in Africa, one in the Asia-Pacific area.

Kurt: You guys referenced you still have.

Kurt: More coming on the.

Kurt: Cost reduction front.

Kurt: So I appreciate that dynamic as we get out beyond 2024.

Kurt: Kind of curious as to.

Jose A. Bayardo: And so they're finding homes elsewhere, and so we're hoping we'll continue to support those ridges as they move to other markets. On the positive side of that ledger, though, we continue to be very excited about the kingdom's goal to lift its gas production to 2.5 BCF per day, mostly coming from their unconventional Jafura gas field development, which they FID, I think, back in 2020. The rig count there has continued to grow. They are securing new rigs for both that as well as, I think, additional gas production out of South Guar.

Kurt: What do you see the primary driver.

Kurt: For margin improvement.

Kurt: He is going to be more internal.

Kurt: Or is it going to be external for example, like pricing power or.

Kurt: Dynamics, yes, there is a little high.

Kurt: I would like to get your sense on how youre thinking about the margin improvement once you get beyond 25 or 24 excuse me.

Kurt: Hey, Kurt.

Kurt: Good question and I'll start off and I'm sure, we'll want to want to chime in on this one as well but.

Speaker Change: I think what we see there are several opportunities to continue to see.

Speaker Change: Movement or margin over the next several years. So obviously you touched on.

Speaker Change: The cost out program, we're still in the relatively early phases of that $75 million cost out.

Jose A. Bayardo: And just a couple weeks ago, they celebrated 23 new rigs they're bringing into the kingdom, and that's in addition to the rigs that we're building in the kingdom for Sinod that are going to work. What's interesting to us about that, there's a couple things that are. First of all, the rigs that they're bringing in are all AC powered, and they're all available to be more closely controlled with electronics and software.

Speaker Change: Program really got started at the very end of last year and we've probably worked about we have worked our way through about 30% of that at this point in time.

Speaker Change: We expect that to pick up a bit into Q2, which is why you see unimproved land and the incremental margins.

Speaker Change: But we're always going to be but really expect that wind out as we've worked our way through Q3 and Q4, we're going to continue to look for other opportunities, we're always looking to streamline and optimize the operations within the company, but the bolt we've done obviously done a tremendous amount of heavy lifting over the last several years.

Jose A. Bayardo: It's really a step up in technology, and I think that speaks to Aramco's desire as well as other NOCs around the gulf. We're seeing the same desire to bring in better technology rigs and to help sort of bridge the performance gap between the rig fleet that they have versus the rig fleet that they can do. And so that's, I think, a good development for us. And then the other way NOV can participate in that is through the supply of all of the production equipment and kit that I mentioned earlier. We manufacture chokes in the kingdom.

Speaker Change: And this is another small step relatively speaking from a cost out standpoint that we will have wrapped up in 'twenty four as we get into 'twenty five and beyond.

Speaker Change: Youre going to see the continued progression.

Speaker Change: Lower margin.

Speaker Change: Contracts and projects winding out of the system, we've been seeing that over the last several quarters, we will see that gradually take place through the remainder of 'twenty four and then clay touched on expectations for one of our businesses in particular to really come to an end of some of those contracts quite suddenly really.

Jose A. Bayardo: We're the largest provider of production chokes worldwide, and the largest provider of composite piping systems worldwide, and we're seeing big orders and a lot of demand in the kingdom to support gas production in both of those areas, in addition to separators for gas dehydration technologies. Again, we're the largest provider of that. And so there's a lot of ancillary equipment that gets pulled through those gas developments that would benefit NOV as well. And then the jackups go back to work.

Speaker Change: The end of 'twenty, four should more or less be a step change.

Speaker Change: In 2005, which should allow more margin improvement that's one out of many businesses, but still still still makes a difference also will continue to see improved absorption.

Speaker Change: Whilst the entire footprint think of when we get into 'twenty five we will see continued.

Jose A. Bayardo: Is that feeding, you know, upgrades to equipment, you know, are there dollars flowing to the NAV as those rigs mobilize elsewhere? It may, it depends on what their operator in these new markets wants. I would say most upgrades to drilling equipment today are really prompted by the operator customer requiring them. There's not a lot of speculative investment by offshore drilling contractors, given what most of them just went through around adding equipment, but the operators are stepping up and helping them out by paying higher moat fees or paying for new equipment through the day rate.

Speaker Change: Strong activity in international offshore market, and we expect North America to be much healthier right. Now we are crosscurrents with international more than offsetting what's happening in North America, but North America is certainly a drag and if we can get all eight cylinders firing that's another step up from a margin improvement standpoint, just from a throughput.

Speaker Change: Point of view and then lastly pricing.

Speaker Change: Okay.

Speaker Change: As the cycle progresses advances and matures.

That's really when we have a better opportunity once capacity is fully absorbed.

Speaker Change: And that becomes more of a conversation of how quickly can I get something versus what's the price that's sort of the final leg that we are looking forward to and counting on in the not too distant future.

Speaker Change: That's great color and then.

Jose A. Bayardo: And they're also offering longer terms. I think for both jackups and floaters, you're seeing fixtures extend out to the longer contracts so that both parties have a shot at getting payback on these new capital investments and new capabilities. That's kind of the dynamic at work there.

Speaker Change: Bigger picture dynamic right, we've had a lot of disk.

Speaker Change: A discussion of late.

Increasing crescendo of discussion around.

Speaker Change: The data center build out and what that's going to mean for.

Speaker Change: Yes, great great demands et cetera, right. So.

Jose A. Bayardo: So it depends on what the operators in these new markets want. I got it. I appreciate the call, Clay.

Speaker Change: Alright.

Speaker Change: I guess I'm curious on two fronts number one do you see an opportunity for <unk> to provide some elevated equipment into the data center build out infrastructure and or what do you think the ultimate pull is going to be with respect to your customer base right in terms of drilling activity in frac activity and so on.

Jose A. Bayardo: Thank you. Thank you, and one moment for our next question. And our last question is going to come from the line of Kurt Hallead with Benchmark. Your line is open. Please go ahead.

Jose A. Bayardo: Hey, good morning, everybody. Hi, Kurt. Morning, Kurt. I always appreciate the color and the insides; they are very informative. So, I have one big picture question and then one financial question. So let me hit the financial question first, right? As you guys referenced, you still have more coming on the cost reduction front. So appreciate that dynamic as we get out beyond 2024. I'm just kind of curious as to what you see the primary driver for margin improvement? Do you think it is going to be more internal?

Speaker Change: Yes, I think we're probably frankly more likely to be a customer of those data centers as our digital offering continues to grow and we were employing artificial intelligence and a lot of sophisticated edge compute and cloud offerings.

Speaker Change: It is growing pretty rapidly here.

Speaker Change: But that's kind of a second order implications for our business is.

Speaker Change: We both know these data centers are going to drive up electricity demand.

Jose A. Bayardo: Or is it going to be external, for example, like pricing power or, you know, those dynamics? Just a little, how you, I'd like to get your sense on how you're thinking about the margin improvement once you get beyond, or 24. Hey, Kurt, thanks for the good question. I'll start off, and Clay, I'm sure, will want to chime in on this one as well.

Speaker Change: The U S, which is going to.

Speaker Change: Require more natural gas require more sources of electricity, including renewables and Curt as Youre aware were.

Speaker Change: We're pursuing very disruptive.

Speaker Change: Technology in the land wind space that we're pretty excited about through a keystone efforts and making good progress there and so I think I think nov's participation in that phenomenon.

Jose A. Bayardo: But I think what we see is there are several opportunities to continue to see an improvement in our margin over the next several years. So, obviously, you touched on the cost-out program. We're still in the relatively early phases of that $75 million cost-out program. It really got started at the very end of last year, and we've probably worked our way through about 30 percent of that at this point in time.

Speaker Change: U S electricity demand rising sharply is going to be more of a realm.

Speaker Change: Helping our customers actually provide that electricity, both renewables as well as in the traditional natural gas base and so really it's kind of interesting developments in that area.

Jose A. Bayardo: We expect that to pick up a bit into Q2, which is why you see an improvement in the incremental margins. But we're always going to be—but really expect that to wind out as we work our way through Q3 and Q4. We're going to continue to look for other opportunities. We're always looking to streamline and optimize the operations within the company. But the bolt—we've obviously done a tremendous amount of heavy lifting over the last several years, and this is another small step, relatively speaking, from a cost-out standpoint that we'll have wrapped up in 24. As we get into 25 and beyond, you're going to see the continued progression of lower-margin contracts and projects winding out of the system. We've been seeing this over the last several quarters.

Speaker Change: For sure. Okay. That's great guys. Thank you I appreciate it. Thank you. Thank you Kurt.

Speaker Change: Thank you and I would now like to hand, the conference back to Clay Williams for further remarks.

Clay C. Williams: Thank you Michele I appreciate everyone joining us this morning, and we look forward to speaking to you again in July when we report our second quarter earnings.

Speaker Change: Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: [music].

Jose A. Bayardo: We'll see that gradually take place through the remainder of 2024. And as Clay touched on, expectations for one of our businesses in particular to really come to an end of some of those contracts quite suddenly, really at the end of 2024, should more or less be a step change in 2025, which should allow more margin improvement. That's one out of many businesses, but it still makes a difference.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Sure.

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Speaker Change: Okay.

[music].

Speaker Change: Okay.

Speaker Change: Sure.

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Jose A. Bayardo: Also, we'll continue to see improved absorption across the entire footprint. I think when we get into 2025, we'll see continued strong activity in international offshore markets, and we expect North America to be much healthier. Right now, we have cross-currents with international more than offsetting what's happening in North America, but North America is certainly a drag.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Jose A. Bayardo: If we can get all eight cylinders firing, that's another step up from a margin improvement standpoint, just from a three-foot point of view. And then, lastly, pricing. You know, as the cycle progresses and advances and matures, that's really when we have a better opportunity once capacity is fully absorbed, and it becomes more of a conversation of how quickly can I get something versus what's the price. That's sort of the final leg up that we are looking forward to and counting on in the not-too-distant future. That's great, Keller!

Jose A. Bayardo: And then Clay, bigger picture dynamic, right? We've had a lot of discussion of late, an increasing crescendo of discussion around, you know, the data center build out and what that's going to mean for, you know, Yeah, great, great demand, etc. Right. So, you know, I guess I'm curious on two fronts.

Speaker Change: Yes.

Speaker Change: [music].

Jose A. Bayardo: Number one, do you see an opportunity for NOV to provide some element of equipment into the data center build out infrastructure? And, or, you know, what do you think the ultimate pull is going to be with respect to your customer base, right? In terms of drilling activity, and crack activity?

Jose A. Bayardo: Yeah, I think we're probably, frankly, more likely to be a customer of those data centers as our digital offering continues to grow. I mean, we employ artificial intelligence and a lot of sophisticated edge compute and cloud offerings, which are growing pretty rapidly here. But that's kind of the second-order implications for our business, as we both know, these data centers are going to drive up electricity demand across the U.S., which is going to require more natural gas and more sources of electricity, including renewables.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Jose A. Bayardo: And, Kurt, as you know, we're pursuing very disruptive technology in the land wind space that we're pretty excited about through our Keystone efforts and making good progress there. So I think NOV's participation in that phenomenon of U.S. electricity demand rising sharply is going to be more around helping our customers actually provide that electricity, both through renewables as well as in the traditional natural gas space. And so really kind of interesting developments in that area, for sure. Okay, that's great, guys. Thank you. I appreciate it. Thank you. Thank you, Kurt. Thank you. And I would now like to hand the conference back to Clay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Jose A. Bayardo: Thank you, Michelle. We appreciate everyone joining us this morning, and we look forward to speaking to you again in July when we report our second quarter earnings. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Jose A. Bayardo: Thomas Curran, James West, Douglas Becker, Atidrip Modak, Kurt Hallead, Scott Gruber, Luke Lemoine, Unknown Executive, Arun Jayaram, Blake McCarthy, National Oilwell Varco Inc. , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Good day, ladies and gentlemen, and welcome to the NOV first quarter 2024 earnings, At this time, all participants are in a listen. Later we will conduct the question and answer session and instructions will follow at that, As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Amy D'Ambrosio, Director of Investor Relations. Ma'am, please go ahead.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Jose A. Bayardo: Thank you. Welcome everyone to NOV's First Quarter 2024 Earnings Conference. With me today are Clay Williams, our Chairman, President, and CEO, and Jose Bayardo, our Senior Vice President and CFO. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities law. They involve risks and uncertainty, and actual results may differ.

Speaker Change: Yes.

Speaker Change: [music].

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Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

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Speaker Change: Okay.

Jose A. Bayardo: No one should assume these forward-looking statements remain valid later in the quarter or later in the year. For a more detailed discussion of the major risk factors affecting our business, please refer to our latest forms, 10-K and 10-Q, filed with the Securities and Exchange Commission. Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding gap measures are in our earnings release, available on our website. On a U.S. GAAP basis, for the first quarter of 2024, NOV reported revenues of $2.16 billion and a net income of $119 million, or $0.30 per fully diluted year.

Speaker Change: Sure.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

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Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Okay.

Speaker Change: [music].

Speaker Change: Okay.

Great.

Speaker Change: Okay.

Speaker Change: [music].

Jose A. Bayardo: Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA as defined in our earnings. Later in the call, we will host a question and answer session. Please limit yourself to one question and one follow-up to permit more participation.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Jose A. Bayardo: Now, let me turn the call over to Amy. In the first quarter of 2024, NOV generated revenue of $2.16 billion, an increase of 10% compared to the first quarter of 2020. The company generated fully diluted earnings of $0.30 per share.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

[music].

Jose A. Bayardo: Pre-tax profit increased 14% year over year, but a higher effective tax rate and lower income from our post-Alpine joint venture in the first quarter led to lower earnings per share year over year. Adjusted EBITDA was $241 million, or 11.2% of revenue. A $46 million increase from the first quarter of 2023, representing 24% leverage year over year. NOV's first quarter EBITDA and EBITDA margin were its highest in nine years, and overall, it was a solid start to 2020.

Speaker Change: Sure.

Speaker Change: Okay.

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Speaker Change: Yes.

Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Jose A. Bayardo: We began the year with several new business leaders across our organization and began operating under two new segments, energy products and services, and energy. Revenue from energy products and services grew 8% compared to the pro forma first quarter of 2023. Despite lower global rig count, your segment continued to realize good adoption of its portfolio of technologies and a rising demand for the tools and consumables it manufactures, particularly in the international year-over-year top-line growth was broad-based as all but one of its businesses posted increased Completion Tools, Drill Pipe, and Rig Instrumentation, in particular, posting strong double- Our new energy equipment segment revenues grew even more.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: Yes.

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Speaker Change: Yes.

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Speaker Change: Okay.

Jose A. Bayardo: Rising offshore activity fueled demand for equipment tied to deep water developments, FPSOs, and drilling rig reactivations and resurfacing to enable the segment to overcome lower sales of pressure pumping equipment to North America. As part of our new structure, we are reporting a March 31, 2024 backlog for the energy equipment segment of $3.96 billion, which is comprised of NOV's contracted longer cycle manufacturing and projects. Backlog declined 5% through the quarter as bookings of $390 million represented a book-to-bill of $77 million.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Thank you.

Yes.

Speaker Change: Okay.

Speaker Change: Good day, ladies and gentlemen, and welcome to the <unk> first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this call.

Call is being recorded I would now like to introduce your host for today's conference Ms. Amy Dambrosio director of Investor Relations Ma'am. Please go ahead.

Jose A. Bayardo: We nevertheless see strong demand and have started the second quarter off with some big orders. For Energy Equipment for Offshore Work in Latin America during the first quarter, a required technical clarification delayed the signing of the contract. Capital Equipment Orders We feel confident in the outlook and strength of the market. Solid and stable commodity prices and expiration successes in new basins provide a foundation for growing offshore.

Amy Dambrosio: Welcome everyone to <unk> first quarter 2024 earnings conference call with me today are clay Williams, our chairman, President and CEO and Jose Bayardo, Our senior Vice President and CFO.

Amy Dambrosio: Before we begin I would like to remind you that some of today's comments are forward looking statements within the meaning of the federal securities laws.

Amy Dambrosio: Involve risks and uncertainty and actual results may differ materially.

Amy Dambrosio: No one should assume these forward looking statements remain valid later in the quarter for later in the year.

Jose A. Bayardo: Foundation, which is expected to drive offshore FIDs over $100 billion per year for the next. Despite Saudi Arabia trimming or postponing its maximum sustainable capacity, we are also optimistic about onshore international development, particularly in the Middle East, where dozens of rigs are being tendered and a couple of national oil companies are pursuing unconventional development. Our optimism and confidence continue.

Amy Dambrosio: For a more detailed discussion of the major risk factors affecting our business. Please refer to our latest forms 10-K, and 10-Q filed with the Securities and Exchange Commission.

Amy Dambrosio: Our comments also include non-GAAP measures.

Amy Dambrosio: Conciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

Amy Dambrosio: On a U S GAAP basis for the first quarter of 2024 and over your reported revenues of $2. One 6 billion and a net income of $119 million or <unk> 30 per fully diluted share.

Jose A. Bayardo: That's why last night we announced the significant expansion of our return of capital. Including our plan to increase our base dividend by 50% and a $1 billion dollar share repurchase program. Our investments over the past several years in new digital edge compute, optimization fueled by artificial intelligence, mechanization and automation, software control systems, and remote monitoring. Equipment Electrification, and Emissions Reduction.

Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA as defined in our earnings release.

Amy Dambrosio: Later in the call we will host a question and answer session. Please limit yourself to one question and one follow up to permit more participation.

Now, let me turn the call over to clay. Thank you Amy.

Amy Dambrosio: For the first quarter of 2024, <unk> generated revenue of $2 $1 6 billion, an increase of 10% compared to the first quarter of 2023. The company generated fully diluted earnings of <unk> 30 per share for the first quarter down <unk> <unk> compared to the prior year first quarter.

Jose A. Bayardo: Drill Cuttings Processing, Artificial Lift, and Downhole Drilling Technologies are leading to new, promising customer conversations and a growing number of users of the. Together with the recovery of oil field activity in key offshore and international markets, new NOV products and businesses underpin our buoyant future for the next decade and our plan to substantially ramp up our return. After a challenging few years, we expect to continue to improve our profitability to drive EBITDA margins into the 14-15% range as we exit 2024 and to generate more cash as working capital moves past first quarter seasonality and normalizes through the remainder. Continued cost reductions are an important part of our plan, too, and our new segment structure is facilitating additional efficiency improvements as we consolidate more manufacturing locations. Centralize certain supply chain functions, engage engineering talent more collaboratively, and benefit from greater marketing coordination across business units.

Amy Dambrosio: Pretax profit increased 14% year over year, but a higher effective tax rate and lower income from our folks to LPG joint venture in the first quarter led to lower earnings per share year over year, adjusted EBITDA was $241 million or 11, 2% of revenue of $46 million increase from the first quarter of 2023, representing 20.

Amy Dambrosio: 4% leverage year over year.

Amy Dambrosio: These first quarter, EBITDA, and EBITDA margin, where its highest in nine years and overall it was a solid start to 2024.

Amy Dambrosio: We began the year with several new business leaders across our organization and began operating under two new segments energy products and services and energy equipment.

Amy Dambrosio: Revenue from energy products and services grew 8% compared to the pro forma first quarter of 2023, despite lower global rig count year over year.

Jose A. Bayardo: Expect the $75 million cost reduction initiative we announced last July to continue to roll out through the remainder of the year, having achieved about 30% so far. Strategically, through the last decade, NOV has reinvented itself with new products and technologies that I mentioned earlier, recognizing that organic innovation occasionally supplemented by targeted acquisition here was the most capital efficient way to reposition our franchise to meet the evolving needs of oil.

Amy Dambrosio: The segment continued to realize good adoption of its portfolio of technologies and a rising demand for the tools and consumables that manufacturers, particularly in the international and offshore markets.

Amy Dambrosio: Year over year topline growth was broad based as all but one of its business has posted increased sales with completion tools drill pipe and rig instrumentation in particular, posting strong double digit gains.

Amy Dambrosio: Our new energy equipment segment revenues grew even more up 12% year over year on a pro forma basis.

Amy Dambrosio: Rising offshore activity fueled demand for equipment tied to deepwater developments, <unk> and drilling rig reactivation and re certifications, which enabled the segment to overcome lower sales of pressure pumping equipment to North America year over year.

Jose A. Bayardo: The two acquisitions we closed during the first quarter are good examples of this. Notably, these acquisitions were made at multiples well below the multiple of our second quarter sale of our pole products business, and below multiples were NOV trades, in effect, reallocating capital across our portfolio to improve profitability. In the first quarter, we acquired Helenus, which brings us the technology underlying our InnovaTherm cuttings process.

Amy Dambrosio: As part of our new structure, we are reporting a March 31, 2020 for backlog for energy equipment segment of $3 96 billion.

Amy Dambrosio: Which is comprised of <unk> contracted longer cycle manufacturing and project work back.

Amy Dambrosio: Backlog declined 5% through the quarter as bookings of $390 million represented a book to bill of <unk>, 77%.

We nevertheless, see strong demand and have started the second quarter off with some big wins, while we won a $250 million plus order.

Jose A. Bayardo: This technology works in concert with dryers and centrifuge technologies we've developed internally to process drill cuttings for safe environmental use. We've deployed edge compute and condition-based monitoring to optimize this onsite project, dramatically lowering greenhouse gas emissions for offshore operators who are experiencing high. We expect our fleet of units on rent to grow from four in the first quarter to seven by the end of the year. Our acquisition of the Extract Electric Submersible Pump business brings an opportunity to deploy our organically developed MaxEdge computing platform for artificial lift and production.

Amy Dambrosio: For energy equipment for offshore work in Latin America during the first quarter a required technical clarification delayed signing of the contract until April.

Amy Dambrosio: Capital equipment orders are typically lumpy, but we feel confident in the outlook and strength of the market solid and stable commodity prices and exploration successes in new basins provide a foundation for growing offshore activity.

Amy Dambrosio: Foundation, which is expected to drive offshore <unk> over $100 billion per year for the next few years and a 50% plus uplift in <unk> ordered in the next five years compared to the previous slide in spite of Saudi Arabia, trimming or postponing its maximum sustainable capacity ambitions in the offshore.

Jose A. Bayardo: As operators extend their well profiles from 2-mile laterals to 3-mile laterals, their initial gross volumes produced through each individual wellhead will increase significantly, a market trend that we expect to provide additional tailwinds to ESP. It also complements our existing artificial lift, choke, separation, pumping, and processing. We believe we can leverage NOB scale. We're delighted that these two strong businesses are now part of the NOV family and should benefit from complementary technologies developed organically within. The MaxEdge platform also provides the foundation for other new products as well, like MaxCompletions, which has been adopted by dozens of companies and thousands of individual users.

Amy Dambrosio: We are also optimistic about onshore international developments, particularly in the middle East where dozens of rigs are being tendered and a couple of national oil companies are pursuing unconventional developments in earnest.

Amy Dambrosio: Our optimism and confidence to continue to grow that's why last night, we announced a significant expansion of our return of capital program, including our plan to increase our base dividend by 50% and a $1 billion share repurchase authorization Jose will go into more details of the program in a few minutes.

Amy Dambrosio: Our investments over the past several years and new digital edge compute optimization fueled by artificial intelligence mechanization and automation software control systems and remote monitoring equipment electrification emissions reductions.

Amy Dambrosio: Drill cuttings processing artificial lift of downhole drilling technologies are leading to new promising customer conversations and a growing number of users of these new products together with the recovery of oilfield activity in key offshore and international markets, New <unk> products and businesses underpin our boy and outlook for the next decade, and our plan to substantially ramp our return of capital to our shareholders.

Jose A. Bayardo: In fact, revenues from the Max family of products increased 35% sequentially and two and a half times from the. Other new technology developments range from new products like our Positrack torsional vibrational mitigation tool to our Atom RTX rig robotics system and our downhole broadband solutions to our investments in startups, like Keystone Tower Systems, where we aim to revolutionize onshore wind towers. Innovation takes time and, frankly, startup costs, which vary across. Nevertheless, our success and innovation are what will continue to differentiate our business and drive improved profitability over the next several years.

Amy Dambrosio: After a challenging few years, we expect to continue to improve our profitability to drive EBITDA margins into the 14% to 15% range as we exit 2024 and to generate more cash as working capital moves past first quarter seasonality and normalizes through the remainder of the year.

Amy Dambrosio: Cost reductions are an important part of our plan too and our new segment structure is facilitating additional efficiency improvements as we consolidate more manufacturing locations centralized certain supply chain functions engaged engineering talent more collaboratively and benefit from greater marketing coordination across business units and segments, we expect the $75 million cost.

Jose A. Bayardo: We expect improving margins in our backlog to contribute to higher profitability as well, particularly in 2025 and beyond, as lower margin frame agreements signed during the pandemic lows. For instance, one of our energy equipment business units foresees a roughly 800 basis point improvement in margins from 2024 to 2025 due to its steady high-grading of contracts with improved inflation risk. We've been systematically working towards higher margin, lower risk contracts, walking away from opportunities where we see insufficient margins or too much. The key to success for NOV is to demonstrate value, as it always has been.

Amy Dambrosio: Initiative, we announced last July to continue to rollout through the remainder of the year, having achieved about 30%, so far and expecting it to accelerate during the second quarter.

Amy Dambrosio: Strategically through the last decade, <unk> has reinvented itself with new products and technologies that I mentioned earlier, recognizing net organic innovation occasionally supplemented by targeted acquisition here or there was the most capital efficient way to reposition our franchise to meet the evolving needs of the oilfield.

Amy Dambrosio: The two acquisitions, we closed during the first quarter are good examples of this approach.

Jose A. Bayardo: Our new technologies do that, and our customers' programs and developments are evolving to benefit even more from this value. International and offshore operators are going back to work, and they want operational efficiencies obtainable with the new NOV2. They want to reduce their environmental impact.

Amy Dambrosio: Notably these acquisitions were made at multiples well below the multiple of our second quarter sale of our pulp products business and below multiples, where <unk> trades and affect reallocating capital across our portfolio to improve profitability and returns.

Amy Dambrosio: During the first quarter, we acquired <unk>, which brings us to the technology underlying our <unk> cuttings processing unit. This technology works in concert with dryers and centrifuge technologies, we developed internally to process drill cuttings for safe environmental disposal, we've deployed edge compute and condition based monitoring to optimize this onsite process.

Jose A. Bayardo: They want to drive better safety. We can help. Consolidation in North America is being led by operators who value technology and are focused on continuous improvement. Again, we can help. Competitive pricing dynamics and inflation continue to be a headwind for March. But as our technologies roll out day by day, customer by customer, our value proposition becomes clearer. That's a great place to reach.

Amy Dambrosio: Which dramatically lowers greenhouse gas emissions for offshore operators, who are expressing high demand. We expect our fleet of units on rent to grow from four in the first quarter to seven by the end of the second quarter.

Jose A. Bayardo: Before I hand it over to Jose, I want to say thank you to all our employees listening. NOV continues to transform this industry in so many ways, and that is directly due to your ingenuity and your hard work. We appreciate it. Thank you, Clay.

Amy Dambrosio: Our acquisition of the extract electric submersible pump business brings an opportunity to deploy our organically developed Max edge computing platform to artificial lift and production optimization as operators extend their well profiles from two mile laterals to three mile laterals are initial gross volumes produced through each individual wellhead will increase significantly to a market trend that we saw.

Jose A. Bayardo: NOV's EBITDA increased 24% year over year to 241 million with margins improving 131 basis points to 11.2%. Cash flow used by operations was $78 million during the first quarter, driven primarily by seasonal bills and working capital and annual payments made in the first quarter. Working capital increased $395 million sequentially due primarily to the decrease in accrued liabilities associated with the annual payments made during the first quarter and the two acquisitions we completed, which While operations consumed cash, the use was well below what we consumed in the first quarters of the last two years, which reflects the turn in our business that gives us confidence in our ability to generate a substantial amount of cash flow over the next several years. We believe NOV is well positioned to deliver strong performance as the cycle matures from a nascent recovery and evolves into an environment where later cycle equipment and technology businesses will outperform.

Amy Dambrosio: Spec to provide additional tailwind to ESP demand. It also complements our existing artificial lift choke separation pumping and processing products and we believe we can leverage <unk> scale and footprint to grow this business.

Amy Dambrosio: We are delighted that these two strong businesses are now part of the <unk> family and should benefit from complementary technologies developed organically within.

Amy Dambrosio: The Max Edge platform also provides the foundation for other new products as well like Max completions, which has been adopted by dozens of companies and thousands of individual users in fact revenues from the Max family of products increased 35% sequentially in two and a half full from the first quarter of last year.

Amy Dambrosio: Other new technology developments range from new products like our positive track torsional vibration mitigation tool to our atom, our T X rig robotic system and our downhole broadband solutions to our investments in startups like Keystone Tower systems, where we aimed to revolutionize onshore wind tower construction.

Amy Dambrosio: Innovation takes time, and frankly startup costs, which vary across these initiatives. Nevertheless, our success and innovation are what will continue to differentiate our business and drive improved profitability over the next several years.

Jose A. Bayardo: As Clay noted, an improved market environment, differentiated technologies that we've developed over the last several years, and our focus on operational efficiencies will continue to push margins in cash flow throughout 2024 and beyond. Our base forecast contemplates a sustainable multi-year period with modestly improving industry activity led by the international and offshore market. We expect soft activity in the U.S. through 2024, but anticipate a recovery in 2025 aided by increasing gas However, we expect improvements in oil-directed activity in the U.S. to be modest, with international and offshore activity providing most of the incremental supplies required to fuel the growth of the world's economy.

Amy Dambrosio: We expect improving margins in our backlog to contribute to higher profitability as well, particularly in 2025 and beyond as lower margin frame agreement signed during the pandemic Lowe's expire for instance, one of our energy equipment business units foresees, a roughly 800 basis point improvement in margins from 2024 to 2025 due to its steady.

Amy Dambrosio: Hi, Graham contracts would improve inflation risk protection, we've been systematically working towards higher margin lower risk contracts walking away from opportunities, where we see insufficient margins were too much risk.

Amy Dambrosio: The key to success for <unk> is to demonstrate value as it always has been our new technologies do that and our customers programs and developments are evolving to benefit even more from this value. That's what's changing international and offshore operators are going back to work and they want operational efficiencies obtainable with new technologies.

Jose A. Bayardo: As a result, we expect a little less volatility in NOC and IOC drilling activity over the next several years versus what we have seen from North American independents over the past. Against this backdrop, we anticipate generating high levels of free cash flow on an annual basis for each of the next several years. I want to stress the word annual when I talk about free cash flow because of the seasonality we experience during each year and the fact that we view our capital allocation activities on an annual, multi-year basis. Our priorities for capital allocation will remain consistent. One, Defend the balance, to Montana. 3. Invest in organic growth opportunities that drive superior risk-adjusted returns. 4. Pursue M&A that accelerates strategic growth initiatives at attractive returns. And 5.

To reduce their environmental impact they want to drive better safety, we can help.

Amy Dambrosio: Holiday season in North America is being led by operators, who value technology and are focused on continuous improvement again, we can help competitive pricing dynamics and inflation continue to be a headwind for margin improvement, but as our technologies rollout day by day customer by customer our value proposition becomes clearer and thats, a great place to reset pricing.

Amy Dambrosio: Discussions before I hand, it over to Jose I want to say, thank you to all our employees listening today.

<unk> continues to transform this industry in so many ways and that is directly due to your ingenuity and your hard work. We appreciate you.

Amy Dambrosio: Jose.

Jose A. Bayardo: Thank you clay Nov's EBITDA increased 24% year over year to $241 million with margins, improving 131 basis points to 11, 2% of sales.

Jose A. Bayardo: Return capital to our shareholders. Our balance sheet is currently in solid shape, with gross debt to EBITDA below our target level of 2 to 1. We intend to continue to use a portion of our free cash flow to return our net debt to EBITDA ratio below one. We have appropriately invested in our assets and expect a base level of investment to maintain and modernize our existing asset base over time of between $200 million and $250 million per year.

Jose A. Bayardo: Cash flow used by operations was $78 million during the first quarter, driven primarily by seasonal build in working capital and annual payments made in the first quarter working capital increased $395 million sequentially due primarily to the decrease in accrued liabilities associated with the annual payments made during the first quarter and the two acquisitions.

Jose A. Bayardo: <unk>, we completed which accounted for $106 million of the $127 million increase in inventory.

Jose A. Bayardo: While operations consumed cash use was well below what we consumed in the first quarters of the last two years, which reflects the turn in our business that gives us confidence in our ability to generate a substantial amount of cash flow over the next several years.

Jose A. Bayardo: Incremental to this base level of spend are attractive organic investment opportunities primarily related to the commercialization of many of the technologies we've deployed over the last several years. This could range from $50 to $150 million per year. All this is consistent with our expected $330 million capital expenditure plan for 2020. We will continue to look for compellingly valued strategic acquisitions that can accelerate our growth. Additionally, we anticipate we will complete occasional small bolt-on transactions similar to what we've done over the last several years. While the likelihood of larger acquisitions remains low, we intend to maintain the flexibility to pursue such a transaction.

Jose A. Bayardo: We believe <unk> is well positioned to deliver strong performance as the cycle matures from a nascent recovery in evolves into an environment, where later cycle equipment and technology businesses will outperform.

Jose A. Bayardo: As clay noted an improved market environment differentiated technologies that we've developed over the last several years and our focus on operational efficiencies will continue to push margins and cash flow throughout 2024 and beyond.

Jose A. Bayardo: Our base forecast contemplates a sustainable multi year period with modestly improving industry activity led by the international and offshore markets. We expect soft activity in the U S through 2024, but anticipate a recovery in 2025% aided by increasing gas exports. However, we expect improvement.

Jose A. Bayardo: With a healthy balance sheet, a well-maintained asset base, the expectation of smaller rifle shot acquisitions, and a high level of confidence in our outlook, where NOV's capital-light business model will generate substantial amounts of free cash. We're ready to increase the return of capital to our shareholders. Last night, we announced a plan to return at least 50% of our excess free cash flow, defined as cash flow from operations, less capital expenditures and other investments to our shareholders going forward, balancing the interests of all NOV stakeholders.

Jose A. Bayardo: In oil directed activity in the U S to be modest with international and offshore activity, providing most of the incremental supplies required to fuel the growth of the world economies. As a result, we expect a little less volatility in NOC and IOC drilling activity over the next several years versus what we've seen from North American independents over.

Jose A. Bayardo: For the past decade.

Jose A. Bayardo: Against this backdrop, we anticipate generating high levels of free cash flow on an annual basis for each of the next several years.

Jose A. Bayardo: Our framework utilizes a steady base dividend, opportunistic stock buybacks, and a supplemental dividend to true up returns to our shareholders on an annual basis. Specifically, we intend to return this capital through a combination of the following. First, we expect to increase our quarterly dividend from 5 cents to 7.5 cents per share.

Jose A. Bayardo: I want to stress the word annual when I talk about free cash flow because of the seasonality we experienced during each year and the fact that we view our capital allocation activities on an annual multiyear basis.

Jose A. Bayardo: Our priorities for capital allocation remain consistent one defend the balance sheet to maintain our asset base three invest in organic growth opportunities that drive superior risk adjusted returns for pursue M&A that accelerate strategic growth initiatives at attractive returns and five returned capital to our shareholders.

Jose A. Bayardo: 50% increase, beginning in the second quarter of 2024, resulting in an annual dividend payment of roughly $118 million. We believe base dividends provide an immediate direct benefit to all shareholders. Two, we plan to opportunistically repurchase shares under our new $1 billion, 36-month share repurchase authorization. With our share price trading below what we consider a fair value, we believe using some of our excess free cash flow to repurchase our shares will drive long-term value.

Jose A. Bayardo: Our balance sheet is currently in solid shape with gross debt to EBITDA below our target level of two to one.

Jose A. Bayardo: We intend to continue to use a portion of our free cash flow to return our net debt to EBITDA ratio below one times.

We have appropriately invested in our assets and expect our base level of investment to maintain and modernize our existing asset base over time of between 200 and $250 million per year.

Jose A. Bayardo: Incremental to this base level of spend our attractive organic investment opportunities primarily related to the commercialization of many of the technologies. We deployed over the last several years, which could range from $50 million to $150 million per year. All of this is consistent with our expected $330 million capital expenditure plan for 2024.

Jose A. Bayardo: Three, at the end of each year, we plan to utilize a supplemental dividend that would be payable in May, starting in 2025, to coincide with our annual shareholders meeting to true up our total annual return of capital to at least 50% of our excess free cash flow generated during the preceding calendar year. We believe this approach serves and balances the interests of all of our shareholders.

Jose A. Bayardo: We will continue to look for a compellingly valued strategic acquisitions that can accelerate our growth initiatives. We anticipate we will complete occasional small bolt on transactions similar to what we've done over the last several years, while the likelihood of larger acquisitions remains low we intend to maintain the flexibility to pursue such a transaction.

Jose A. Bayardo: We will not compromise the health of our balance sheet or our ability to invest in the business. Having experienced several routine industry cycles and one recent and very severe pandemic-induced cycle, we understand our business can change in a hurry. However, our capital return framework reflects our confidence in NOV's outlook and our commitment to delivering superior returns to our shareholders. Finally, acknowledging that none of us can control or accurately predict the future, I want to try to frame what we think is possible over the next four years, associated with our base industry outlook.

Jose A. Bayardo: With a healthy balance sheet, well maintained asset base, the expectation of smaller rifle shot acquisition and a high level of confidence in our outlook. We're nov's capital light business model will generate substantial amounts of free cash flow, we are ready to increase the return of capital to our shareholders.

Jose A. Bayardo: Last night, we announced a plan to return at least 50% of our excess free cash flow defined as cash flow from operations less capital expenditures and other investments to our shareholders going forward.

Jose A. Bayardo: To balance the interests of all <unk> stakeholders, our framework utilizes a steady base dividend opportunistic stock buybacks and a supplemental dividend to true up returns to our shareholders on an annual basis.

Jose A. Bayardo: Assuming continued operational and financial execution, what we believe is a reasonable EBITDA growth profile, and sticking to the minimum level of returns at 50% excess free cash, we estimate the aggregate capital to return to shareholders through 2027 could be in the range of $1.5 billion. Under this scenario, approximately 30%, or $470 million, of shareholder return would be provided through our base dividend, and the remaining $1.03 billion would be split between share buybacks and supplemental dividends. I'll now move on to the next segment.

Jose A. Bayardo: Specifically, we intend to return this capital through a combination of the following one we expect to increase our quarterly dividend from <unk> $2 seven five cents per share a 50% increase beginning in the second quarter of 2024, resulting in an annual dividend payment of roughly $118 million going forward we.

Jose A. Bayardo: Believe base dividends provide an immediate direct benefit to all shareholders too we plan to opportunistically repurchase shares under our new $1 billion 36 month share repurchase authorization with our share price trading below what we consider a fair value. We believe using some of our excess free cash flow to repurchase our shares will dry.

Jose A. Bayardo: Our new energy products and services segment generated revenue of $1.017 billion in the first quarter, an 8% increase compared to the first quarter of 2020. EBITDA increased $20 million to $174 million, or 17.1% of sales, representing flow through of 26% compared to the first quarter of 2023. Revenues for the segment are comprised of service and rentals, sales of consumable products, and sales from generally shorter-lived or consumable capital assets such as drill pipe, composite products, conductor pipe, and solids control. Tendency, demand, rise and fall more or less with. Sales mix for the segment during the first quarter was as follows: service and rental 49%.

<unk> long term value.

Jose A. Bayardo: At the end of each year, we plan to utilize a supplemental dividend that will be payable in may starting in 2025 to coincide with our annual shareholders meeting to true up our total annual return of capital to at least 50% of our excess free cash flow generated during the preceding calendar year.

Jose A. Bayardo: We believe this approach serves and balances the interests of all of our shareholders.

Jose A. Bayardo: We will not compromise the health of our balance sheet or our ability to invest in the business, having experienced several routine industry cycles and one recent and very severe pandemic induced cycle, we understand our business can change in a hurry. However, our capital return framework reflects our confidence in <unk> outlook, and our commitment to delivering superior rich.

Jose A. Bayardo: Turns to our shareholders five.

Jose A. Bayardo: Finally, acknowledging that none of us can control or accurately predict the future I want to try to frame. What we think is possible over the next four years associated with our base industry outlook, assuming continued operational and financial execution. What we believe is a reasonable EBITDA growth profile and sticking to the minimum level of returns at 50% excess free cash flow.

Jose A. Bayardo: Product sales, 20%, and Capital Equipment Sales, 31. As noted, the largest share of our energy products and services segments revenues come from service and rentals, including rentals of our technologically advanced downhole tools and drills, Coding and Inspection Services, Solids Control Services, and Drilling Data Acquisition, Analytics, and Optimization Services. With the exception of coating and inspection services, which tend to somewhat move with demand for drill pipe and other tubular goods, the remainder of our service and rental revenues tend to move in line with industry activity, plus or minus, usually plus, changes, and more.

We estimate the aggregate capital to return to shareholders through 2027 could be in the range of $1 5 billion.

Jose A. Bayardo: Under this scenario approximately 30% or $470 million of shareholder return would be provided through our base dividend and the remaining $1.0 billion to $3 billion would be split between share buybacks and supplemental dividends.

Speaker Change: I'll now move on to segment results.

Speaker Change: Our new energy products and services segment generated revenue of 1.0, $1 7 billion in the first quarter, an 8% increase compared to the first quarter of 2023, EBITDA increased $20 million to $174 million or 17, 1% of sales representing flow through of 26% compared to the first quarter of.

Jose A. Bayardo: First quarter revenue for the segment service and repair revenues increased in the low to mid single digits sequentially and year over year with growing demand from offshore and international markets, particularly the Middle East, more than offsetting lower activity in North America. Product sales are the segment's second category of revenues and are derived from sales of drill bits, completion tools, composite sleeves and liners, artificial lift products, shaker screens, and downhole tools, among others.

2023.

Speaker Change: Revenues for the segment are comprised of service and rentals sales of consumable products and sales from generally shorter lives or consumable capital assets, such as drill pipe composite products conductor pipe and solids control equipment that tend to see demand rise and fall more or less with activity sale.

Speaker Change: Sales mix for the segment during the first quarter was as follows service and rental 49% product sales, 20% and capital equipment sales 31%.

Speaker Change: As noted the largest share of our energy products and services segment's revenues come from service and rentals, including rentals of our technologically advanced downhole tools and drill bits coatings and inspection services solids control services and drilling data acquisition analytics and optimization services with the exception of coating and inspection service.

Jose A. Bayardo: Note that several of these products, such as drill bits and downhole tools, are also rental items, which I will cover in a moment. Product sales tend to be less volatile, less seasonal, and track activity a little more closely than revenue from capital equipment, although sales of products can also lag activity increases as our customers frequently stock inventories of these products.

Speaker Change: <unk>, which tend to somewhat move with demand for drill pipe and other tubular goods the remainder of our service and rental revenues tend to move in line with industry activity, plus or minus usually plus changes in market share.

Jose A. Bayardo: While individual sales are typically small and frequent, each operation can have occasional individually large shipments that may be requested by certain large NOCs who sometimes take bulk shipments one or two times per day. The segment has steadily increased product sales every quarter over the last year, with the first quarter of 2024 up 8% sequentially and 19% year over year. And we expect product sales to increase in the mid to upper single digits again in the second quarter. Looking at specific product lines, drill bits are capitalizing on increasing activity in the Middle East and offshore markets.

Speaker Change: First quarter revenue for the segment service and repair revenues increased in the low to mid single digits sequentially and year over year with growing demand from offshore and international markets, particularly the middle east more than offsetting lower activity in North America.

Speaker Change: Product sales or the segment second category of revenues are derived from sales of drill bits completion tools composite sleeves, and liners artificial lift products shaker screens and downhole tools among others.

Speaker Change: Note that several of these products such as drill bits and downhole tools are also rental items, which I'll cover in a moment.

Speaker Change: Product sales tend to be less volatile less seasonal and track activity a little more closely than revenue from capital equipment. Although sales of products can also lag activity increases as our customers frequently stock inventories of these products.

Jose A. Bayardo: Our completion tools business is also realizing solid levels of demand in the Middle East more than offsetting softness in North America. Sales of our Tubiscope ThruCoat sleeves, ZappLock connections, and Tektor thread protectors have remained solid, and we expect to see a significant increase in the second quarter from shipments to customers in the Middle East, Western Africa, and Latin America. Sales of our downhole tools decreased 20% sequentially after large shipments to Asia and Europe in the fourth quarter did not.

Speaker Change: While individual sales are typically smaller in frequent each operation can have occasional individually large shipments that may be requested by certain large nse's, who sometimes take bulk shipments one or two times per year.

Speaker Change: The segment has steadily increased product sales every quarter over the last year with the first quarter of 2024 up 8% sequentially and 19% year over year.

Speaker Change: And we expect product sales to increase in the mid to upper single digits again in the second quarter.

Speaker Change: Looking at specific product lines drill bits for capitalizing on increasing activity in the middle East and offshore markets. Our completion tools business is also realizing solid levels of demand in the middle east more than offsetting softness in North America.

Jose A. Bayardo: Finally, sales of the segment's capital equipment offerings, which include drill pipe, conductor pipe, fiberglass products, managed pressure drilling equipment, shale shakers, and other equipment, tend to be seasonal and volatile, often lagging activity. In the first quarter of 2024, revenues from capital equipment in our energy products and services segment increased 8% year over year but declined 23% sequentially due to the seasonal effect of customers making a big push to receive their equipment at year-end.

Speaker Change: Sales of our <unk> scope through KOTE sleeves, Zap Lok connections and texture thread protectors have remained solid and we expect to see a significant increase in the second quarter from shipments to customers in the Middle East Western Africa, and Latin America sales of our downhole tools decreased 20% sequentially after large shipments to Asia and Europe in the fourth quarter did not repeat.

Speaker Change: Finally sales of the segments capital equipment offerings, which include drill pipe conductor pipe fiberglass products managed pressure drilling equipment shale shakers and other equipment tends to be seasonal and volatile often lagging activity a bit and.

Jose A. Bayardo: Our drill pipe business unit experienced a greater than average seasonal decline given outsized fourth quarter shipments to international markets partially offset by increased U.S. land delivery. New orders, however, had a more favorable international and offshore weighting and included an award for the completion work of a riser destined for offshore Brazil. Capital Equipment Sales for our Solid Controls offerings were down in the mid 20% range sequentially due to the ordinary increase in year-end shares.

Speaker Change: In the first quarter of 2024 revenues from capital equipment in our energy products and services segment increased 8% year over year, but declined 23% sequentially due to the seasonal effect of customers, making a big push to receive their equipment at year end.

Speaker Change: Our drill pipe business unit experienced a greater than average seasonal decline given outsized fourth quarter shipments to international markets, partially offset by increased U S land deliveries.

Speaker Change: New orders, however had a more favorable international and offshore waiting and included an award for an offshore completion and Workover riser destined for offshore Brazil.

Jose A. Bayardo: Revenues increased in the upper teens percent range year over year on growing adoption of our alpha shaker and sales of other innovative drilling solutions, such as our Tundra Maxx mud chilling, Our two most seasonally volatile capital equipment offerings are a conductor pipe and our managed pressure drilling equipment. After a strong fourth quarter for the two product lines, both realized substantial sequential revenue drops, and yet both also have very strong outlooks resulting from the increase in offshore activity, conductor pipe casing orders achieved a book to bill of over 200% with solid demand coming from projects in the North Sea, West Africa, Gulf of Mexico and South America, which will allow for a much improved second, We're expecting revenues from both Conductor Pipe and MPD to more than double from the first quarter to the second quarter of 2020.

Speaker Change: Capital equipment sales for our solid controls offerings were down in the mid 20% range sequentially due to the ordinary increase in year end shipments revenues increase in the upper teens percent range year over year on growing adoption of our alpha Shaker and sales of other innovative drilling solutions, such as our tundra Max mud chilling systems are.

Speaker Change: Our two most seasonally volatile capital equipment offerings, our conductor pipe and our managed pressure drilling equipment.

Speaker Change: After a strong fourth quarter for the two product lines, both realized substantial sequential revenue drops and yet both also have very strong outlooks, resulting from the increase in offshore activity conductor pipe casing orders achieved a book to bill of over 200% with solid demand coming from projects in the North Sea West Africa Gulf of Mexico, and South America, which.

Speaker Change: Will allow for a much improved second quarter.

Speaker Change: We're expecting revenues from both conductor pipe in MPD to more than double from the first quarter to the second quarter of 2024.

Jose A. Bayardo: Our composite product offerings tend to be our least volatile capital equipment line in the segment, due in part to the diverse set of end markets served, which include midstream oil and gas, fuel handling, chemical, industrial, and marine. Demand for composite products is still seasonal, and sales declined in the low single-digit range sequentially, but are up mid single digits year over year.

Speaker Change: Our composite product offerings tend to be our least volatile capital equipment line in this segment due in part to the diverse set of end market served which include midstream oil and gas fuel handling chemical industrial and marine.

Speaker Change: Demand for composite products is still seasonal and sales declined in the low single digit range sequentially, but are up mid single digits year over year outlook for all end markets remains solid with particularly robust demand for oil and gas products in the middle East and a recent pickup for orders for flexible pipe and composite tanks in the Permian.

Jose A. Bayardo: Outlook for all end markets remains solid, with particularly robust demand for oil and gas products in the Middle East and a recent pickup for orders for flexible pipe and composite tanks in the Permian. For the second quarter, we expect revenues for our energy products and services segment to improve between 1 and 5% from the second quarter of 2023 with EBITDA in the range of $180 to $190. Our energy equipment segment, which is comprised of our longer cycle capital equipment oriented businesses, generated revenues of 1.178 billion in the first quarter, a 12% increase compared to the first quarter of 2023. EBITDA was 119 million, or 10.1% of sales, up 27% compared to the first quarter of 2020.

Speaker Change: For the second quarter, we expect revenues for our energy products and services segment to improve between 1% and 5% from the second quarter of 2023 with EBITDA in the range of $180 million to $190 million.

Speaker Change: Our energy equipment segment, which is comprised of our longer cycle capital equipment oriented businesses generated revenues of $1 178 billion in the first quarter, a 12% increase compared to the first quarter of 2023, EBITDA was $119 million or 10, 1% of sales up 27% compared to the first quarter of 2023.

Jose A. Bayardo: Clay covered our bookings for the quarter, but I want to emphasize that capital equipment business, In this case, despite orders that slipped from the first to second quarter, we foresee a generally bright outlook and now expect an outsized order book in the second quarter. As a pure capital equipment business, our operations have two revenue, Capital Equipment Sales and Aftermarket Sales and Services. During the first quarter, equipment sales, which includes both revenue out of backlog as well as quicker turning equipment sales that do not meet our criteria to qualify as backlog, accounted for 52% of the segment's revenue, aftermarket sales and service accounted for the remaining 48, Similar to what we experience our energy products and services segment, sales and orders for capital equipment tend to be more volatile and are much more affected by seasonality than aftermarket, segment's capital equipment sales were up 7% year over year, but had a seasonal decline from the fourth quarter of 16% due to the typical year-end push by customers to take delivery.

Speaker Change: Quite covered our bookings for the quarter, but I want to emphasize the capital equipment business is inherently more volatile than other businesses. In this case, despite orders that slipped from the first to second quarter, we foresee a generally bright outlook and now expect an outsized order book in the second quarter as a pure capital equipment business our opera.

Speaker Change: <unk> have two revenue streams capital equipment sales and aftermarket sales and services.

Speaker Change: During the first quarter equipment sales, which includes both revenue out of backlog as well as quicker turning equipment sales that do not meet our criteria to qualify as backlog accounted for 52% of the segment's revenues aftermarket sales and service accounted for the remaining 48% similar.

Speaker Change: Similar to what we experienced in our energy products and services segment sales and orders for capital equipment tend to be more volatile and are much more affected by seasonality than aftermarket sales. The segment's capital equipment sales were up 7% year over year, but had a seasonal decline from the fourth quarter of 16% due to the typical year end push.

Speaker Change: By customers to take deliveries.

Jose A. Bayardo: Aftermarket revenues tend to have a little less seasonality and are much less volatile; aftermarket revenue improved 18% since the first quarter of 2023 and was off approximately 1% from the fourth. The vast majority of our aftermarket revenue comes from our drilling equipment and intervention and stimulation business. Our drilling equipment business generates three quarters of its revenues from aftermarket sales, and in the first quarter, its aftermarket revenues improved 27% year over year as the business continued to improve throughput and capitalize on a very healthy level of reactivation and recertification projects and spare parts.

Speaker Change: Aftermarket revenues tend to have a little less seasonality and are much less volatile after.

Speaker Change: Aftermarket revenue improved 18% since the first quarter of 2023 and was off approximately 1% from the fourth quarter. The vast majority of our aftermarket revenue comes from our drilling equipment and intervention and stimulation businesses.

Speaker Change: Our drilling equipment business generate three quarters of its revenues from aftermarket sales and services and in the first quarter. It is aftermarket revenues improved 27% year over year as the business continued to improve throughput and capitalize on a very healthy level of reactivation and recertification projects and spare part orders high.

Jose A. Bayardo: High levels of activity around the world are increasing the number of NOV-equipped rigs turning to the right, requiring more demand for NOV's parts and services. Additionally, as we dig deeper into the stack for reactivations and the average age of the operating fleet increases, reactivations, recertifications, and upgrades become more complex. During the first quarter of 2024, we saw the total value of projects in execution, having a value of greater than $2 million, continue its steady rise, now up 175% from the first quarter of 2023 and reaching an average size of $20 million per project, up from a $9 million average in the first quarter of 2023. With robust offshore operator drilling plans and current day rates allowing drilling contractors to generate significant cash, but not high enough to justify new bills. Contractors have an incentive to keep their aging assets in good working condition.

Speaker Change: High levels of activity around the world are increasing the number of <unk> equipped rigs turning to the right requiring more demand for nov's parts and services. Additionally, as we dig deeper into the stack for reactivation and the average age of the operating fleet increases reactivation re certifications and upgrades become more complex during the first.

Speaker Change: Quarter of 2024, we saw the total value of projects in execution, having a value of greater than $2 million continue its steady rise now up 175% from the first quarter of 2023, and reaching an average size of $20 million per project up from a $9 million average in the first quarter.

Speaker Change: 2023.

Speaker Change: With robust offshore operator drilling plans and current day rates, allowing drilling contractors to generate significant cash, but not high enough to justify new builds contractors have incentive to keep their aging assets in good working condition being the OEM with the largest installed base our rig technologies aftermarket business will continue to play a larger role.

Jose A. Bayardo: Being the OEM with the largest installed base, our rigged technologies aftermarket business will continue to play a larger role for our customers who rely on NOV to provide reliable service and quality for these critical. Our intervention and simulation equipment business units relatively stable aftermarket revenues reached 63% of the unit mix in the first quarter of 2020. Despite a soft North American market, we expect our aftermarket operations to remain busy, providing consumables and replacement components as well as upgrades and refurbishments of equipment both domestically and, Moving to the capital equipment side of the business.

Speaker Change: For our customers, who rely on <unk> to provide reliable service and quality for these critical assets.

Speaker Change: Our intervention and stimulation equipment business units relatively stable aftermarket revenues reached 63% of the unit mix in the first quarter of 2024, despite a soft north American market, we expect our aftermarket operations to remain busy providing consumables and replacement components as well as upgrades and refurbishment of equipment, both domestically and over.

Speaker Change: <unk> <unk>.

Speaker Change: Moving to the capital equipment side of the business are drawing equipments capital sales improved in the mid 20% range year over year book to Bill was well north of a 100% led by a 20000 Psi BOP upgrade for drillship in deepwater Gulf of Mexico.

Jose A. Bayardo: Our drilling equipment's capital sales improved in the mid 20% range year over year, and book to bill was well north of 100%, led by a 20,000 PSI BOP upgrade for a drill ship and deep water Gulf of Mexico.

Jose A. Bayardo: This will be the industry's fourth 20,000 PSI BOP, with NOV building all four systems and demonstrating our leadership in cutting-edge pressure control technology that allows our customers to reach previously inaccessible areas. Utilization for offshore rigs remains high and increased toward the end of the first. The news from the Saudis scaling back their offshore fleet will put some pressure on jack-up utilization near term. But we believe those rigs will eventually be absorbed by other projects around the world and will drive more activity into onshore unconventional gas.

Speaker Change: This will be the industry's fourth 20000 Psi.

Speaker Change: With <unk> building, all four systems, and demonstrating our leadership and cutting edge pressure control technology that allows our customers to reach previously inaccessible reservoirs.

Realization for offshore rigs remains high and increased towards the end of the first quarter. The news from the Saudis scaling back their offshore fleet will put some pressure on jackup utilization near term.

Speaker Change: But we believe those rigs will eventually be absorbed by other projects around the world and will drive more activity into onshore unconventional gas fields. This will increase demand for our land rig equipment and aftermarket support which we are very well positioned to provide in Saudi as well as for our intervention and stimulation equipment business, which has already seen an increase.

Jose A. Bayardo: This will increase demand for our land rig equipment and aftermarket support, which we are very well positioned to provide in Saudi Arabia. As well as for our intervention and stimulation equipment business, which has already seen an increase in orders for completion and intervention equipment as a result of rapidly improving activity in the Jafura unconventional.

Speaker Change: <unk> orders for completion and intervention equipment as a result of rapidly improving activity in the defer unconventional field.

Jose A. Bayardo: Sticking with our Intervention and Stimulation Equipment business, capital equipment deliveries were down in the 20% range from the first quarter of 2023, due primarily to strong deliveries of EFRAC and conventional pressure pumping equipment in early 2023 that did not materialize. Capital equipment orders declined due to lower demand for new pressure pumping kits, but the unit still posted a book-to-bill greater than one as a result of solid demand for equipment destined for international markets While we anticipate bookings for new pressure pumping equipment will remain soft in the second quarter, there continues to be a high level of interest in alternative energy equipment, specifically EFRAC and CNG units, and the business's backlog remains healthy with meaningful shipments of DGB and EFRAC units slated for the second quarter. In international markets, the business is seeing solid demand from Africa and Europe in addition to strong demand from the Americas. Our offshore wind and construction Bookings include an inter-array cable lay vessel for a Japanese construction company which will be used to connect wind turbines within an offshore development.

Speaker Change: Sticking with our intervention and stimulation equipment business capital equipment deliveries were down in the 20% range from the first quarter of 2023, due primarily to strong deliveries of <unk> and conventional pressure pumping equipment in early 2023 that did not repeat.

Speaker Change: Capital equipment orders declined due to lower demand for new pressure pumping kit, but the units still posted a book to bill greater than one as a result of solid demand for equipment destined for international markets, including the order for Saudi that I just mentioned.

Speaker Change: While we anticipate bookings for new pressure pumping equipment will remain soft in the second quarter. There continues to be a high level of interest for alternative energy equipment, specifically <unk> and CMG units and the business is backlog remains healthy with meaningful shipments of DGB and if rack unit slated for the second quarter in international markets. The business is seeing solid.

Speaker Change: Demand from Africa, and Europe. In addition to strong demand from the Middle East.

Speaker Change: Our offshore wind and construction business achieved year over year revenue growth in the mid 20% range from strong execution on the unit's backlog of offshore wind projects bookings include an inter array cable lay vessel for a Japanese construction company, which will be used to connect wind turbines within an offshore development.

Jose A. Bayardo: Outlook for the units' core markets is positive, with improving sentiment in the offshore wind space and the potential for a couple new wind installation orders later this year. Wellstream Processing Operations achieved solid year over year revenue growth from strong execution on the operations backlog of processing equipment projects, which continues to grow with increasing opportunity to support new FPS. The operation also continues to realize more opportunities to leverage its gas and fluids processing expertise into large-scale energy transition projects and received an order for a hydrogen dehydration and deoxygenation package in Australia after having completed an engineering study for the customer over the last. Our production and midstream business saw an upper single-digit decline in revenue compared to the first quarter of 2020.

Speaker Change: Outlook for the unit's core markets is positive with improving sentiment in the offshore wind space and the potential for a couple of new wind installation orders later this year.

Speaker Change: Wellstream processing operations achieved solid year over year revenue growth from strong execution on operations backlog of processing equipment projects, which continues to grow with increasing opportunities support new fpss.

Speaker Change: Operations also continues to realize more opportunities to leverage its gas and fluids processing expertise into large scale energy transition projects and received an order for a hydrogen dehydration and D. Oxygenation package in Australia. After having completed an engineering study for the customer over the last year.

Speaker Change: Our production and midstream business saw an upper single digit decline in revenue compared to the first quarter of 2023 challenging conditions in North American gas markets impacted demand for chokes and other equipment, but was partially offset by strong international activity, particularly in the middle East.

Jose A. Bayardo: Challenging conditions in North American gas markets impacted demand for chokes and other equipment but was partially offset by strong international activity, particularly in the Middle East. However, bookings remained robust, driven by choke orders in the Middle East, where demand over the last five months exceeded orders for the preceding 11 months. With units quickly improving their backlog and ramping deliveries, we expect solid growth from this operation in the second half. Notwithstanding the low level of bookings in the first quarter, our subsea flexible pipe business unit posted solid results, and its mid to longer-term outlook is very strong. The unit posted mid-teens year-over-year revenue.

Speaker Change: Bookings remained robust driven by choke orders in the middle East where demand over the last five months exceeded orders for the preceding 11 months with units quickly improving backlog and ramping deliveries, we expect solid growth from this operation in the second quarter.

Speaker Change: Notwithstanding the low level of bookings in the first quarter, our subsea flexible pipe business unit posted solid results and its mid to longer term outlook is very strong.

Speaker Change: The unit posted mid teens year over year revenue growth.

Jose A. Bayardo: And despite the large order slipping out of the quarter, the business secured a contract to deliver its first actively heated flexible pipe system for a deep water gas field development in the Black Sea. The pipeline of future tenders for subsea flexible pipe is robust, with considerably improved pricing. We expect lower margin contracts to continue to be replaced by higher margin projects, which will drive significant improvement in margins during 2025. For the second quarter, we expect revenues for our energy equipment segment to improve between 1 and 5% from the second quarter of 2023, with EBITDA in the range of $135 to $145 million. With that, we'll now open the call to, [inaudible] To withdraw your question, please press star 11 again.

Speaker Change: Despite the large orders slipping out of the quarter the business secured a contract to deliver its first actively heated flexible pipe system for a deepwater gas field development in the Black sea the pipeline of future tenders for subsea flexible pipe is robust with considerably improved pricing.

Speaker Change: We expect lower margin contracts to continue to be replaced by higher margin projects, which will drive significant improvement in margins during 2025.

Speaker Change: For the second quarter, we expect revenues for our energy equipment segment to improve between 1% and 5% from the second quarter of 2023 with EBITDA in the range of $135 million to $145 million with that we'll now open the call to questions.

Speaker Change: Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: So withdraw your question. Please press star one again.

Jose A. Bayardo: We ask that you please limit yourself to one question and one follow-up. One moment while we compile our Q&A. Our first question is going to come from the line of Jim Rollyson with Raymond James. Your line is open. Please go ahead.

Speaker Change: Could you please limit yourself to one question and one follow up one moment, while we compile our Q&A roster.

Speaker Change: Our first question is going to come from the line of Jim Rollyson with Raymond James Your line is open. Please go ahead.

Jose A. Bayardo: Hey, good morning, Clay and Jose. Nice morning, first of all, and thank you. Jose, you've talked about free cash flow again and kind of the outlook over the next handful of years. You obviously got the negative quarter out of the way for the year, season- is that in the past you have talked about this kind of EBITDA to free cash flow conversion in the plus 50% And as you think about just I want to date that for 24 but as you think about how that transcends over this 24 to 27 timeframe that you kind of laid out, Is that still the right range of conversion rate to use?

James Michael Rollyson: Hey, good morning, Clay and Jose.

James Michael Rollyson: Good morning, good afternoon first of all.

James Michael Rollyson: And thank you Brian.

James Michael Rollyson: You've talked about free cash flow again in kind of the outlook over the next handful of years.

James Michael Rollyson: You, obviously got the negative quarter out of the way for the year seasonally but is.

James Michael Rollyson: Is that in the past you have talked about this kind of EBITDA to free cash flow conversion rate and the plus 50% range and as you think about just I want to state that for 'twenty four but as you think about how that transcends over this 24 to 2007 timeframe that you've kind of laid out is that.

James Michael Rollyson: Still the right range of conversion rate to use.

Jose A. Bayardo: Yeah, thanks for the question, Jim. First of all, as it relates to 2024, we continue to expect that we'll convert at least 50% of our EBITDA to free cash flow during the year, and if anything, we're becoming more confident about our ability to achieve, if not exceed that. And then really, I think the bulk of your question is related to the next couple of years.

Speaker Change: Yes. Thanks for the question Jim first of all yes, as it relates to 2024.

Speaker Change: We continue to expect that.

Speaker Change: We will convert at least 50% of our EBITDA to free cash flow.

Speaker Change: During the year and if anything we're growing more confident about.

Speaker Change: Our ability to achieve if not exceed that and then really I think the bulk of your question is related to the out years, obviously not ready to provide explicit guidance, but did provide.

Jose A. Bayardo: Obviously, we are not ready to provide explicit guidance, but we did provide kind of a little bit of information related to that from the standpoint of our return of capital program and plan. The bottom line is, you know, if we look forward in time to the sort of base case scenario that I laid out where we expect a slightly less volatile environment than we've been in over the past decade and steady, gradual improvement in activity levels, there's no reason why we shouldn't be able to maintain that level of free cash flow as a percentage of our EBITDA.

Speaker Change: Kind of.

Speaker Change: A little bit of information related to that from the standpoint of.

Speaker Change: Our return on our capital program and plan.

Speaker Change: Bottom line is.

As we look forward in time with sort of a base case scenario that I laid out where we expect slightly less volatile environment and we've been over the past decade, and steady gradual improving activity levels. There is no reason why we shouldnt be able to maintain that level of free cash flow as a percentage of.

Jose A. Bayardo: Gotcha, that's just helpful for modeling and how to think about it. And that makes me just glad to see the framework for the capital return program, I think a quarter earlier than you guys promised, so even better. But as we look at, you mentioned from the share repurchase program of a billion dollars, that that's going to be opportunistically driven. Maybe how you think about or how the board thinks about where to allocate capital to that part of the equation versus your kind of supplemental catch-up at year end. Like what drives the decision to move capital between those two means of returning capital?

Speaker Change: For EBITDA.

Speaker Change: Got you.

Speaker Change: Just helpful for modeling and how to think about this.

Speaker Change: And that takes me just glad to see the framework for the capital return program I think a quarter earlier than you guys had promised so even better but as we look at you mentioned from the share repurchase program of $1 billion, that's going to be Opportunistically, driven maybe how you think about or how the board thinks about.

Speaker Change: <unk>.

Speaker Change: Where to allocate capital to that part of the equation versus your kind of supplemental catch up at year end like what drives the decision to move capital between those two means of returning capital to shareholders.

Jose A. Bayardo: As you pointed out, the program is intended to be opportunistic. As I also mentioned in the prepared commentary, we're really viewing our return on capital plan and, frankly, just the way that we look at cash flow across the board on an annual and then a multi-year basis. And so, what we wanted to do was provide a very clear framework and assure our investors that every year we would return at least 50% of our excess free cash flow.

Speaker Change: As you pointed out the program is intended to be opportunistic and as also I mentioned in the prepared commentary.

Speaker Change: We're really viewing.

Speaker Change: Return on capital plan, and frankly, just the way that we look at cash flow across the board on an annual and then a multiyear basis and so what we wanted to do was provide a very clear framework and assure our investors that every year, we will return.

Speaker Change: At least 50% of our excess free cash flow and so we intend to be opportunistic we do intend to as we mentioned increased the base dividend and then Opportunistically buy back shares throughout the course of the year and then.

Jose A. Bayardo: And so we intend to be opportunistic. We intend to, as we mentioned, increase the base dividend and then opportunistically buy back shares throughout the course of the year. And then, depending as to whether or not we're able to return the entire 50% plus of excess free cash flow during the course of the year or not, we would have the supplemental dividend early the following year to true up that return of capital to our shareholders.

Speaker Change: Depending on as to whether or not we're able to return the entire 50% plus of excess free cash flow. During the course of the year or not we would have the supplemental dividend early the following year to true up that return of capital to our shareholders.

Jose A. Bayardo: You know, some of the other variables that go into the definition of excess free cash flow is sort of what we're seeing from an acquisition standpoint. And there could be times, such as right now, where there are a couple of small acquisitions that we've sort of factored into what we expect to be our excess free cash flow during the course of the year. But acquisitions are never done until they're done.

Some of the other the other variable that goes into the definition of excess free cash flow is.

Sort of what we're seeing from an acquisition standpoint, and there could be times. So does right. Now there are a couple of small acquisitions that we've sort of factored into what we expect to be our excess free cash flow during the course of the year.

Speaker Change: Acquisitions are never done until they're done until if they don't materialize if they don't transact. They don't close we will have extra capital at the end of the year that we would certainly need to return via that supplemental dividends. So hopefully hopefully that helps.

Jose A. Bayardo: And so if they don't materialize, if they don't transact, if they don't close, we'll have extra capital at the end of the year that we would certainly need to return via that supplemental dividend. So hopefully, that helps frame how we're thinking about things.

Speaker Change: How we're thinking about things.

Speaker Change: Okay.

Speaker Change: That does I appreciate the color guys. Thank you.

Jose A. Bayardo: You bet. Thanks, Jim. Thank you. And one moment, as we move on to our next question.

Speaker Change: You bet. Thanks, Tim.

Speaker Change: Thank you and one moment as we move on to our next question.

Jose A. Bayardo: And our next question is going to come from the line of Stephen Gengaro with Stiefel. Your line is open. Thanks. Good morning, everybody.

Speaker Change: Okay.

Speaker Change: And our next question is going to come from the line of Stephen <unk> with Stifel. Your line is open please.

Jose A. Bayardo: I think the first question for me is, when you think about the announcement of the return of capital framework, what's changed over the last couple of months that gives you the confidence to put it in place? I mean, Jose, you talked a little bit about the visibility of free cash, but it did come earlier than we expected. I'm just kind of curious, what sort of drove the decision to announce this today as opposed to maybe seeing more progress on free cash generation?

Stephen: Thanks, Good morning, everybody.

Stephen: Hi, Steven.

Stephen: The first question for me is when you think about the announcement of the of the <unk>.

Stephen: Return of capital framework.

Stephen: What what's changed over the last couple of months that gives you the confidence to put in place I mean, Jose you talked a little bit about kind of the visibility on free cash.

Stephen: But it did come earlier than we expected and I'm just kind of curious what sort of drove the decision to announce this today as opposed to after maybe seeing more progress our free cash generation.

Jose A. Bayardo: Before Jose answers, can I just say, Stephen, frankly, putting 2023 in the rearview mirror was a big plus for us. We've been very frustrated here with our supply chain disruptions and lack of free cash flow, and we got Q1 behind us. And I think that really, looking forward, our shareholders need to know how we're thinking about return on capital. And we said 90 days earlier than we had indicated before would be better for all parties. Yeah, I think Clay summed it up pretty well.

Stephen: And the poor Jose answers can I, just say Steven.

Jose A. Bayardo: Frankly, putting 2023 in our rearview mirror.

Jose A. Bayardo: A big plus for US we've been very frustrated here with our supply chain disruptions and lack of free cash flow and got Q1 behind us and.

Jose A. Bayardo: I think that really.

Jose A. Bayardo: Looking forward, we think our shareholders need to know how we're thinking about return of capital.

Jose A. Bayardo: I think the only other thing that I would really add to that is that, obviously, we got through the typical ordinary course burn of cash from an operating cash flow and free cash flow standpoint in Q1, which is a big milestone that we wanted to get through. Also, during the quarter, we had $243 million that we spent on acquisitions. And then one of the items that allowed us to really gain an additional level of confidence, in addition to just from what we're saying from an operating environment going forward, is the fact that we were able to close the divestiture early in Q2 to replenish our cash balance and really allow us to go ahead and start moving forward with the return of capital program.

Jose A. Bayardo: 90 days.

Jose A. Bayardo: Earlier than we had indicated before we'd be better off for all parties.

Jose A. Bayardo: Yes.

Quite summed it up pretty well I think the only other thing that I would really add to that is that.

Jose A. Bayardo: Obviously, we had.

Jose A. Bayardo: Got through the typical ordinary course burn cash and operating cash flow and free cash flow standpoint in Q1, which is a.

No.

Jose A. Bayardo: Big milestone that we wanted to get through also during the quarter, we had the $243 million that.

Jose A. Bayardo: But we spent on acquisitions and then.

Jose A. Bayardo: One of the items that allowed us to really gain additional level of confidence. In addition to just from what we're seeing from an operating environment going forward.

Jose A. Bayardo: Fact that we were able to close the divestiture early in Q2 to replenish our cash balance and really allow us to go ahead and start moving forward with return of capital program. So feeling great about thanks from operational standpoint.

Jose A. Bayardo: So feeling great about things from an operational standpoint, feeling great about the balance sheet and where we sit, and feeling good about where the stock price is, that it will be a good accretive value proposition for our shareholders to buy back shares at this point in time. Great. No, thank you.

Jose A. Bayardo: About the balance sheet, and where we sit and feeling good about where the stock price is that it will be a good.

Jose A. Bayardo: Accretive value proposition for our shareholders to buy back shares.

Jose A. Bayardo: <unk>.

Jose A. Bayardo: That's helpful. And just one follow-up on the free cash side. We've talked historically about kind of working capital as a percentage of revenue and kind of where that has been historically versus versus in 23. How should we think about that unfolding over the next year or two? Yeah, good question, Stephen.

Speaker Change: Great. Thank you that's helpful. And then just one follow up on the free cash side, we've talked historically about kind of working capital as a percentage of.

Speaker Change: Revenue and kind of where that has been historically versus versus in 'twenty three.

Speaker Change: Should we think about that.

Speaker Change: Unfolding over the next year or two.

Speaker Change: Yes. Good question, Stephen So I think last quarter.

Jose A. Bayardo: So I think last quarter, I mentioned that at the end of this year, we expected working capital as a percentage of our revenue run rate to see some modest improvement, basically one to 200 basis points. Now, that's changed a little bit here with the completion of the recent acquisitions, which had a very high load of working capital. As I pointed out in my prepared remarks, the bulk of the increase in inventory that we saw from Q4 to Q1 was a result of the acquisition. And we actually view that as a positive.

Speaker Change: I mentioned that at the end of this year, we expected that working capital as a percentage of our revenue run rate to see some modest improvement basically 1% to 200 basis points.

Speaker Change: That's changed a little bit here with the completion of the recent acquisitions, which had a.

<unk>.

Speaker Change: The acquisition had a.

Speaker Change: A very high load of working capital in the quarter.

Speaker Change: It out in my prepared remarks, the bulk of the increase in the <unk>.

Speaker Change: The inventory that we saw from Q4 to Q1 was a result of the acquisition.

Speaker Change: And we actually view that as a positive we think that day.

Jose A. Bayardo: We think that, you know, they, like every other manufacturer, had challenges from a supply chain standpoint and built up some inventory to work through those challenges. And I think we'll be the beneficiary of that as we sort of normalize inventory levels over the coming months and quarters. I'm not quite prepared to sort of give you a pinpoint answer as to what the new metric will be at the end of 2024. We've only had this under our belts for a couple of months now.

Speaker Change: They like every other manufacturer that had challenges from a supply chain standpoint.

Speaker Change: Built up some inventory to work through those challenges and I think we'll be the beneficiary of that as we sort of normalized inventory levels over the over the coming months and quarters.

Speaker Change: Not quite prepared to sort of give you a pinpoint answer as to what the new metric will be at the end of 2024, we've only had this under our belt for a couple of months now.

Jose A. Bayardo: But needless to say, we're more optimistic about converting working capital to cash during 2024 than we were a quarter ago as a result of this time. Great. Thank you for the color.

Speaker Change: Needless to say, we're more optimistic about converting working capital.

Speaker Change: Cash.

Speaker Change: During 2024 than we were a quarter ago as a result of this.

Speaker Change: Yeah.

Jose A. Bayardo: Yeah, thanks, Stephen. Thank you, and one moment as we move on to our next question, and our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead.

Speaker Change: Great. Thank you for the color.

Speaker Change: Yes, Thanks, David.

Speaker Change: Thank you and one moment as we move onto our next question.

Speaker Change: Okay.

Speaker Change: And our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead.

Jose A. Bayardo: Hey, good morning, Clay, Jose. Morning, James. So, I'd love to hear both your perspectives actually on this, given that we've got, you know, an enormous number of offshore rigs that are going to turn to the right or are turning to the right now and will be turning to the right as we go through this year and next year for pretty, you know, long-term contracts and duration is extending, you know, we're going to need, obviously, spare parts, but we're going to need a lot of offshore just equipment to be built, whether it's, you know, platforms and TLPs, spars, all the kind of stuff that you guys do.

James Carlyle West: Hey, good morning, clay or Jose.

James Carlyle West: Good morning, James.

James Carlyle West: So.

James Carlyle West: Love to hear both your perspective is actually on this.

James Carlyle West: Given that we've got.

James Carlyle West: An enormous number of offshore rigs that are.

James Carlyle West: I'm going to turn to the right or alternative right now and we'll be turning to the right. As we go through this year and next year for pretty long term contracts and duration is extending.

James Carlyle West: We're going to need.

James Carlyle West: Spare parts, but we're going to need a lot of offshore just equipment to be built whether it's platforms and <unk> as far as all the kind of stuff that you guys do and so how are you thinking about the visibility.

Jose A. Bayardo: And so, how are you thinking about visibility and, secondarily, what kind of innovations, because you guys are constantly innovating these products as equipment, are you introducing to the market to make them, you know, more efficient, to decarbonize the operation, etc.

James Carlyle West: And secondarily, what kind of innovations because you guys are constantly innovating. These products as equipment are you introducing to the market to make them more efficient.

James Carlyle West: <unk> operations et cetera, as we see this long duration cycle play out offshore.

Jose A. Bayardo: As we see this, you know, long duration cycle play out here offshore. Great question, James, and we appreciate you pointing out the fact that NOV has been a major innovator in the offshore market. And you, more than anybody, know that the outlook for offshore wind is very, very bright. There are lots of discoveries and developments and things going on in multiple basins around the world, including some new exploration basins that have emerged in the past few years with discoveries in Namibia and Guyana and Suriname and places like that that are fueling all that demand, and that's giving rise to a pretty bright outlook for FIDs around those projects and a much higher level of offshore activity, which has been pretty much lacking in the last decade.

Speaker Change: Great question James.

Speaker Change: I appreciate you pointing out the fact that <unk> has been a major innovator in the offshore market and you more than anybody know the outlook for the offshore is very very bright there or lots of discoveries and developments and things going on in multiple basins around the world, including some new exploration.

Speaker Change: <unk> that have emerged in the past few years with discoveries and then maybe in Guyana, and Suriname and places like that that are fueling all of that demand and that's giving rise to a pretty bright outlook for.

Speaker Change: These are on those projects and much higher level of offshore activity, which has been.

Speaker Change: Pretty much lapping through the last decade, and so just to recount.

Jose A. Bayardo: And so just to recount how we participate in that, yes, we do support the bulk of the world's offshore drilling fleet because we built most of those rigs, and there is rising demand for aftermarket support of those. We're reactivating a number now.

Speaker Change: How we participate in that yes, we do support.

Speaker Change: The bulk of the world's offshore drilling fleet, because we built most of those rigs.

Speaker Change: And there is as rising demand for aftermarket support of those were reactivating a number now Jose went through some statistics on that.

Jose A. Bayardo: Jose went through some statistics on that, and he also pointed out the strong results in the aftermarket in our rig business there, and we're well known for that. Those rigs need drill pipe. They need spare parts. They need solids control services. They need bits. They need downhole tools, and hole openers, all of which NOB provides.

Speaker Change: Also pointed out the.

Speaker Change: Strong results in the aftermarket and R. R.

Speaker Change: Our rig business there.

Speaker Change: And we're well known for that those rigs need drill pipe they need.

Speaker Change: Parts.

Speaker Change: They need solids control services, they need bits and downhole tools all of those all of which provides and then on the production side I think we're probably less well known for what we do there but through the past 10 to 15 years, we've added a lot too.

Jose A. Bayardo: And then on the production side, I think we're probably less well known for what we do there, but over the past 10, 15 years, we've added a lot to what we sell to FPSOs. And so the outlook for floating production and storage and offloading vessels, FPSOs, is similarly bright in deepwater basins, and I think a disproportionate level of offshore activity is going to be focused on deepwater, which will drive demand for FPSOs.

Speaker Change: What we sell into <unk> and so.

Speaker Change: The outlook for floating production storage and Offloading vessels at Dsos. Similarly bright.

Speaker Change: In the deepwater basins, and I think a disproportionate level of offshore activity is going to be focused on the deepwater, which will drive demand for <unk> and there are some industry forecasts out there that evident in the range of 50 to 60 vessels needed over the next five years significant increase.

Jose A. Bayardo: And there are some industry forecasts out there that have them in the range of 50 to 60 vessels needed over the next five years, a significant increase over the preceding five years. And there, we provide everything from hull designs and cranes to firewater piping systems and ballast piping systems to gas processing and dehydration to chokes to separators to turret mooring systems to spread mooring systems to flexible pipe that's used to connect those vessels to the wellheads on the seafloor. And if you add all that up, it can range anywhere from $100 million per vessel for NOB's kit all the way up to as much as $700 million per vessel for NOB's entire fleet.

Speaker Change: Over the preceding five years and and there we provide everything from whole designs in cranes to firewater piping systems, imbalanced piping systems to gas processing and dehydration to chokes to separator.

Speaker Change: Good morning systems spread mooring systems to flexible pipe that choose to connect those vessels to the wellheads on the seafloor.

Speaker Change: And you add all that up it can range anywhere from the $100 million per vessel for these kids all the way up to.

Speaker Change: As much as $700 million.

Speaker Change: Vessel these kit and so thats another area, where we can participate.

Jose A. Bayardo: And so that's another area where NOB can participate. With respect to innovation and the kind of next generation of drilling, everything from wire drill pipe high-speed data connections to the bottom of the hole to artificial intelligence that's making meaningful impacts on drilling optimization through our Kaizen offering to rig automation, which now a couple of large IOCs are using our new Atom RTX robotics on offshore rigs in Brazil. We have an offshore drilling contractor that's now ordered their second set.

Speaker Change: Participate with respect to innovation and kind of the next generation of drilling everything from wire drill pipe high speed data connections to the bottom of the hole to artificial intelligence, making meaningful impacts on drilling optimization through our kaizen.

Speaker Change: Offering two rig automation, which.

Now a couple of large ioc's are used.

Speaker Change: Using our new AD Rts robotics on offshore rigs.

Speaker Change: In Brazil, we have an offshore drilling contractor. That's now order. The second set they are so pleased with it and a lot of interest really across numerous operators and bringing more automation to that that process is well along with digital support.

Jose A. Bayardo: They're so pleased with it, and there is a lot of interest really across numerous operators in bringing more automation to that process as well, along with digital support. And then on the production side, we also continue to innovate and offer a lot in the way of edge compute and condition-based monitoring to optimize production. And we're very excited about our new Xtract ESP products as well. It's a new place for us to deploy our edge compute capabilities to drive better efficiency and automation through the production process. That's great. Thanks. Thanks, Clay.

Speaker Change: And then on the production side, we also continue to innovate and offer a lot in a way of edge compute and condition based monitoring to.

Speaker Change: To optimize production.

Speaker Change: We're very excited about our new extract ESP products as well as a new place for us to deploy our edge compute capabilities to drive better efficiencies and automation automation through the production process.

Speaker Change: Okay. That's great. Thanks, Thanks, Clay and then maybe just a quick follow up for me with the rigs that are.

Jose A. Bayardo: And then maybe just a quick follow-up for me. With the rigs that are working today and about to go to work, clearly, over the last decade, it has been a tough, tough time, and they have dramatically reduced the number and amount of spare parts and stuff on the rigs. Are the rigs back up to kind of the normalized level of spare parts on the rigs that they usually require? I think for a deepwater rig, it's, you know, $56 million or so worth of equipment. Or are they still a little understaffed? A good question.

Speaker Change: Working today and about to go to work clearly over the last decade was tough tough time and.

Speaker Change: Yes radically reduce the number of your amount of spare parts and stuff on the rigs are the rigs back up to kind of the normalized level of spare parts on the rigs that they usually require I think for a deepwater rig it's $56 million. So the equipment or are they still understaffed.

Speaker Change: Good good question. The reason that we are the reason that we're reactivating.

Jose A. Bayardo: The reason that we're reactivating, we've got close to 30 now that we're working on now. Part of the reactivation plan will be to replenish those spare parts that they have depleted. And our customers, as you know, are really, really good at cannibalizing and going to their unutilized rigs and cold-stacked and even one-stacked rigs to source spare parts, both land and offshore. And so most of these rigs have been picked over already. So part of the reactivation plan for the rigs that we're working on now includes replenishing spare parts so they can go back to work. And I guess I should probably fill in the rest of the picture too, it's interesting.

Speaker Change: We've got close to 30 now that we're working on now part of the reactivation plan will be to replenish those spare parts that they depleted our customers really really good at cannibalizing.

Speaker Change: And then in.

Speaker Change: Going to their unutilized rigs cold stacked and even one stack rigs to source spare parts, both land and offshore.

Speaker Change: Most of these rigs have been picked over already so part of the reactivation plan for the rigs that were working on now includes replenishing spare parts and.

Speaker Change: So they can go back to work and I guess probably to fill in the rest of the picture too it's.

Jose A. Bayardo: There were a lot of rigs that were delivered in 2014, 2015, 2016, 2017 at the back end of the last kind of capital supercycle. Those rigs are facing their 10-year special purpose survey, and so they have to come into a shipyard and be inspected.

Interesting there are a lot of rigs that were delivered.

Speaker Change: 2014, 2015 2016 2017.

Speaker Change: On the back end of the last kind of capital Super cycle. Those rigs, we're facing a 10 year special purpose survey and so they have to come into a shipyard and be inspected and that's that's a pretty major.

Jose A. Bayardo: And that's a pretty major waypoint in their lives and an opportunity for NOV to, again, rebuild equipment, replace equipment, add additional capabilities that maybe their oil and gas operator customers want to add while those rigs are in the shipyards. And so we're kind of coming up to that for a lot of rigs in the fleet right now.

Speaker Change: Waypoint in their lives and an opportunity for <unk> to it.

Again rebuild equipment replace equipment add additional capabilities.

Speaker Change: Maybe their oil and gas.

Speaker Change: Operator customers, who I want to add while those rigs are in the shipyard and so we're kind of coming up to that for a lot of rigs in the fleet right now.

Jose A. Bayardo: You bet. Thanks, James. Thank you, and one moment as we move on to our next question, and our next question is going to come from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead. Good morning, guys. Hi, John.

Speaker Change: Got it thanks a lot.

Speaker Change: You bet. Thanks, Jamie.

Speaker Change: Thank you and one woman as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead.

Thomas Patrick Curran: Good morning, guys.

Jose A. Bayardo: Morning, Clay, within that masterful, expansive refresher you just gave us on all of the exposures and areas that NOV participates in, right, from growing all the way through down to production, you know, infrastructure, capital equipment services. If we were to see, you know, a significant step up in offshore orders coming out of 2024 into 2025, where would you most likely expect it to come from?

Thomas Patrick Curran: I don't want to do.

Thomas Patrick Curran: Clay with within that masterful expansive refresher you just gave us on.

Thomas Patrick Curran: All of the exposure in areas that Adobe.

Thomas Patrick Curran: Page 18, right from from growing all the way through down the production.

Thomas Patrick Curran: Infrastructure capital equipment services.

If we were to see.

Thomas Patrick Curran: A significant step up in offshore orders coming out of 2024 into 2025.

Thomas Patrick Curran: Where would you most.

Thomas Patrick Curran: Likely expect it to come from.

Jose A. Bayardo: Would it be, do you think, on the offshore drilling front in the form of upgrades or cold stack reactivations? Would you expect it to be, you know, the ramp in FPSO projects? Maybe, you know, subsea infrastructure like Plexipipe and other subsea hardware? Could you just give us an idea of sort of what the sequence of acceleration could look like to the extent that we get some?

Thomas Patrick Curran: Would it be do you think on me.

Thomas Patrick Curran: Offshore drilling front in the form of upgrades or cold stack reactivation is would you expect it to be the ramping in DSO projects maybe.

Thomas Patrick Curran: Subsea infrastructure like flex a pipe and other subsea hardware could you just give us an idea of sort of what the sequence of acceleration could look like to the extent, we get something like I get the difference with this recovery slower steadier, but if we get an acceleration within offshore would you expect it.

Jose A. Bayardo: I get the difference with this recovery, you know; it's slower and steadier. But if we get an acceleration with an offshore, where would you expect it to be? First, the rig reactivation offshore is underway. As I mentioned, we're reactivating a lot of rigs right now. Although, never say never in this industry, at some point in the future, we will see a new round of rig building.

Thomas Patrick Curran: First the rig reactivation offshore is underway as I mentioned, we're reactivating a lot of rigs right now.

Thomas Patrick Curran: Although.

Thomas Patrick Curran: Never say never in this industry at some point in future, we will see a new round of rebuilding that is not in our near term forecast what I think is more likely to surprise to the upside is all the other more production related.

Jose A. Bayardo: What I think is more likely to surprise on the upside is all the other more production-related offshore kit that NOV can provide to the FPSOs, including the flexible pipe and all the things that I just went through. We have a very large and meaningful opportunity there.

Thomas Patrick Curran: Offshore.

Thomas Patrick Curran: That we can provide to the fts shows, including the flexible pipe and all the things that I just went through.

Thomas Patrick Curran: And we have a very large and meaningful opportunity there and thats a little bit later.

Thomas Patrick Curran: <unk>.

Thomas Patrick Curran: Pull the trigger on their <unk> the projects typically move to.

Jose A. Bayardo: These companies pull the trigger on their FIDs. The projects then are typically moved to APCs for more detailed planning, drawings, and purchasing. The awards are a little later in that cycle.

<unk> for more detailed.

<unk> and drawings and purchasing and so.

Thomas Patrick Curran: The awards are a little later in that and that sort of a cycle and I think that's kind of what's next for <unk>.

Jose A. Bayardo: I think that's what's next for NOV. I also want to say, when it comes to renewable energy, we have a fantastic opportunity that we haven't talked much about in the past. It's around floating wind, in particular in the North Sea.

Speaker Change: But I also want to say it.

Shifting over to renewables, we have a fantastic opportunity that we haven't talked much about in the past, but it's around floating wind in particular in the North Sea, where we're working closely with.

Jose A. Bayardo: We're working closely with a partner over there, a party that's pursuing development. That's a multi-billion dollar opportunity for NOV, and it has implications for floating wind in deep water areas in Asia as well.

Speaker Change: Kind of a partner over there to a party that's pursuing development and that's a multibillion dollars kind of opportunity for <unk> and then has implications for floating wind.

Speaker Change: Deepwater areas in Asia, as well, so not in the traditional oil and gas space, but in renewables.

Jose A. Bayardo: Not in the traditional oil and gas space, but in renewables. We could see some help from that area as well. That's on top of the wind turbine installation vessels in shallower waters, the fixed wind installation vessels that Jose mentioned.

Speaker Change: We could see some some help from that that area as well and that's on top of the wind turbine installation vessel in shallow waters, the fixed wind installation vessels that Jose.

Jose A. Bayardo: We wouldn't be surprised to see a couple of orders for WTIVs in 2024, plus growing demand for cable lay vessels that also support those offshore shallow water installations. There's a lot going on offshore, and that's really good for NOV, given our high mix and high level of participation and expertise in that area. Got it, got it.

Speaker Change: They mentioned.

Speaker Change: Wouldnt be surprised to see a couple of orders for <unk>.

Speaker Change: In 2024, plus sort of growing demand for cable lay vessels that also support those offshore shallow water installations.

Speaker Change: Well, so there's a lot happening offshore and that's really good for <unk>, given our high mix and high level of participation and expertise in that in that area.

Speaker Change: Got it got it.

Jose A. Bayardo: And thanks for highlighting what's happening on the renewable side as well. Just as a follow-up here, then, you mentioned that Jose has some stats with regard to where you're at currently with reactivation, recertification, and upgrade projects. I believe your backlog at this time last year stood at 83 projects. Could you just give us an update on where you're at?

Speaker Change: Thanks for highlighting what's happening on the renewable side as well just as a follow up here then.

Speaker Change: You had mentioned.

Speaker Change: Jose has some stats with regards to.

Speaker Change: You are at currently with reactivation recertification and upgrade projects I believe your backlog around this time last year stood at 80.

Speaker Change: <unk> 83 projects could you just give us an update.

Jose A. Bayardo: Yeah, when I think I mentioned just a moment ago, 30 offshore rig reactivation projects, those are all those that are north of the $2 million number. We have a lot of smaller rigs that we also do work on that we also log in as projects. Thanks for taking my question. Do that.

Speaker Change: Where youre at.

Jose A. Bayardo: Yes, I think I mentioned, just a moment ago 30 offshore rig reactivation projects. Those are those are all that are north of the two 2 million.

Jose A. Bayardo: No.

Jose A. Bayardo: There are a lot smaller rigs that we also do work on that we also logged in this project.

Jose A. Bayardo: Thank you. Thank you, and one moment as we move on to our next question, and our next question is going to come from the line of Scott Gruber with Citigroup. Your line is open. Please go ahead. Yes, good morning.

Speaker Change: Thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Scott Gruber with Citigroup. Your line is open. Please go ahead.

Jose A. Bayardo: This has been a presentation by the National Oil and Gas Administration. Thank you. This has been a presentation by the National Oil and Gas Administration. Well, I'm curious how the Saudi CapEx shift impacts NOV. I imagine when these jackets go down, there'll be eventually a hit to Grant Pride Co. and potentially some other product lines. But then you have a greater number of onshore rigs going to work over the next few years, which all require new pipe and bits, etc. at startup.

Scott Andrew Gruber: Yes, good morning.

Scott Andrew Gruber: Good morning, Scott.

Scott Andrew Gruber: I'm curious are the Saudi capex shift impacts MTV.

Scott Andrew Gruber: Imagine when these jackets go down there's eventually.

Scott Andrew Gruber: Hit the grant <unk> and potentially some other product lines, but then you have a greater quantum of onshore rigs going to work.

Scott Andrew Gruber: Over the next few years, which all required can pipe in there et cetera that startup.

Jose A. Bayardo: So if you put the new builds to the side, which have long-run contracts, how should we think about the Saudi CapEx shift towards onshore impact again in the VEA? Yeah, it's a good question, Scott. We would prefer they keep both sets of ridges running, but that doesn't fit their plans. We understand the energy ministries directing Aramco to back off adding a million barrels per day, given that the natural gas liquids coming from the gas developments are going to add liquids to the kingdom, and, as well, they'll displace black oil that they were burning for electricity generation over there. It makes sense, I guess.

Scott Andrew Gruber: So if you put the newbuild.

Scott Andrew Gruber: Side, which are largely contracted.

Speaker Change: How should we think about this.

Speaker Change: The Saudi Capex shift towards onshore impact again.

Speaker Change: Yes, it's a good question Scott.

Scott Andrew Gruber: We would prefer that we keep both sets of rigs running but that doesn't fit their plans we understand.

Scott Andrew Gruber: The energy ministries.

Speaker Change: Directing the aramco to back off adding 1 million barrels per day given that.

Natural gas liquids coming from the gas developments are going to add liquids to the kingdom and as well they will displace black oil, but they were burning for electricity generation over there and so it makes sense I guess.

Jose A. Bayardo: That's led, as you know, to the suspension of, I think they've announced 20 jackups, contracts suspended, maybe a couple more to come. The good news is six of those that have been suspended so far have either secured work elsewhere or are very close to securing work elsewhere, a couple in the Arabian Gulf, a couple in India, one in Africa, one in the Asia-Pacific area. And so they're finding homes elsewhere, and so we're hoping we'll continue to support those ridges as they move to other markets.

Speaker Change: As you know.

Speaker Change: To the suspension of I think they've announced 'twenty.

Speaker Change: Jackups contracts suspended maybe a couple of more to come the good news is <unk>.

Six of those that have been suspended so far have either secure the work elsewhere or are very close to securing elsewhere coupled.

Speaker Change: The Arabian Gulf couple in India.

Speaker Change: One in Africa, one in Asia.

Speaker Change: Asia Pacific area. So they are finding homes elsewhere and so we're hoping will continue to support those rigs as they move to other other other markets on the on the positive side of that ledger, though.

Jose A. Bayardo: On the positive side of that ledger, though, we continue to be very excited about the kingdom's goal to lift its gas production to 2.5 BCF per day, mostly coming from their unconventional Jafura gas field development, which they FID, I think, back in 2020. The rig count there has continued to grow. They are securing new rigs for both that as well as, I think, additional gas production out of South Guar. And just a couple weeks ago, 23 new rigs were brought into the kingdom, and that's in addition to the rigs that we're building in the kingdom for Sanod that are going to work. What's interesting to us about that is there are a couple things that are. First of all, the rigs that they're bringing in are all AC-powered. They're all available to be more closely controlled with electronics and software.

Speaker Change: We continue to be very excited about the kingdoms.

Speaker Change: To lift the gas production two five Bcf per day.

Speaker Change: Mostly coming from your unconventional gas.

Speaker Change: Yes field development.

Speaker Change: Back in 2020.

Speaker Change: Rig count there has continued to grow.

Speaker Change: They are securing new rigs for both debt as well as I think additional gas production out of <unk> and.

Speaker Change: Just a couple.

A couple of weeks ago celebrated 23, new rigs are bringing into the kingdom.

Speaker Change: And that's in addition to the rigs that we're building in the Kingdom.

Speaker Change: Person on that are ongoing.

Speaker Change: Going to work.

Speaker Change: What's interesting to us about that there are a couple of things first of all the rigs that they are bringing in.

Speaker Change: They are all AC powered or all of it.

Speaker Change: Available to be more closely controlled with electronics and software.

Jose A. Bayardo: It's really a step up in technology, and I think that speaks to Aramco's desire as well as other NOCs around the gulf. We're seeing the same desire to bring in better technology rigs and to help sort of bridge the performance gap between the rig fleet that they have versus the rig fleet that they can do. And so that's, I think, a good development for us. And then the other way NOV can participate in that is through the supply of all of the production equipment and kit that I mentioned earlier. You know, we manufacture chokes in the kingdom.

It's really a step up in technology, and I think that speaks to a ram COSE desire as well as other NOC is around makena and around the Gulf. We are seeing the same desire to bring in better technology rigs and to help sort of bridge the performance gap between our rig fleet that they have versus the wind fleet.

Speaker Change: They can do and so that's I think a good development for us.

Speaker Change: And then the other way.

Speaker Change: We can and is participating in that as through the supply of all of the production.

Speaker Change: Equipment and kit that I mentioned earlier, we manufacture.

Speaker Change: <unk> and <unk> were the largest provider of production chokes worldwide, the largest provider of composite piping systems worldwide.

Jose A. Bayardo: We're the largest provider of production chokes worldwide, and the largest provider of composite piping systems worldwide, and we're seeing big orders and a lot of demand in the kingdom to support gas production in both of those areas, in addition to separators and gas dehydration technologies. Again, we're the largest provider of that. And so there's a lot of ancillary equipment that gets pulled through those gas developments that will benefit NOV as well. And then the jackups go back to work.

Speaker Change: We're seeing big orders and a lot of demand in the key to support gas production in both of those areas. In addition to the separators to our.

Speaker Change: Gas dehydration technologies again, we're the largest provider of that and so there's a lot of ancillary kit the pull through those gas developments that will benefit.

Speaker Change: As well.

Speaker Change: And then as the.

Speaker Change: Jackups go back to work.

Jose A. Bayardo: Is that feeding upgrades to equipment, and are there dollars flowing to the NAV as those rigs mobilize elsewhere? It may. It depends on what their operator in these new markets wants. I would say most upgrades to drilling equipment today are really prompted by the operator customer requiring that there's not a lot of speculative investment by offshore drilling contractors given what most of them just went through around adding equipment, but the operators are stepping up and helping them out by paying higher moat fees or paying for new equipment through the day rate.

Speaker Change: Is that seating upgrades to equipment.

Speaker Change: $8 12.

Speaker Change: Those rigs mobilized elsewhere.

Speaker Change: It may it depends on what their operator in these new markets. Once I would say most upgrades to drilling equipment today are really prompted by the operator customer requiring that theres not a lot of spec.

Speaker Change: Speculative investment by offshore drilling contractors, given what most of them just went through.

Speaker Change: Around around adding equipment, but the operators.

Speaker Change: We are stepping up and helping them out by paying higher most of these were paying for new equipment to the day rate and are also offering longer terms I think for both jackups and floaters youre seeing fixture.

Jose A. Bayardo: And they're also offering longer terms. I think for both jackups and floaters, you're seeing fixtures extend out to the longer contracts so that both parties have a shot at getting payback on these new capital investments and new capabilities. That's kind of the dynamic at work there.

Speaker Change: <unk> fixtures extend out to be longer contracts. So that both parties have have a shot at getting payback on these new capital investments in new capabilities in that range, that's kind of the dynamic at work there. So it depends on what the operators in these two buckets one.

Jose A. Bayardo: So it depends on what the operators in these new markets want. I got it. I appreciate the cover, Clay.

I got it I appreciate that correctly. Thank you you bet.

Jose A. Bayardo: Thank you. Thank you, and one moment for our next question. And our last question is going to come from the line of Kurt Hallead with Benchmark. Your line is open. Please go ahead. Hey, good morning, everybody. Hi Kurt!

Speaker Change #100: Thank you and one moment for our next question.

Speaker Change #100: Okay.

Speaker Change #100: Yeah.

Speaker Change #100: And our last question is going to come from the line of Kurt <unk> with benchmark. Your line is open. Please go ahead.

Kurt: Hey, good morning, everybody.

Kurt: I couldn't recur.

Jose A. Bayardo: I always appreciate the color and the insides; they're very informative. So, I have one big picture question and then one financial question. So let me hit the financial question first, right? As you guys referenced, you still have more coming on the cost reduction front. So I appreciate that dynamic as we get out beyond 2024. I'm just kind of curious as to, you know, what do you see the primary driver for margin improvement as?

Kurt: I always appreciate the color and the answer is very informative. Thank you.

Kurt: So so I got one big picture question and then one one financial question. So let me hit the financial question first right.

Kurt: You guys referenced you still have.

Kurt: More coming on the.

Kurt: Cost reduction front.

So I appreciate that dynamic as we get out beyond 2024, and just kind of curious as to.

Kurt: What do you see the primary driver.

Jose A. Bayardo: Do you think it is going to be more internal, or is it going to be external? For example, like pricing power or, you know, those dynamics, just a little, how you, I'd like to get your sense on how you're thinking about the margin improvement once you get beyond 24. Hey, Kurt, thanks for the good question. I'll start off, and Clay, I'm sure we'll want to weigh in on this one as well. But I think what we see is there are several opportunities to continue to see an improvement in our margin over the next several years. So, obviously, you touched on the cost-out program.

Kurt: For margin improvement.

Kurt: There's going to be more internal or is it going to be external for example, like pricing power or those dynamics just a little.

Kurt: I would like to get your sense on how youre thinking about the margin improvement once you get beyond 25 or 24 excuse me.

Kurt: Hey, Kurt Thanks for the.

Kurt: Good question I'll start off and I'm sure will want to chime in on this one as well but.

Kurt: I think what we see there are several opportunities to continue to see.

Kurt: Movement in our margin over the next several years. So obviously you touched on.

Jose A. Bayardo: We're still in the relatively early phases of that $75 million cost-out program, which really got started at the very end of last year, and we've probably worked our way through about 30% of that at this point in time. We expect that to pick up a bit into Q2, which is why you see an improvement in the incremental margins. But—and we're always going to be—but really expect that to wind out as we work our way through Q3 and Q4. We're going to continue to look for other opportunities. We're always looking to streamline and optimize operations within the company.

Kurt: The cost out program, we're still in the relatively early phases of that $75 million cost out.

Kurt: Program really got started at the very end of last year and we've probably worked about we have worked our way through about 30% of that at this point in time.

Kurt: We expect that to pick up a bit into Q2, which is why you see an improvement in the incremental margins.

Kurt: But we're always going to be but really expect that wind out as we work our way through Q3 and Q4, we're going to continue to look for other opportunities, we're always looking to streamline and optimize the operations within the company, but the bolt we've done obviously done a tremendous amount of heavy lifting over the last several years.

Jose A. Bayardo: But the bolt—we've done—obviously done a tremendous amount of heavy lifting over the last several years, and this is another small step, relatively speaking, from a cost-out standpoint that we'll have wrapped up in 24. As we get into 25 and beyond, you're going to see the continued progression of lower-margin contracts and projects winding out of the system. We've been seeing that over the last several quarters.

Kurt: And this is another small step relatively speaking from a from a cost out standpoint that will have.

Kurt: Wrapped up in 'twenty, four as we get into 'twenty five and beyond.

Kurt: Going to see the continued progression.

Kurt: Lower margin.

Kurt: Contracts and projects winding out of the system, we've been seeing that over the last several quarters, we will see that gradually take place through the remainder of 'twenty four and then clay touched on expectations for one of our businesses in particular, it's really come to an end of some of those contracts quite suddenly really at the end of <unk>.

Jose A. Bayardo: We'll see that gradually take place through the remainder of 24. And then, as Clay touched on, expectations for one of our businesses in particular to really come to an end of some of those contracts quite suddenly, really at the end of 24, should more or less be a step change in 25, which should allow more margin improvement. That's one out of many businesses, but it still makes a difference.

Kurt: 24 should more or less the step change.

Kurt: In 2005, which should allow more margin improvement that's one out of many businesses, but still still still makes a difference also will continue to see improved absorption.

Jose A. Bayardo: Also, we'll continue to see improved absorption across the entire footprint. I think when we get into 25, we'll see continued strong activity in international offshore markets, and we expect North America to be much healthier. Right now, we have cross-currents with international business—more than offsetting what's happening in North America, but North America is certainly a drag. And if we can get all eight cylinders firing, that's another step up from a margin-improvement standpoint, just from a three-foot point of view. And then lastly, pricing.

Kurt: <unk> the entire footprint think when we get into 'twenty five we will see continued strong activity in international offshore market and we expect North America to be much healthier right now we have crosscurrents with international more than offsetting what's happening in North America, but North America is certainly a drag and if we can get all eight cylinders.

Kurt: Firing that's another step up from a margin improvement standpoint, just from a throughput.

Kurt: Point of view and then lastly pricing.

Kurt: Yes.

Jose A. Bayardo: As the cycle progresses and advances and matures, that's really when we have a better opportunity once capacity is fully absorbed, and it becomes more of a conversation of how quickly can I get something versus what's the price. That's sort of the final leg up that we are looking forward to and counting on in the not-too-distant future. That's great, Keller. And then Clay, the bigger picture dynamic, right? We've had a lot of discussion of late, an increasing crescendo of discussion around, you know, the data center build out and what that's going to mean for, you know, grid demand, etc., right? So, you know, I guess I'm curious on two fronts.

Kurt: As the cycle progresses advances and matures.

Kurt: That's really when we have a better opportunity once capacity is fully absorbed.

Kurt: It was more of a conversation of how quickly can I get something versus what's the price that's sort of the final leg that we are looking forward to and counting on in the not too distant future.

Kurt: That's great color and then clay big.

Kurt: Bigger picture dynamic right, we've had a lot of.

Kurt: A discussion of late.

Kurt: Increasing crescendo discussion around.

Kurt: The data center build out and what that's going to mean for.

Speaker Change #101: Yes, great.

Speaker Change #101: Great great demands et cetera, right so right.

Speaker Change #101: Alright.

Jose A. Bayardo: Number one, do you see an opportunity for NOV to provide some element of equipment into the data center, build out the infrastructure, and or, you know, what do you think the ultimate pull is going to be with respect to your customer base, right, in terms of drilling activity, crack activity? Yeah, I think we're probably, frankly, more likely to be a customer of those data centers as our digital offering continues to grow. I mean, we're employing artificial intelligence and a lot of sophisticated edge compute and cloud offerings, which are growing pretty rapidly here.

I guess I'm curious on two fronts number one do you see an opportunity for <unk> to provide some elevated equipment into the data center build out infrastructure and or what do you think the ultimate Paul is going to be with respect to your customer base right in terms of drilling activity bracket can be and so on.

Speaker Change #101: Yes, I think we're probably frankly more likely to be a customer of those data centers as our digital offering continues to grow one point artificial intelligence and a lot of sophisticated edge compute and cloud.

Speaker Change #101: Offerings, which.

Speaker Change #101: <unk> is growing pretty rapidly here.

Speaker Change #101: But that's kind of a second order implications for our business as we both know these data centers are going to drive up electricity demand.

Jose A. Bayardo: But the kind of second-order implications for our business are, as we both know, these data centers are going to drive up electricity demand across the U.S., which is going to require more natural gas, and require more sources of electricity, including renewables. And, Kurt, as you're aware, we're pursuing very disruptive technology in the land wind space that we're pretty excited about through our Keystone efforts and making good progress there. So I think NOV's participation in that phenomenon of U.S. electricity demand rising sharply is going to be more around helping our customers actually provide that electricity, both renewables as well as in the traditional natural gas space, and so really kind of interesting developments in that area, for sure.

Speaker Change #101: Across the U S, which is going to.

Speaker Change #101: Require more natural gas require more sources of electricity, including renewables and Curt as Youre aware were we're pursuing very disruptive.

Speaker Change #101: Technology in the land wind space that we're pretty excited about through a keystone efforts and making good progress there and so I think I think nov's participation in that phenomenon.

Speaker Change #101: U S electricity demand rising sharply is going to be more of a realm.

Speaker Change #101: Helping our customers to actually provide that electricity, both renewables as well as in the traditional natural gas base, and so really kind of an interesting developments in that area.

Jose A. Bayardo: Okay, that's great, guys. Thank you. I appreciate it. Thank you, Kurt. Thank you. And I would now like to hand the conference back to Clay.

Speaker Change #102: Sure. Okay. That's great guys. Thank you I appreciate it. Thank you. Thank you Kurt.

Speaker Change #102: Thank you and I would now like to hand, the conference back to Clay Williams for further remarks.

Clay C. Williams: Thank you, Michelle. We appreciate everyone joining us this morning, and we look forward to speaking to you again in July when we report our second quarter earnings. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Clay C. Williams: Thank you Michele I appreciate everyone joining us this morning, and we look forward to speaking to you again in July when we report our second quarter earnings.

Speaker Change #103: Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.