Q2 2024 NOV Inc Earnings Call

Good day and thank you for standing by. Welcome to Q2 NOV, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: NOV Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Unknown Executive: Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amie D'Ambrosio, Director of Investor Relations. Please go ahead.

Unknown Executive: To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Unknown Executive: Please be advised that today's conference is being recorded.

Amie D'Ambrosio: I would now like to hand the conference over to your speaker today, Amie D'Ambrosio, Director of Investor Relations. Please go ahead. Welcome everyone to NOV's second 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.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Amie D'Ambrosio, Director of Investor Relations. Please go ahead.

Amie D'Ambrosio: I welcome everyone to NOV's second quarter 2024 earnings. With me today are Clay Williams, our Chairman, President, and CEO, and Jose Bayardo, our Senior Vice President. Before we begin, I would like to remind you that some of today's comments are forward-looking, within the meaning of the federal security regulations. Transcription by https://otter.ai. 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.

Amie D'Ambrosio: Welcome everyone to NOV's second 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 .

Amie D'Ambrosio: Reconciliations to the nearest corresponding GAAP measures are in our earnings release, available online. On a US GAAP basis for the second quarter of 2024, NOV reported revenues of $2.22 billion and a net income of $226 million, or $0.57 per fully diluted year.

Unknown Executive: 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. 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.

Amie D'Ambrosio: Our use of the term EBITDA throughout this morning's call corresponds with the term Adjust, as defined in our. 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. Now, let me turn the call over to you, Amie. Thank you.

Speaker Change: 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.

Speaker Change: They involve risks and uncertainty, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year.

Speaker Change: 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.

Unknown Executive: Our comments also include non-GAAP measures. Reconciliation to the nearest corresponding GAAP measures is in our earnings release available on our website. On a US GAAP basis, for the second quarter of 2024, NOV reported revenues of $2.22 billion and a net income of $226 million, or 57 cents 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.

Speaker Change: Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

Speaker Change: On a U.S. GAAP basis, for the second quarter of 2024, NOV reported revenues of $2.22 billion and a net income of $226 million, or $0.57 per fully diluted share.

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

Unknown Executive: 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: 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.

Clay Williams: Now, let me turn the call over to Clay. Thank you, Amy. NOV's second quarter revenues of $2.2 billion increased 6% compared to the second quarter of 2023, as year-over-year double-digit growth in international markets and 6% growth in the offshore easily overcame a modest 1% decline in North American sales. The company posted fully diluted GAP earnings for the second quarter of 57 cents per share, an 18 cents year-over-year, helped by gains from our divestiture of our poll products business during the quarter. Second quarter EBITDA improved 15% year-over-year to $281 million. Strong sequential EBITDA leverage of 66% was driven by the impact of cost reductions undertaken over the past several months, along with a poll forward of some work and very good execution.

Unknown Executive: NOB's second quarter revenues of $2.2 billion increased 6% compared to the second quarter. Year-over-Year Double-Digit Growth in International, The company posted fully diluted GAP. Second quarter EBITDA improved 15% year-over-year to $280,000, along with a pull forward of some work and was very good due to the cost savings. Exploration and New Offshore, and International Development of Uncommissioned Oil, emerging as a primary growth length and duration of this cycle. Stable oil prices and a strong long-term outlook for natural gas and LNG demand are supporting EMPI.

Speaker Change: Now, let me turn the call over to Clay.

Clay C. Williams: Thank you, Amie. NOB's second quarter revenues of $2.2 billion increased 6% compared to the second quarter of 2023, as year-over-year double-digit growth in international markets and 6% growth in the offshore easily overcame a modest 1% decline in North American sales.

Speaker Change: The company posted fully diluted GAAP earnings for the second quarter of $0.57 per share up $0.18 year-over-year, helped by gains from our divestiture of our pulled products business during the quarter.

Speaker Change: Second quarter EBITDA improved 15% year-over-year to $281 million.

Speaker Change: Strong sequential EBITDA leverage of 66% was driven by the impact of cost reductions undertaken over the past several months, along with a pull forward of some work and very good execution.

Clay Williams: Consolidated EBITDA margin of 12.7% improved sequentially and year-over-year due to the cost savings and rising margins in NOV's revenue out of backlog, which accounted for about 25% of our revenue mix during the second quarter. Exploration in new offshore basins, greenfield and brownfield offshore development for both willing gas, and international development of unconventional resources are emerging as the primary growth drivers for NOV. As a strength and duration of this cycle. will remain on display. Stable oil prices and strong long-term outlook for natural gas and LNG demand are supporting EMP investments in these. In fact, industry forecasts are calling for several additional final investment decisions or FIDs for big offshore projects following the significant ramp of the past three years, which are expected to drive sharply higher demand for offshore production assets like FPSOs.

Speaker Change: Consolidated EBITDA margin of 12.7% improved sequentially and year-over-year due to the cost savings and rising margins in NOV's revenue out of backlog, which accounted for about 25% of our revenue mixed during the second quarter.

Speaker Change: Exploration and new offshore basins, greenfield and brownfield offshore development for both oil and gas.

Speaker Change: And, international development of unconventional resources are emerging as the primary growth drivers for NOV, as the strength and duration of this cycle remains on display. Stable oil prices and strong long-term outlook for natural gas and LNG demand are supporting EMP investments in these.

Unknown Executive: In fact, industry forecasts are calling for several additional final investment decisions (FIDs) for big offshore projects following this significant ramp. It is expected to drive sharply higher demand. National Oil Company's Reno C's have been, Transcribed by https://otter.ai International Land Development, CP Operators Need Better Drilling, Stimulation, and Production Equipment, Those Developed and Honed in North America's Uncommissioned Shale Landing Reminder, the U.S. shale revolution began with a retooling of its drilling fleet to A.C. power and high-spec capabilities, followed by the build-out of substantially more and more efficient hydraulic fractures. https://www.youtube.com.uk; New International Wells also need miles of corrosion-resistant concrete, is a leading global Make sure EMP operators need drilling rigs to be reactivated Accelerates the corrosion cause. These also need to be...

Speaker Change: In fact, industry forecasts are calling for several additional Final Investment Decisions, or FIDs, for big offshore projects following this significant ramp of the past three years, which are expected to drive sharply higher demand for offshore production assets like FPSOs.

Clay Williams: National oil companies or NOCs have been clear about their higher spending plans to achieve ambitious goals to boost production. These trends have important implications for NOV's business. For international land developments, EMP operators need better drilling, stimulation, and production equipment and technologies, like those developed and honed in North America's unconventional shale laboratory through the past two decades. As a reminder, the US shale revolution began with a retooling of its drilling fleet to AC power and high-spec capabilities early in the century. That was step one, followed by the buildout of substantially more and more efficient hydraulic fracturing equipment; two things that never happened across the Middle East, Asia Pacific, or Latin America.

Speaker Change: National oil companies or NOCs have been clear about their higher spending plans to achieve ambitious goals to boost production.

Speaker Change: These trends have important implications for NOV's business.

Speaker Change: For international land developments, EMP operators need better drilling, stimulation, and production equipment and technologies, like those developed and honed in North America's unconventional shale laboratory through the past two decades.

Speaker Change: As a reminder, the U.S. shale revolution began with a retooling of its drilling fleet to A.C. power and high-spec capabilities early in the century.

Speaker Change: That was step one, followed by the build out of substantially more and more efficient hydraulic fracturing equipment. Two things that never happened across the Middle East, Asia Pacific, or Latin America.

Clay Williams: New international wells also need miles of corrosion-resistant flow line, plus choke's valves processing equipment in the line. NOV is a leading global provider of all of these. Offshore EMP operators need drilling rigs to be reactivated after long periods of inactivity, which accelerates the corrosion caused by salt air, and these also need to be retrofitted with drill pipe bits and drilling tools. Our organization supports the majority of the global offshore drilling fleet as a leading drilling equipment OEM. Drilling rig reactivation activity has been strong over the past few quarters as we've worked to put assets back to work.

Speaker Change: New international wells also need miles of corrosion-resistant flowline, plus chokes, valves, processing equipment, and the like.

NOV: NOV is a leading global provider of all of these.

NOV: Offshore E&P operators need drilling rigs to be reactivated after long periods of inactivity, which accelerates the corrosion caused by salt air. And these also need to be retrofitted with drill pipe bits and drilling tools.

Unknown Executive: Drill pipe bitch, the organization supports the majority of the global offshore drilling fleet as a leading drilling equipment manufacturer. Billing Rig Reactivation Activity has been strong over the past, but offshore operators also need platforms and FPSO. Flowline, Transcription by CastingWords, and NOV is a leading global provider of OV's opportunity per FPSO production vessel ranges from $100 million in benign, $1,700,000,000, Worked the bill was nearly 180%, driven by strong demand for flexible pipe for deepwater FPSO.

Speaker Change: Our organization supports the majority of the global offshore drilling fleet as a leading drilling equipment OEM. Drilling rig reactivation activity has been strong over the past few quarters as we've worked to put assets back to work.

Clay Williams: Offshore operators also need platforms and FPSOs and subsea flow lines and production kit ranging from flexible and composite piping systems to gas treatment pumps, valves, and chokes. Again, NOV is a leading global provider of these, and we are now also seeing rising demand for production technologies we provide, which drove the strong level of orders this quarter. NOV's opportunity per FPSO production vessel ranges from $100 million in benign waters up to $700 million in harsh environments. Book to Bill was nearly 180% in the second quarter. Driven by strong demand for flexible pipe for deep water FPSO developments, bookings were also helped by demand for well intervention equipment for both offshore and international markets, and a large order for windtowers that Jose will speak to later.

Speaker Change: Offshore operators also need platforms and FPSOs and subsea flow lines and production kit ranging from flexible and composite piping systems to gas treatment pumps, valves, and chokes.

Speaker Change: Again, NOV is a leading global provider of these, and we are now also seeing rising demand for production technologies we provide.

Speaker Change: which drove the strong level of orders this quarter. NOV's opportunity per FPSO production vessel ranges from $100 million in benign waters up to $700 million in harsh environments.

Jose A. Bayardo: Book-to-bill was nearly 180 percent in the second quarter. Driven by strong demand for flexible pipe for deepwater FPSO developments, bookings were also helped by demand for well intervention equipment for both offshore and international markets, and a large order for wind towers that Jose will speak to later.

Unknown Executive: Bookies were also helped by demand for well intervention equipment for both offshore and onshore applications, and a large order for wind towers at Jose Bayardo's. Offshore tendering and drilling activity continues to be strong in the Middle East. Most of these customers understand that the economics of uncommissioned technology work best with modern AC powered rigs supported by advanced technology. Downhole bits and friction reduction tools that enable longer laterals, and they understand the fluid handling and corrosion challenges of high flow back rates of fluids carrying heavy abrasive loads.

Clay Williams: Onshore tindering and drilling activity continues to be strong in the Middle East and is rising in Latin America and Asia as NOCs pursue aspirational production targets, particularly around gas and employee unconventional production technology, many for the first time. Most of these customers understand that the economics of unconventional technology work best with modern AC powered rigs supported by advanced control systems, with downhill bits and friction reduction tools that enable longer laterals and higher production per well. And with safe and efficient pressure pumping spreads and cool tubing units that de-risk completions. They understand the fluid handling and corrosion challenges of high flow back rates of fluids carrying heavy abrasive loads through their processing plants.

Jose A. Bayardo: Onshore tendering and drilling activity continues to be strong in the Middle East and is rising in Latin America and Asia as NOCs pursue aspirational production targets, particularly around gas, and employ unconventional production technology, many for the first time.

Jose A. Bayardo: Most of these customers understand that the economics of unconventional technology work best with modern AC-powered rigs supported by advanced control systems, with downhole bits and friction reduction tools that enable longer laterals and higher production per well.

Jose A. Bayardo: and with safe and efficient pressure pumping spreads and cooled tubing units that de-risk completions.

Jose A. Bayardo: They understand the fluid handling and corrosion challenges of high flowback rates of fluids carrying heavy abrasive loads through their processing plants. They understand that NOV can help them navigate these challenges with our unconventional production technology that enables profitable development of their resources.

Clay Williams: They understand that NOV can help them navigate these challenges with our unconventional production technology that enables. is profitable development of their resources. NOV is well positioned to capitalize on the building, offshore, and international momentum.

Unknown Executive: I understand that NOV can help them navigate these challenges with our unconventional production technology that enables Novi is well positioned to capitalize on the building offshore and international momentum. In North America, however, we see a different and more challenging picture.

Jose A. Bayardo: NOV is well positioned to capitalize on the building offshore and international momentum.

Clay Williams: On the other hand, in North America, we see a different and more challenging picture to the second half of 2024. It's an NGO crisis, particularly in West Texas, reduced the realized well-head revenues for operators and diminished their cash flows, their well-bored construction economics, and their appetite can drill. Certain of our North American oilfield service customers are facing more price pressure, as fleet utilization falls, and most are increasingly cautious about their purchases, which led to an 8% decline in energy equipment revenues for the region year over year. And drove North America and mixed down to 25% of segment revenue in the second quarter of 2024.

Jose A. Bayardo: On the other hand...

Speaker Change: In North America, we see a different and more challenging picture to the second half of 2024. Onshore activity in the U.S. continues to slow due to EMP merger integrations and low natural gas prices. As the market awaits more LNG export takeaway capacity slated for 2025.

Unknown Executive: Interactivity in the U.S. continues to slow due to EMP, merger integrations, and low natural gas emissions; the market awaits more LNG export takeaway capacity slated Low Natural Gas Prices and NGL, particularly in the West, to produce Realized Wellhead Revenues for Operators and Diminish Their Cash Flows, Their Well, North American Oilfield Service North American Oilfield Service customers are facing more price, Suite Utilization. And most are increasingly cautious about their purchases, which led to an eight.

Speaker Change: Low natural gas prices and NGL prices, particularly in West Texas, reduce the realized wellhead revenues for operators and diminish their cash flows, their wellbore construction economics, and their appetite to drill.

Speaker Change: Certain of our North American Oilfield Service customers are facing more price pressure as fleet utilizations fall.

Speaker Change: And most are increasingly cautious about their purchases, which led to an 8% decline in energy equipment revenues for the region year over year, and drove North American mix down to 25% of segment revenue in the second quarter of 2024.

Clay Williams: In energy products and services, with 51% of its mix from North America, you'd expect an even bigger impact from this trend. However, with market share gains in North America, rising from new products and technologies, along with revenues from our first quarter acquisition of Extract, North America revenues for our energy products and services segment were actually up 3% year on year.

Speaker Change: In energy products and services, with 51% of its mix from North America, you'd expect an even bigger impact from this trend. However, with market share gains in North America rising from new products and technologies along with revenues from our first quarter acquisition of extract, North America revenues for our energy products and services segment were actually up 3% year-on-year.

Unknown Executive: However, with market share gains in North America rising from new products and technologies along with revenues from our first quarter acquisitions. North American revenues for our Energy business So to sum it up, we're very pleased with bookings. We are increasingly cautious about continued headwinds in North America.

Clay Williams: So, to sum it up, we're very pleased with bookings during the quarter and 129% book-to-bill through the first half. While we are increasingly cautious about continued headwinds in North America, we think continued rising demand and offshore and international space will yield a book-to-bill greater than one for the second half of 2024. As they typically are, though, orders will continue to be lumpy quarter to quarter, and we do not expect a repeat of the second quarter's barn burner bookings again in key three.

Speaker Change: So to sum it up, we're very pleased with bookings during the quarter, and 129% booked a bill through the first half.

Unknown Executive: Continued rising demand in offshore and international space, orders to build greater than one for the second, typically are, though. Orders will continue to be lumpy, and we do not accept it.

Speaker Change: While we are increasingly cautious about continued headwinds in North America, we think continued rising demand in offshore and international space will yield a book-to-bill greater than one for the second half of 2024.

Speaker Change: As they typically are, though, orders will continue to be lumpy quarter to quarter, and we do not expect a repeat of the second quarter's barn burner bookings again in Q3.

Clay Williams: Turning to cost savings, today we have substantially achieved the $75 million annualized cost reduction initiative we announced last year through our new segment structure, workforce reductions, and our facilities closures. But we recognize we are facing a more challenging market in North America, and to achieve acceptable returns on capital we can't stop here. So we're developing additional opportunities to further reduce costs and drive better efficiencies, focusing on what we can control. As always, that includes keeping an eye out for merging technologies that we can bring to bear in our own operations as well as our customers.

Unknown Executive: According to Cost Savings, to date, we have substantially achieved the $75 million annualized cost reduction initiatives we announced last year through our new segment. We recognize we are facing a more challenging market in North America. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Turning to cost savings, to date we have substantially achieved the $75 million annualized cost reduction initiatives we announced last year through our new segment structure, our workforce reductions, and our facilities closures.

Speaker Change: But we recognize we are facing a more challenging market in North America, and to achieve acceptable returns on capital, we can't stop here. So we're developing additional opportunities to further reduce costs and drive better efficiencies focusing on what we can control.

Unknown Executive: For the reduced cost. As always, that includes keeping an eye out for emerging technologies that we can bring to bear in our own operations. For the past few years, we've helped our customers optimize their drilling with AI through our. We've used AI to help write code here for a number of new NOVs. More recently, we've begun to apply it to our own operations across more than 50 of our manufacturers, using a proprietary AI. Owner Normal Owner Microsoft Office Word Microsoft, Inc.

Speaker Change: As always, that includes keeping an eye out for emerging technologies that we can bring to bear in our own operations as well as our customers.

Clay Williams: Technology is like AI, Artificial Intelligence. For the past few years, we've helped our customers optimize their drilling with AI through our Kaizen app, and we've used AI to help write code here for a number of new NOV software products. More recently, we've begun to apply it to our own operations across more than 50 of our manufacturing facilities globally using a proprietary AI platform we call a RIDIA that we've developed internally to optimize capacity, improve machine tool utilization, and drive better absorption and efficiency. The platform leverages NOV's proprietary max-edge devices to collect real-time data from sensors affixed to manufacturing machinery in our plants.

Speaker Change: Technologies like AI, artificial intelligence.

Speaker Change: For the past few years, we've helped our customers optimize their drilling with AI through our Kaizen app.

Speaker Change: and we've used AI to help write code here for a number of new NOV software products.

Speaker Change: More recently, we've begun to apply it to our own operations across more than 50 of our manufacturing facilities globally using a proprietary AI platform we call Iridia that we've developed internally to optimize capacity, improve machine tool utilization, and drive better absorption and efficiency.

Unknown Executive: Title Microsoft, Inc. Transcribed by https://otter.ai, Platform leverages InnoVis proprietary MaxEdge devices to collect real-time data Manufacturing Machinery, https://www.nasa.gov These models remove the guesswork to allow our operations team to quickly respond to, Transcribed by https://otter.ai, Unknown Executive, Arun Jayaram, Blake McCarthy, Amie DAMbrosio, National Oilwell Varco Inc. No feasibility to quickly scale our operation. You're also using AI to drive better.

Speaker Change: The platform leverages NOV's proprietary MaxEdge devices to collect real-time data from sensors affixed to manufacturing machinery in our plants.

Clay Williams: The platform then feeds that data to AI prescriptive models that identify opportunity costs, caused by throughput, quality, or reliability issues. These models remove the guesswork to allow our operations teams to quickly respond to issues and opportunities. The platform is highly scalable, and we plan to connect all our manufacturing machines worldwide beyond the several hundred that are using it today to help us improve utilized. We're also using AI to drive better forecasting. The supply chain drama rising from the COVID pandemic highlighted shortcomings in our lead time estimation and planning. In response, we are developing an AI solution to more accurately predicted managed vendor lead times to ensure we have inventory on hand, win, and where we need it.

Speaker Change: The platform then feeds that data to AI prescriptive models that identify opportunity costs caused by throughput, quality, or reliability issues. These models remove the guesswork to allow our operations team to quickly respond to issues and opportunities.

Speaker Change: The platform is highly scalable, and we plan to connect all our manufacturing machines worldwide beyond the several hundred that are using it today to help us improve utilization and results. NOV's ability to quickly scale our operations as cycles dictate is a competitive strength that this system will enhance.

Unknown Executive: Supply chain drama arising from the COVID pandemic highlighted shortcomings in our lead time estimation. Transcripts provided by Transcription Outsourcing, LLC, of inventory on hand when and where. Further optimization.

Speaker Change: We are also using AI to drive better forecasting.

Speaker Change: The supply chain drama arising from the COVID pandemic highlighted shortcomings in our lead time estimation and planning.

Speaker Change: In response, we are developing an AI solution to more accurately predict and manage vendor lead times to ensure we have inventory on hand when and where we need it. This will further optimize working capital while maintaining high reliability and logistical efficiency.

Clay Williams: This will further optimize working capital while maintaining high-roading reliability and logistical efficiency. We think steadily rising market demand a key offshore and international markets dormant for a decade plus, together with these technology driven operating efficiency initiatives, new products and technologies we are bringing to the market, and further cost improvements are the prominent features that will guide in these journey to better margins and returns. Our company is very well positioned to support and enhance our customers' operations, to drive better efficiency, to reduce emissions, and to improve their safety for the next several years.

Unknown Executive: For more information, call 1-800-634-7000. We think steadily rising market demand and key offshore and international markets dormant for a together with these technology-driven operating Products and Technologies. We're bringing Cost Improvements, or the prominent guide NOB's journey. NOB is very well positioned to support and enhance our customers' operations to drive better efficiency and reduce emissions. Before I turn the call over to Jose, I want to...

Speaker Change: We think steadily rising market demand in key offshore and international markets, dormant for a decade plus, together with these technology-driven operating efficiency initiatives, new products and technologies we are bringing to the market, and further cost improvements are the prominent features that will guide NOV's journey to better margins and returns.

Speaker Change: Our company is very well positioned to support and enhance our customers' operations to drive better efficiency, to reduce emissions, to improve their safety for the next several years. Before I turn the call over to Jose, I want to take a moment to thank our employees who may be listening this morning.

Clay Williams: But before I turn the call over to Jose, I want to take a moment to thank our employees who may be listening this morning. As I just noted, we have a big opportunity in front of us, as our offshore and international customers get back to work and as our North American customers continue to look to us for solutions to improve their business. They're counting on us to deliver, and I appreciate your hard work and creativity to support them. Thank you for the great job that you do.

Unknown Executive: Thank our employees who may be, Just know that we have a big opportunity Transcript by Rev.com Page of Appreciate your hard work and creativity. Thank you for the great job that you do. NOV's consolidated EBITDA improved 15% year over year to $281 million, with margins improving 100 basis points to 12.7%, reaching the highest level since 20 at our $75 million cost. Cash flow from operations was a healthy $432 million due to improvements in working capital and... CapEx totaled $82 million, leading to free cash flow of $350 million.

Speaker Change: As I just noted, we have a big opportunity in front of us as our offshore and international customers get back to work, and as our North American customers continue to look to us for solutions to improve their business. They're counting on us to deliver, and I appreciate your hard work and creativity to support them. Thank you for the great job that you do. Jose?

Jose Bayardo: Jose? Thank you, Clay. NOV has consolidated EBITDA, improved 15% year over year to 281 million, with margins improving 100 basis points to 12.7% of sales, reaching the highest level since 2015, supported by our $75 million cost out program, which, as Clay mentioned, was substantially completed during the second quarter. Cash flow from operations was a healthy $432 million due to improvements in working capital and profitability. CapEx totaled $82 million, leading to free cash flow of $350 million, and we continue to expect that we will convert over 50% of EBITDA to free cash flow for the year.

Jose A. Bayardo: Thank you, Clay.

Speaker Change: NOV has consolidated EBITDA and improved 15% year-over-year to $281 million, with margins improving 100 basis points to 12.7% of sales.

Jose A. Bayardo: Reaching the highest level since 2015, supported by our $75 million cost-out program, which, as Clay mentioned, was substantially completed during the second quarter.

Jose A. Bayardo: Cash flow from operations was a healthy $432 million due to improvements in working capital and profitability. CapEx totaled $82 million, leading to free cash flow of $350 million, and we continue to expect that we will convert over 50% of EBITDA to free cash flow for the year.

Unknown Executive: We continue to expect that we will convert over 50%. Much improved cash flow realized in the second quarter reinforces our already strong confidence. Capital Light Business Model. Last quarter, we unveiled our return of capital. Aligned with our long-standing capital, As a reminder, priority one is to defend.

Jose Bayardo: Much improved cash flow realized in the second quarter reinforces our already strong confidence that NOV's capital light business model will generate substantial amounts of free cash flow over the coming years.

Speaker Change: Much improved cash flow realized in the second quarter reinforces our already strong confidence that NOV's capital light business model will generate substantial amounts of free cash flow over the coming years.

Jose Bayardo: Last quarter, we unveiled our return of capital framework that is aligned with our long-standing capital allocation priorities. As a reminder, priority one is to defend the balance sheet. As expected, during the second quarter, our net debt to EBITDA's leverage ratio fell below one, and our gross debt leverage ratio remained below two, meaning we now consider the balance sheet to be in optimal condition, which paves the way to return a large portion of our future cash generation to shareholders while maintaining adequate financial flexibility.

Jose A. Bayardo: Last quarter we unveiled our return of capital framework that is aligned with our long-standing capital allocation priorities.

Unknown Executive: As expected, during the second quarter, our net debt to EBITDA leverage ratio fell below one, and our gross... Transcribed by https://otter.ai, Pave the way to return a large portion of our future cash generation to shareholders while maintaining Second, we aim to properly maintain our asset base and invest in organic growth opportunities that drive superior. During the second quarter, the bulk of our $82 million in capital expenditures was invested in building out our ability to support more of our latest efficiency.

Jose A. Bayardo: As a reminder, priority one is to defend the balance sheet.

Jose A. Bayardo: As expected, during the second quarter, our net debt to EBITDA leverage ratio fell below 1, and our gross debt leverage ratio remained below 2, meaning we now consider the balance sheet to be in optimal condition, which paves the way to return a large portion of our future cash generation to shareholders while maintaining adequate financial flexibility.

Jose Bayardo: Second, we aim to properly maintain our asset base and invest in organic growth opportunities that drive superior risk-adjusted returns. During the second quarter, the bulk of our 82 million in capital expenditures was invested in building out our ability to support more of our customers with our latest efficiency-enhancing tools, technologies, and services. Next, we always want to remain opportunistic regarding acquisitions that can accelerate strategic growth initiatives at attractive returns. In the second quarter, we completed our acquisition of Keystone Tower Systems, which I'll talk more about in a moment, and we're continuing to evaluate Rifle Shot Technology.

Jose A. Bayardo: Second, we aim to properly maintain our asset base and invest in organic growth opportunities that drive superior risk-adjusted returns.

Jose A. Bayardo: During the second quarter, the bulk of our $82 million in capital expenditures was invested in building out our ability to support more of our customers with our latest efficiency enhancing tools, technologies, and services.

Unknown Executive: Next, we always want to remain opportunistic regarding acquisitions and can accelerate strategic growth initiatives at a rapid pace. In the second quarter, we completed our acquisition of Keystone, which I'll talk more about in a moment, and we're continuing to evaluate rifle shot technology. Lastly, we remain committed to returning at least 50% of our excess free cash flow, defined as cash flow from operations less, to our shareholders on it. During the quarter, we stepped up our return of capital by increasing our dividends by 50%, which amounted to $30 million. We also bought back 2 million shares at an average price of $18.50 per share, totaling an additional $30 million.

Jose A. Bayardo: Next, we always want to remain opportunistic regarding acquisitions and can accelerate strategic growth initiatives at attractive returns.

Jose A. Bayardo: In the second quarter, we completed our acquisition of Keystone Tower Systems, which I'll talk more about in a moment, and we're continuing to evaluate rifle shot technology acquisitions that improve our strategic positioning.

Jose Bayardo: of the acquisitions that improve our strategic positioning.

Jose Bayardo: Lastly, we remain committed to returning at least 50% of our excess free cash flow, defined as cash flow from operations, less capital expenditures and other investments, to our shareholders on an annual basis. During the quarter, we stepped up our return of capital by increasing our dividend 50%, which amounted to $30 million paid in the quarter. We also bought back two million shares at an average price of $18.50 per share, totaling an additional $37 million.

Jose A. Bayardo: Lastly, we remain committed to returning at least 50% of our excess free cash flow, defined as cash flow from operations, less capital expenditures, and other investments, to our shareholders on an annual basis.

Jose A. Bayardo: During the quarter, we stepped up our return of capital by increasing our dividend 50%, which amounted to $30 million paid in the quarter.

Jose A. Bayardo: We also bought back 2 million shares at an average price of $18.50 per share, totaling an additional $37 million. In sum, we returned $67 million of capital to our shareholders during the second quarter.

Jose Bayardo: In some, we returned $67 million of capital to our shareholders during the second quarter.

Jose Bayardo: As I just mentioned, during the quarter, we completed the acquisition of the remaining minority interest in Keystone Tower Systems. With NOV's help, Keystone developed a proprietary spiral welding manufacturing technology that we think will be a game changer in the wind industry due to not only its potential to reduce the cost and time to manufacture wind towers, but even more so due to its potential to enable the manufacturing of towers in the field. This avoids the logistical challenges that prevent land wind forms from using taller towers, which can access stronger, more steady winds and utilize larger turbines.

Unknown Executive: In sum, we returned $67 million of capital. As I just mentioned, during the quarter, we completed the acquisition of the remaining minority interest in Keystone. With NOV's help, Keystone developed a proprietary spiral welding manufacturer due to not only its potential to reduce the cost and time to manufacture wind turbines, but even more so due to its potential to enable the manufacturing of towers. This avoids the logistical challenges that prevent land wind farms from using taller towers. Transcribed by https://otter.ai, Using taller towers can significantly improve the economics of wind power and therefore expand the geographical areas where you can cost.

Jose A. Bayardo: As I just mentioned, during the quarter, we completed the acquisition of the remaining minority interest in Keystone Tower Systems.

Jose A. Bayardo: with NOV's help.

Jose A. Bayardo: Keystone developed a proprietary spiral welding manufacturing technology that we think will be a game-changer in the wind industry due to not only its potential to reduce the cost and time to manufacture wind towers, but even more so due to its potential to enable the manufacturing of towers in the field.

Jose A. Bayardo: This avoids the logistical challenges that prevent land wind farms from using taller towers, which can access stronger, more steady winds and utilize larger turbines.

Jose Bayardo: Using taller towers can significantly improve the economics of wind power and therefore expand the geographical areas where you can cost-effectively produce wind power outside of the wind belt and into regions with higher populations and energy demand. We made our initial investment in Keystone during 2019 and increased our financial investment over time, becoming the majority shareholder in 2023. We also increased our investment with human capital over time by sharing our manufacturing expertise to help produce and sell Keystone's first commercial tower sections and position the operation to be able to win a contract for 398 meter tall wind towers from a major wind turbine OEM.

Jose A. Bayardo: Using taller towers can significantly improve the economics of wind power and therefore expand the geographical areas where you can cost-effectively produce wind power outside of the wind belt and into regions with higher populations and energy demand.

Unknown Executive: and into regions with higher population. We made our initial investment in Keystone during 2019 and increased our financial investment, becoming the majority shareholder in We also increased our investment with human capital over time by sharing our manufacturing, producing and selling Keystone's First Commercial Tower and preparing the operation to be able to win a contract for 398 meter tall wind from a major wind turbine. With this win, we elected to exercise an option to buy out the remaining minority, and we are now working to significantly expand Keystone's manufacturing and begin making deliveries on this contract.

Speaker Change: We made our initial investment in Keystone during 2019 and increased our financial investment over time, becoming the majority shareholder in 2023.

Speaker Change: We also increased our investment with human capital over time by sharing our manufacturing expertise to help produce and sell Keystone's first commercial tower sections and position the operation to be able to win a contract for 398-meter tall wind towers from a major wind turbine, OEM.

Jose Bayardo: With this wind, we elected to exercise an option to buy out the remaining minority shareholders, and we are now working to significantly expand Keystone's manufacturing capacity to begin making deliveries on this contract beginning mid 2025.

Speaker Change: With this win, we elected to exercise an option to buy out the remaining minority shareholders, and we are now working to significantly expand Keystone's manufacturing capacity to begin making deliveries on this contract beginning mid-2025.

Jose Bayardo: This operation is really just getting started, but we're excited about the long-term potential of this business.

Unknown Executive: This operation is really just getting started, but we're excited about the long... Moving on to our segment, our energy products and services segment generated revenues of $1.050 billion. EBITDA decreased $14 million to $184 million year-over-year or $17.

Speaker Change: This operation is really just getting started, but we're excited about the long-term potential of this business.

Jose Bayardo: Moving on to our segment results. Our energy products and services segment generated revenues of 1.050 billion in the second quarter, a 2% increase compared to the second quarter of 2023. EBITDA decreased 14 million to 184 million year-over-year, or 17.5% of sales, due to a less favorable sales mix and a more challenging North American market. Sequentially, the segment realized 3% growth with 30% EBITDA flow through. As a reminder, our energy products and services segment generates income from three revenue streams: services and rentals, consumable products, and sales of shorter-lived capital equipment. The segment sales mix for the quarter was 48% service and rentals, 20% product sales, and 32% capital equipment sales.

Speaker Change: Moving on to our segment results. Our energy products and services segment generated revenues of $1.050 billion in the second quarter, a 2% increase compared to the second quarter of 2023.

Speaker Change: EBITDA decreased $14 million to $184 million year-over-year, or 17.5% of sales, due to a less favorable sales mix and a more challenging North American market.

Unknown Executive: Due to a less favorable sales mix and a more challenging North America, sequentially, the segment realized 3% growth with 30%. As a reminder, our energy products and services segment generates income from three revenue sources, Services and Rentals, Consumable Products, and Sales of Shorter-Lived Capital. The segment sales mix for the quarter was 48% service and rentals, and 20% product.

Speaker Change: Sequentially, the segment realized 3% growth with 30% EBITDA flow-through.

Speaker Change: As a reminder, our energy products and services segment generates income from three revenue streams, services and rentals, consumable products, and sales of shorter-lived capital equipment.

Speaker Change: The segment sales mix for the quarter was 48% service and rentals, 20% product sales, and 32% capital equipment sales.

Unknown Executive: 32% cap. Revenue from service and rentals includes tubular coating and inspection. Drilling Data Acquisition, Analytics, and Optimization Services, and Rentals of our Downhole Drilling Tools, Drill. During the second quarter, revenue from NOV service and rental businesses increased in the low single-digits. With market share gains in the U.S., strong demand from international markets, and the contribution from our new artificial lift business more than offsetting, excluding the contribution from our artificial... Revenues from service and rentals declined in the US, but revenue from drill bit rentals in the US held flat from the second quarter of 2023, despite the 17% decline.

Jose Bayardo: Revenue from service and rentals includes tubular coding and inspection services, solid control services, drilling data acquisition, analytics and optimization services, and rentals of our downhole drilling tools, drill bits, and artificial lift equipment. During the second quarter, revenue from NOV service and rental businesses increased in the low single digits year-over-year. With market share gains in the U.S., strong demand from international markets, and the contribution from our new artificial lift business, more than offset in the 12th percent decline in North American drilling activity. Excluding the contribution from our artificial lift business, revenues from service and rentals declined in the low single digits year over year.

Speaker Change: Revenue from service and rentals includes tubular coating and inspection services, solid control services, drilling data acquisition analytics and optimization services, and rentals of our downhole drilling tools, drill bits, and artificial lift equipment.

Speaker Change: During the second quarter, revenue from NOV service and rental businesses increased in the low single digits year over year, with market share gains in the U.S., strong demand from international markets, and the contribution from our new artificial lift business more than offsetting the 12 percent decline in North American drilling activity.

Speaker Change: Excluding the contribution from our artificial lift business, revenues from service and rentals declined in the low single digits year over year.

Jose Bayardo: Revenue from drill bit rentals in the US held flat from the second quarter of 2023, despite the 17 percent decline in the US rig count. We realize strong growth in the Permian Basin from the rapid adoption of our latest bit and cutter designs, which coincides with many operators re-evaluating performance, bit designs, and vendors as they optimize hole sizes across much of the basin. Growth in the Permian offset declines in other areas of the US, resulting from lower activity in gas basins and the cooling effect consolidation among oil and gas producers continues to have on activity.

Speaker Change: Revenue from drill bit rentals in the U.S. held flat from the second quarter of 2023, despite the 17% decline in the U.S. rig count.

Unknown Executive: We've realized strong growth in the Permian Basin from the rapid adoption of our latest bit and cutter, which coincides with many operators re-evaluating performance, bit designs, and vendors. Optimize Hole Sizes Across, Growth in the Permian offset declines in other areas of the U.S., resulting from lower activity in gas.

Speaker Change: We realize strong growth in the Permian Basin from the rapid adoption of our latest bit and cutter designs, which coincide with many operators re-evaluating performance, bit designs, and vendors as they optimize hole sizes across much of the basin.

Speaker Change: Growth in the Permian offset declines in other areas of the U.S. resulting from lower activity in gas basins and the cooling effect consolidation among oil and gas producers continues to have on activity.

Unknown Executive: Internationally, Bit Rentals and Borehole Enlargement Services improved slightly on increasing activity in the Middle East more than offsetting lower revenue from downhole tool rentals. We realized a low- to mid-single-digit decline in North America against Unknown Executive, Arun Jayaram, Blake McCarthy, Amie DAMbrosio, National Oilwell Varco Inc. Demand for our tools is generally driven by footage. Higher levels of drilling complexity require more of our technology. For example, as customers push beyond two-mile laterals, they're realizing the benefit of running multiple zero-pressure droppers.

Jose Bayardo: Internationally, bit rentals in borehole and mortgment services improve slightly on increasing activity in the Middle East, more than offsetting lower activity in Latin America. Revenue from downhole tool rentals improved 3 percent from the second quarter of 2023. We realize the low to mid-single digit decline in North America against a rig count decreased 12 percent. Result of rapidly growing adoption of our latest drilling technologies that allow operators to more efficiently drill high pressure and low-model wells. Demand for our tools is generally driven by footage drilled, but higher levels of drilling complexity require more of our technologies for efficient operations.

Speaker Change: Internationally, Bit Rentals and Borehole Enlargement Services improved slightly on increasing activity in the Middle East, more than offsetting lower activity in Latin America.

Speaker Change: Revenue from downhole tool rentals improved 3% from the second quarter of 2023. We realized a low to mid single-digit decline in North America against a rig count that decreased 12%, a result of rapidly growing adoption of our latest drilling technologies that allow operators to more efficiently drill high pressure and long lateral wells.

Speaker Change: Demand for our tools is generally driven by footage drilled, but higher levels of drilling complexity require more of our technologies for efficient operations.

Jose Bayardo: For example, as customers push beyond two-mile laterals, they are realizing the benefit of running multiple zero-pressure drop agitators in their bottom hole assembly. And for wells drilled with rotary steerable tools, our Positract torsional vibration mitigation tool enables operators to maintain higher weight on bit, allowing them to drill further without damaging the BHA. Well, international revenue from downhole rentals was mostly flat year over year. We expect to realize strong growth over the mid to long term, driven by increasing activity in the unconventional plays of the Middle East. Revenue from solid control services realized a low single-digit growth rate compared to the second quarter of 2023.

Speaker Change: For example, as customers push beyond two-mile laterals, they're realizing the benefit of running multiple zero-pressure drop agitators in their bottom-hole assembly.

Unknown Executive: Wells Drilled With Rotary Steerable Tools, Our Positrack Torsional Vibration Mitigation Tool Enables Operators To Maintain Higher Weight on the Bit, Allowing Them To Drill Further Without Damaging, All international revenue from downhole rentals was mostly flat. We expect to realize strong growth over the mid to long term, driven by increasing activity and unconventional, Revenue from solid control services realized a low single-digit growth rate compared to the In North America, the rapid adoption of NOV's new alpha shale shaker, which offers significantly higher cuttings. Writer Safety and Lower Costs, Mostly Offset, Meaningfully Lowered Revenues from the Eastern Hemisphere improved on higher activity.

Speaker Change: And for wells drilled with rotary steerable tools, our Positrack Torsional Vibration Mitigation Tool enables operators to maintain higher weight on bit, allowing them to drill further without damaging the BHA.

Speaker Change: While international revenue from downhole rentals was mostly flat year over year, we expect to realize strong growth over the mid to long term, driven by increasing activity in the unconventional plays of the Middle East.

Speaker Change: Revenue from solid control services realized a low single-digit growth rate compared to the second quarter of 2023.

Jose Bayardo: In North America, rapid adoption of NOV is new alpha-shell shaker, which offers significantly higher cuttings handling capacities, greater safety and lower costs, mostly offset, meaningfully lower drilling activity in North America. Revenue is from the eastern hemisphere improved on higher activity levels and increasing adoption of new technologies, including the alpha-shaker and or ANOVA-tharm waste treatment system, which efficiently treats oil-based drilling waste at the well site, allowing customers to eliminate the costly transport costs while meeting all environmental requirements for disposal. Revenue from rentals of our drilling data acquisition systems improved year over year, with a low single-digit decline in North America being more than offset by improved activity in the Eastern Hemisphere.

Speaker Change: In North America, rapid adoption of NOV's new Alpha Shale Shaker, which offers significantly higher cuttings handling capacities.

Speaker Change: Greater safety and lower costs mostly offset meaningfully lower drilling activity in North America.

Unknown Executive: Increasing Adoption of New Customers to eliminate the cost, meeting all environmental Revenues from rentals of our drilling data acquisition systems improved year over year with a low single-digit decline in North America being more than offset by improved activity, Downhole Broadband Solutions, and Wire Drill gearing up for a big... As noted in our significant achievements, we signed a framework agreement with a major Norwegian oil and gas company.

Speaker Change: Revenues from the Eastern Hemisphere improved on higher activity levels and increasing adoption of new technologies, including the Alpha Shaker and our InnovaTherm waste treatment system, which efficiently treats oil-based drilling waste at the well site, allowing customers to eliminate the costly transport costs.

Speaker Change: while meeting all environmental requirements for disposal.

Speaker Change: Revenues from rentals of our drilling data acquisition systems improved year over year with a low single-digit decline in North America being more than offset by improved activity in the Eastern Hemisphere.

Jose Bayardo: Our downhole broadband solutions, wire drill-type services, operation is gearing up for a big 2025. Sequential revenues were mostly flat, but profitability declined, with the operation beginning to carry additional costs as it raised itself for significant growth.

Speaker Change: or Downhole Broadband Solutions Wire Drill Pipe Services operation is gearing up for a big 2025.

Speaker Change: Sequential revenues were mostly flat, but profitability declined, with the operation beginning to carry additional costs as it readies itself for significant growth. As noted in our significant achievements, we signed a framework agreement with a major Norwegian oil and gas producer associated with their intent to deploy our services across their rigged fleet.

Jose Bayardo: As noted in our significant achievements, we signed a framework agreement with a major Norwegian oil and gas producer associated with their intent to deploy our services across their rig fleet. We also recently had two additional significant customer wins with our DBS offering. After completing a drilling campaign, months ahead of schedule and with better well placement than the customer expected, Activity, an operator, extended its contracts with us for another two years. And earlier this week, after realizing strong results from a trial with our DBS services, a major NOC in the Middle East awarded us contracts for one offshore and one land rig to begin operations at the end of the year.

Unknown Executive: [inaudible] We also recently had two additional significant customer wins: Completing a Drilling Campaign Months Ahead, Leading to Improved Productivity. The operator extended its contracts with us for another, and earlier this year, Realizing Strong Results from a Trial with our DBS Service. A major NOC in the Middle East awarded us contracts for one offshore and one land. Lastly, our tubescope operations experienced a low to mid single-digit decline due to lower demand for inspections of oil field tubulars and for drills. Revenue from product sales, which include consumable products used in drilling and completion operations, improved Excluding the acquisition of our artificial lift business, the number of employees was low.

Speaker Change: We also recently had two additional significant customer wins with our DBS offering.

Speaker Change: After completing a drilling campaign months ahead of schedule, and with better well placement than the customer expected, leading to improved productivity.

Speaker Change: An operator extended its contracts with us for another two years. And, earlier this week, after realizing strong results from a trial with our DBS services, a major NOC in the Middle East awarded us contracts for one offshore and one land rig to begin operations at the end of the year.

Jose Bayardo: Lastly, our Tuboscope operations experienced a low to mid single digit decline in revenues on lower demand for inspections of oil field tubulars and for drill pipe coding in the U.S. Revenue from product sales, which included consumable products used in drilling completion operations, improved in the mid to low 20% range year over year. And excluding the acquisition of our artificial list, business was up low single digits. The small year-over-year increase was primarily the result of higher product sales in the eastern hemisphere from our tuboscope operations, including our pipe connection systems and sleeves and bulk powder coding shipments.

Speaker Change: Lastly, our tuboscope operations experience a low to mid-single-digit decline in revenues on lower demand for inspections of oilfield tubulars and for drill pipe coating in the U.S.

Speaker Change: Revenue from product sales, which include consumable products used in drilling and completion operations, improved in the mid to low 20% range year-over-year, and excluding the acquisition of our artificial lift business was up low single digits.

Unknown Executive: The small year-over-year increase was primarily the result of higher product sales in the Eastern Hemisphere from our tuboscope, including our pipe connection system. A Low 20% Increase in Sales of Completion, an increase in bulk drill These increases were partially offset by lower sales of fishing tools. Sales of capital equipment within the segment, including composite pipes, did primarily due to lower drill due to a sharp fall off in demand from the U.S.

Speaker Change: The small year-over-year increase was primarily the result of higher product sales in the Eastern Hemisphere from our tuboscope operations, including our pipe connection systems and sleeves and bulk powder coating shipments.

Jose Bayardo: A low 20% increase in sales of completion tools with significant gains in the Middle East, North Sea, and North America, and an increase of bulk drill bit sales into Africa and Asia. These increases were partially offset by lower sales of fishing tools and components for managed pressure drilling equipment. Sales of capital equipment within the segment, including composite pipe and tanks, drill pipe, conductor pipe, shell shakers, and managed pressure drilling equipment, fell in the low to mid single digits compared to the prior year due primarily to lower drill pipe sales, which declined in the low 20% range due to a sharp fall off in demand from the U.S.

Speaker Change: A low 20% increase in sales of completion tools, with significant gains in the Middle East, North Sea, and North America, and an increase of bulk drill bit sales into Africa and Asia. These increases were partially offset by lower sales of fishing tools and components for managed pressure drilling equipment.

Speaker Change: Sales of capital equipment within the segment, including composite pipe and tanks.

Speaker Change: Drill Pipe, Conductor Pipe, Shell Shakers, and Managed Pressure Drilling Equipment fell in the low to mid-single digits compared to the prior year, due primarily to lower drill pipe sales, which declined in the low 20% range.

Jose Bayardo: land markets partially offset by improving demand from international land markets. The decline in our drill pipe business was more than offset by higher deliveries of MPD equipment and a modest improvement in sales of fiberglass equipment, where there's growing demand from composite pipe in the oil and gas fields of the Middle East and for corrosion resistant composite tubulars and tanks for use in FPSOs. Bookings for our fiberglass business increase 25% sequentially and include orders for 462 kilometers of fiber spore spoolable pipe and 128 kilometers of bond strand pipe destined for the Middle East.

Speaker Change: Due to a sharp falloff in demand from U.S. land markets, partially offset by improving demand from international land markets.

Unknown Executive: The decline in our drill pipe business was more than offset by higher deliveries of MPD, Modest Improvement and Sales, and growing demand for composite pipe in oil and gas. Bookings for our fiberglass business increased 25, including orders for 462 km of Fiberspar spoolable oil and 128 kilometers of Bondstrand pipe destined. For the third quarter, we expect revenues for our energy products and services segment to be flat to up in the low single-digit percent range when compared to the third quarter of 2022, with EBITDA between $175 and $190. Our Energy Equipment segment generated revenues of $1.204 billion in the second quarter of 2011.

Speaker Change: The decline in our drill pipe business was more than offset by higher deliveries of MPD equipment and a modest improvement in sales of fiberglass equipment, where there's growing demand from composite pipe in the oil and gas fields of the Middle East and for corrosion-resistant composite tubulars and tanks for use in FPSOs.

Speaker Change: Bookings for our fiberglass business increase 25% sequentially and include orders for 462 kilometers of fiber spar spoolable pipe and 128 kilometers of bond strand pipe destined for the Middle East.

Jose Bayardo: For the third quarter, we expect revenues for our energy products and services segment to be flat to up in the low single digit percent range when compared to the third quarter of 2023, with even down between 175 and 190 million. Our energy equipment segment generated revenues of 1.204 billion in the second quarter of 2024 and 87 million, or 8% increase year over year compared to the second quarter of 2023. EBITDA improved 43 million to 142 million or 11.8% of sales, representing an incremental flow through of 49%. The outside incremental margin was a result of cost savings, the improving quality of our backlog, and a more favorable sales mix.

Speaker Change: For the third quarter, we expect revenues for our energy products and services segment to be flat to up in the low single-digit percent range when compared to the third quarter of 2023, with EBITDA between $175 and $190 million.

Speaker Change: Our energy equipment segment generated revenues of $1.204 billion in the second quarter of 2024, an 87 million or 8% increase year-over-year compared to the second quarter of 2023.

Unknown Executive: $87 million worth of goods, increased year over year compared to the second quarter. EBITDA improved $43 million to $142 million or 11.8% of sales, representing an incremental flow through of $49. The outsized incremental margin was a result of cost, The Proven Quality of Our Backlog, and I'm. Double-digit revenue growth from both international land and offshore markets more than offset a slight decline in sales into the North American landmark, normalizing for the divestiture of the segment's pull product.

Speaker Change: EBITDA improved $43 million to $142 million, or 11.8% of sales, representing an incremental flow-through of 49%. The outsized incremental margin was a result of cost savings, the improving quality of our backlog, and a more favorable sales mix.

Jose Bayardo: Double digit revenue growth from both international land and offshore markets more than offset the flight decline in sales into the North American land market year over year. Normalizing for the divesture of the segment's poll products business, revenue increased roughly 10% year over year. As a reminder, the segment is primarily a later cycle capital equipment business that has two revenue streams: equipment sales and after market sales and services. During the second quarter, equipment sales accounted for approximately 54% of the segment's revenues. Aftermarket sales and service accounted for their maintenance. at the beginning of the year, and the beginning of the year.

Speaker Change: Double-digit revenue growth from both international land and offshore markets more than offset a slight decline in sales into the North American land market year-over-year. Normalizing for the divestiture of the segment's pull products business, revenue increased roughly 10% year-over-year.

Unknown Executive: Revenue increased roughly 10%. As a reminder, this segment is primarily a later-cycle capital equipment business that has two... During the second quarter, equipment sales accounted for approximately 54 percent of revenue, while aftermarket sales and service accounted for the remaining. Transcribed by https://otter.ai, roughly 10% when normalized for the divestiture of our pull product. Most of our aftermarket revenue comes from our large installed base of drilling equipment. Intervention Stimulus, rig equipment business saw a high teens percent Aftermarket Revenue, Euro, led by Hire Spare Parts, http://www.larryweaver.com reactivate, recertify.

Speaker Change: As a reminder, this segment is primarily a later cycle capital equipment business that has two revenue streams, equipment sales and aftermarket sales and services.

Speaker Change: During the second quarter, equipment sales accounted for approximately 54% of the segment's revenues. Aftermarket sales and service accounted for the remaining 46%.

Speaker Change: Segment's capital equipment sales increased in the mid-single-digit percent range, or roughly 10 percent when normalized for the divestiture of our pull products business, and aftermarket revenue improved in the upper single digits relative to the second quarter of 2023.

Speaker Change: Most of our aftermarket revenue comes from our large install base of drilling equipment and intervention and stimulation equipment.

Speaker Change: Our rig equipment business saw a high teens percent increase in its aftermarket revenue year over year, led by higher spare parts sales and significant increase in projects to reactivate, recertify, and upgrade offshore rigs.

Jose Bayardo: Prior SparePort Seals and the significant increase in projects to reactivate, recertify, and upgrade offshore rigs. As offshore rigs have gone back to work and idle rigs that could have been cannibalized for parts have diminished. Excess inventories of spare parts have been depleted by our customers, and their fleets of active rigs are now providing steady demand for spare parts, recertifications, and special purpose survey work, which are typically done once every five years. And as the global fleet ages, recertifications are requiring more parts and services, leading to strong aftermarket demand for NOV at the leading OEM in the space.

Unknown Executive: As offshore rigs have gone back to work, and idled rigs that could have been cannibalized for parts have diminished, Access Inventories of Spare Parts have been depleted by our, and the fleets of active rigs are now providing steady demand for spare parts, research..., typically done once. And as the global fleet ages, recertifications are requiring more ports, leading to strong aftermarket demand for NOV. In addition to traditional aftermarket spares and service, we're building a steady stream of recurring revenues.

Speaker Change: As offshore rigs have gone back to work, and idle rigs that could have been cannibalized for parts have diminished, excess inventories of spare parts have been depleted by our customers.

Speaker Change: and their fleets of active rigs are now providing steady demand for spare parts, recertifications, and special purpose survey work, which are typically done once every five years.

Speaker Change: And, as the global fleet ages, recertifications are requiring more ports and services, leading to strong aftermarket demand for NOV as the leading OEM in the space.

Jose Bayardo: In addition to traditional aftermarket spares and service, we're building a steady stream of recurring revenues from subscription services that include support from our 24-7 remote support center, which is currently monitoring 244 offshore rigs, regular updates, and support from our NOV's multi-machine control and process automation systems, where we currently have 125 systems deployed, 26 being installed, and another 63 in our backlog. And support for our recently introduced robotic systems that have seen rapid adoption during the second quarter, including new orders for another 10 systems from eight different drilling contractors. Our intervention and simulation equipment units aftermarket revenues were down in the low teens year over year due to declines in North American activity.

Speaker Change: In addition to traditional aftermarket spares and service, we're building a steady stream of recurring revenues from subscription services that include support from our 24-7 remote support center, which is currently monitoring 244 offshore rigs.

Unknown Executive: Production Services that includes support from our 24-7 remote.., currently monitoring 244 off, regular updates, and support from our Novus multi-machine control and process, currently have 125, 26 being installed, and another 63 in, and support for our recently introduced Rapid Adopt.

Speaker Change: Regular updates and support from our Novus multi-machine control and process automation systems, where we currently have 125 systems deployed, 26 being installed, and another 63 in our backlog.

Speaker Change: and support for our recently introduced robotic systems that has seen rapid adoption during the second quarter, including new orders for another 10 systems from 8 different drilling contractors.

Unknown Executive: Including new orders for another, Intervention and Stimulation Equipment Units aftermarket down in the low teens year over year. Due to declines in North America, While we may not have quite reached the bottom in demand for aftermarket parts and services in North America. Moving into Capital Equipment. As we mentioned in our last call, we had a significant order slip from Q1. Attributed to a very strong level of orders and a book-to-bill of $190,000. The book bill for the first half of 2024 was $120,000, orders for large pieces of capital. We're hearing from them that we can expect bookings for May.

Speaker Change: Our Intervention and Stimulation Equipment Units after market revenues were down in the low teens year over year due to declines in North American activity.

Jose Bayardo: While we may not have quite reached the bottom in demand for aftermarket parts and services in the North American completions market, demand from international markets continues to improve and should begin to more than offset sluggish demand in North America.

Speaker Change: While we may not have quite reached the bottom in demand for aftermarket parts and services in the North American completions market, demand from international markets continues to improve and should begin to more than offset sluggish demand in North America.

Jose Bayardo: Moving to the capital equipment side of the business, as we mentioned in our last call, we had a significant order slip from Q1 and Q2, which contributed to a very strong level of orders and a book-to-bill of 177 percent during the second quarter. Book-to-bill for the first half of 2024 was 129 percent. Orders for large pieces of capital equipment are inherently lumpy, so we don't get too excited about bookings in any individual quarter, but instead focus on what our customers are telling us related to their upcoming needs. And what we're hearing from them suggests that we can expect bookings to remain solid in the second half of the year.

Speaker Change: Moving to the capital equipment side of the business, as we mentioned in our last call, we had a significant order slip from Q1 into Q2, which contributed to a very strong level of orders and a book-to-bill of 177% during the second quarter.

Speaker Change: Booked a bill for the first half of 2024 was 129 percent.

Speaker Change: Orders for large pieces of capital equipment are inherently lumpy, so we don't get too excited about bookings in any individual quarter, but instead focus on what our customers are telling us related to their upcoming needs. And what we're hearing from them suggests that we can expect bookings to remain solid in the second half of the year.

Jose Bayardo: During the second quarter, we posted a significant year-over-year improvement in sales of drilling equipment. Land deliveries increased on improved progress on Saudi new builds and a sizable increase in top drive and iron rough neck deliveries. Offshore capital sales growth has been driven by pull through from rig reactivations and a general uptick and automation upgrades. Offshore activity remains strong, and we expect continued reactivations and recertifications from the aging fleet to drive upgrades that will require meaningful capital equipment orders. Revenue for marine construction business posted a flight decline compared to the second quarter of 2023, with higher revenues from cable A vessels and electric cranes, not quite offsetting lower revenues from winter miles.

Unknown Executive: During the second quarter, posted a significant year over year improvement in sales. Land deliveries increased on improved progress on Saudi Arabian new builds and a sizable increase in top drive. Our short capital sales growth has been driven by pull-through from rig reactivations and a general... The crashware activity remains strong, and we expect continued reactivations and recertifications from the aging fleet to drive upgrades that will require meaningful revenue for the Marine Construction Business and higher revenues from Cableway Vest. Cranes, not quite.

Speaker Change: During the second quarter, we posted a significant year-over-year improvement in sales of drilling equipment.

Speaker Change: Land deliveries increased on improved progress on Saudi new builds and a sizable increase in top drive and iron roughneck deliveries.

Speaker Change: Offshore capital sales growth has been driven by pull-through from rig reactivations and a general uptick in automation upgrades. Offshore activity remains strong and we expect continued reactivations and recertifications from the aging fleet to drive upgrades that will require meaningful capital equipment orders.

Speaker Change: Revenue for marine construction business posted a slight decline compared to the second quarter of 2023, with higher revenues from cable lay vessels and electric cranes not quite offsetting lower revenues from wind turbine installation vessels.

Unknown Executive: Lower revenues from wind turbines, orders were solid for offshore wind, and we booked a repeat order for our NG-20,000 WTIV design and jacking system for Europe's largest... Despite delayed FIDs and the inflationary impact on, Outlook for orders of WTIVs, cable lay vessels, and heavy lift equipment for FPSOs and offshore construction vessels remains promising. The possibility of one to two more.

Jose Bayardo: and Installation Vessels. Orders were solid for an offshore wind and construction business, and we booked a repeat order for our NG2000 WTIV design and jacking system for Europe's largest installation vessel owner in the offshore wind space. Despite delayed FIDs and inflationary impact on developers' projects, the outlook for orders of WTIVs, KableA vessels, and heavy lift equipment for FPSOs and offshore construction vessels remains promising, with the possibility of 1-2 more vessels in the second half of the year. Capital equipment sales by our intervention, stimulation equipment business improved almost 10% compared to the second quarter of 2023. Solid execution from the business units, growing backlog of waterline equipment, and higher shipments of coil tubing equipment more than offset only slightly lower shipments of pressure pumping equipment.

Speaker Change: Orders were solid for our offshore wind and construction business, and we booked a repeat order for our NG20,000 WTIV design and jacking system for Europe's largest installation vessel owner in the offshore wind space.

Speaker Change: Despite delayed FIDs and inflationary impact on developers' projects, the outlook for orders of WTIVs, cable lay vessels, and heavy lift equipment for FPSOs and offshore construction vessels remains promising, with the possibility of one to two more vessels in the second half of the year.

Unknown Executive: Capital Equipment Sales by our Intervention and Stimulation Equipment business improved almost 10% compared to the second quarter. Solid execution from the Business Unit's Growing Backlog of Wirelines. Transcribed by https://otter.ai, Despite soft demand from North America, the business posted its fourth straight quarter with a book-to-bill better than one on continues. The Process Systems Operation achieved a low single-digit revenue increase year-over-year resulting from the strong... We expect a modest step down in revenues from this operation in the third quarter, but longer term, the outlook for this operation is positive.

Speaker Change: Capital equipment sales by our intervention and stimulation equipment business improved almost 10% compared to the second quarter of 2023. Solid execution from the business unit's growing backlog of wireline equipment and higher shipments of coil tubing equipment more than offset only slightly lower shipments of pressure pumping equipment.

Jose Bayardo: Despite soft demand from North America, the business posted its fourth straight quarter with a book to build better than one on continued strength and demand for waterline and coil tubing equipment from international markets. Our process systems operation achieved a low single-digit revenue increase year-over-year, resulting from the strong execution on a large processing module for the North Sea.

Speaker Change: Despite soft demand from North America, the business posted its fourth straight quarter with a book to build better than one on continued strength and demand for wireline and coil tubing equipment from international markets.

Speaker Change: Our process systems operation achieved a low single-digit revenue increase year over year resulting from the strong execution on a large processing module for the North Sea.

Jose Bayardo: We expect a modest step down revenues from this operation in the third quarter, but longer term doubt look for this operation is bright, and we're seeing growing demand for new mono-ethylene glycol units, which are sizeable, higher margin FPSOs modules where our process systems team provides unmatched capabilities and experience. Our production midstream business saw a mid-teens percentage improvement in revenue compared to the second quarter of 2023, with a large increase in shipments of production chokes in the Middle East outweighing softer demand for chokes and pumps in North America. Lastly, our subsea flexible pipe business unit continued to capitalize on robust demand for subsea flexible pipe.

Speaker Change: We expect a modest step down in revenues from this operation in the third quarter, but longer term, the outlook for this operation is bright, and we're seeing growing demand for new monoethylene glycol units, which are sizable, higher margin, FPSO modules, where our process systems team provides unmatched capabilities and experience.

Unknown Executive: Sizeable Higher Margin FPSO Modules where our process systems team provides unmatched, Production Midstream Business saw a mid-teens percentage improvement due to a large increase in shipments of production chokes in the Middle East outweighing soft, Lastly, our subsea flexible pipe business unit continued to capitalize on robust demand; it has increased its backlog by more than 80% much improved Awareness of limited remaining industry production capacity is driving for their Positive Out, some of which are now for delivery.

Speaker Change: Our production midstream business saw mid-teens percentage improvement in revenue compared to the second quarter of 2023, with a large increase in shipments of production chokes in the Middle East outweighing software demand for chokes and pumps in North America.

Speaker Change: Lastly, our Subsea Flexible Pipe business unit continues to capitalize on robust demand for subsea flexible pipe. The business has increased its backlog by more than 80% over the last year, achieving an all-time high and providing a clear path to significant top-line growth with much improved margins beginning in 2025.

Jose Bayardo: The business has increased its backlog by more than 80% over the last year, achieving an all-time high and providing a clear path to significant top-line growth with much improved margins beginning in 2025. Awareness of limited remaining industry production capacity is driving operators to place orders further in advance, creating a positive outlook for additional orders, some of which are now for delivery stretching into 2027.

Speaker Change: Awareness of limited remaining industry production capacity is driving operators to place orders further in advance, creating a positive outlook for additional orders, some of which are now for delivery stretching into 2027.

Jose Bayardo: For the third quarter, we expect revenues for our energy equipment segment to be flat to up a couple percent compared to the third quarter of 2023, with EBITDA between 140 and 160 million.

Unknown Executive: For the third quarter, we expect revenues for energy equipment, eBitDA, between $140 and $160 million. With that, we'll now, Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: For the third quarter, we expect revenues for our energy equipment segment to be flat to up a couple percent compared to the third quarter of 2023, with EBITDA between $140 and $160 million. With that, we'll now open the call to questions.

Unknown Executive: With that, we'll now open the call to questions. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by when we compile the Q&A roster.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: Please stand by while we compile the Q&A raw. Our first question comes from the line of Jim Rollyson from Raymond James. Hey, good morning, Clay and Jose. Morning, Dan.

Speaker Change: Please stand by while we compile the Q&A roster.

James Rollyson: Our first question comes from the line of Jim Roleson from Raymond James. Hey, good morning, Clay and Jose. Good morning, Jim. Obviously, pretty solid results and fantastic bookings, which I guess we kind of expected some benefit from the slippage. But Clay, maybe you replaced kind of more than 20% of your backlog in a quarter from new bookings. And obviously, we've been on this trajectory through conversation and results of margins embedded in backlogs. is getting better. And if I did the math correctly, you know, you gave 3Q guidance, and if you kind of back into 4Q from the annual guidance, your EVA dot margins are moving into the 14 plus percent range in 4Q.

Speaker Change: Our first question comes from the line of Jim Rollyson from Raymond James.

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

Clay C. Williams: Uh, obviously pretty solid results and a fantastic book. I guess we kind of expected some benefit from the slippage, but Clay, maybe, you know, you replaced kind of more than 20% of your backlog in a quarter from new bookings. And obviously, we've been on this trajectory through conversation and results of margins embedded in backlog. Transcription by https://otter.ai Yeah, and as we've discussed before, Jim, at the bottom of the pandemic, we ended up with some frame agreements that weren't as inflation-protected as we'd hoped and had more difficult payment terms and the like, and during a pretty soft time.

Speaker Change: [inaudible]

James Michael Rollyson: Obviously pretty solid results and fantastic bookings, which I guess we kind of expected some benefit from the slippage. But Clay, maybe, you know, you replaced kind of more than 20% of your backlog in a quarter from new bookings.

Speaker Change: And obviously, we've been on this trajectory through conversation and results of margins embedded in backlog.

Speaker Change: is getting better. And if I did the math correctly, you know, you gave three Q guidance. And if you kind of back into four Q from the annual guidance

Speaker Change: Your EBITDA margins are moving into the 14 plus percent range in 4Q. So just maybe some color around that margin trajectory in backlog and kind of how backlog pricing is even trending in real time.

Clay Williams: So just maybe some color around that margin trajectory in backlog and kind of how backlog pricing is even trending in real time. Yeah, and as we've discussed before, Jim, at the bottom of the pandemic, we ended up with some frame agreements that weren't as inflation protected as we hoped and had more difficult payment terms and the like. During a pretty soft time, those are we continue to deliver on those, but they're becoming less and less of our revenue stream quarter by quarter, and we're bringing in new work as we did this quarter that's at much better terms and margins, and so very pleased to see that happen.

Speaker Change: Yeah, and as we've discussed before, Jim,

Speaker Change: At the bottom of the pandemic, we ended up with some frame agreements that weren't as inflation protective as we'd hoped and had more difficult payment terms and the like.

Clay C. Williams: And those are continued to, we continue to deliver on those, but they're becoming less and less of our revenue stream quarter by quarter. And we're bringing in new work, as we did this quarter, that's at much better terms and margins. And so I'm very pleased to see that happen.

Speaker Change: And during a pretty soft time and those are continued to.

Speaker Change: We continue to deliver on those, but they're becoming less and less of our revenue stream, quarter by quarter, and we're bringing in new work as we did this quarter that's at much better terms and margins, and so I'm very pleased to see that happen.

Clay Williams: And as Jose said, you know, as we get into 2025 in particular, there's a big one, a couple of big ones that will dissipate and should help prompt additional margin expansion as we move through 2025 in a big way. So, yeah, we've been more broadly. We've been very focused on margins here; that $75 million cost out is certainly helping the improvement of our, and by the way, we have more to come. We're not going to quantify that for you, but we've got a bunch of new leaders here coming out of our reorganization, and they're looking at new ways to improve margins, very focused on locations that are underperforming actually with respect to the return on capital and for which margin is kind of proxy. But I think that will help drive better margins in the future.

Clay C. Williams: And as Jose said, you know, as we get into 2025, in particular, there's a big one, a couple of big ones that will dissipate and should help prompt additional margin expansion as we move through 2025 in a big way. So yeah, we've been, more broadly, we've been very focused on margins here, and that $75 million cost out is certainly helping. The improvement of our, and by the way, we have, we have more to come.

Speaker Change: As Jose said, you know, as we get into 2025 in particular, there's a big one.

Jose A. Bayardo: A couple of big ones that will dissipate and should help prompt additional margin expansion as we move through 2025 in a big way. So yeah, we've been...

Speaker Change: And more broadly, we've been very focused on margins here. The $75 million cost out is certainly helping. The improvement of our... And by the way, we have more to come. We're not going to quantify that for you, but we've got a bunch of new leaders here coming out of our reorganization.

Clay C. Williams: We're not going to quantify that for you, but we've got a bunch of new leaders here coming out of our reorganization, and they're looking at new ways to improve margins, very focused on locations that are underperforming, actually with respect to return on capital and for which margin is kind of a proxy. But I think that will help drive better margins in the future. So, so yeah, our outlook is pretty, is pretty strong.

Speaker Change: And they're looking at new ways to improve margins, very focused on locations that are underperforming actually with respect to return on capital, for which margin is kind of a proxy.

Clay Williams: So yeah, our outlook is pretty strong with respect to the exit margins in Q4. Yeah, I think right around that 14% range is kind of what we're looking at this point. And so, an expectation is that you know, set aside the seasonality, Q4 is usually our best water with respect to margin; that the company should see upward trend on margins for the next few years, given us the strengths that we see in offshore and international.

Speaker Change: But I think that will help drive better margins in the future. So, yeah, our outlook is pretty strong.

Clay C. Williams: With respect to the exit margins in Q4, yeah, I think right around that 14% range is kind of what we're looking at this point. And so, and the expectation is that, you know, we set aside the seasonality, Q4's usually our best quarter with respect to margin, that the company should see an upward trend on margins for the next few years, given the strengths that we see in offshore and international. Got it, that's helpful.

Speaker Change: With respect to the exit margins in Q4, yeah, I think right around that 14% range is kind of what we're...

Speaker Change: What we're looking at at this point and expectation is that you set aside the seasonality.

Speaker Change: Q4 is usually our best quarter with respect to margin, that the company should see upward trend on margins for the next few years given the strengths that we see in offshore and international.

Clay C. Williams: And then kind of an interesting question that you prompted me with the slide just on the FPSO side. So if you believe some of the forecasts like RISDAT has almost 50 incremental FPSOs in the next five years, and you're talking about a revenue opportunity of between 100 million and 700 million per FPSO, depending on, Transcribed by https://otter.ai. Well, yeah, you know, each one of these is a competitive bidding situation.

Unknown Executive: That's that's helpful.

Clay Williams: And then kind of an interesting question that that what would you prompted me with the slides just on the FPSO side. So if you believe some of the forecast like right that has almost 50 incremental FPSOs in the next five years and you're talking about revenue opportunity of between 100 million and 700 million per FPSO depending on, you know, the size scale, how far offshore, etc. But curious what your typical win rate is, and you know those are pretty potentially pretty big numbers just in one small segment of what you do. So just curious, your view on that.

Speaker Change: Got it, that's helpful. And then kind of an interesting question that you prompted me with the slides, just on the FPSO side, so if you believe some of the forecasts, like RYSTAT has almost 50

Speaker Change: incremental FPSOs in the next five years.

Speaker Change: And you're talking about revenue opportunity of between $100 million and $700 million per FPSO, depending on...

Speaker Change: and the size scale, how far offshore, etc. But curious what your typical win rate is. And those are potentially pretty big numbers just in one small segment of what you do. So just curious your view on that.

Clay C. Williams: But we usually come into those with a really strong portfolio of technology. The biggest portions of that are around process systems, our gas dehydration, and seawater treatment processes, a lot of experience with a global leader in that area, and modules that go into FPSOs to handle those fluids. We sell a lot of composite piping systems into those FPSOs for seawater fire suppression systems and for ballast systems, and we have a really strong market position with that.

Clay Williams: Well, yeah, you know each one of these is a competitive bidding situation, but we usually come into those with a really strong portfolio of technology. The biggest portions of that are around process systems, our gas dehydration, sea water treatment processes. A lot of experience with the global leader in that area and modules that go into FPSOs to handle those fluids. We sell a lot of composite piping systems into those FPSOs for sea water, fire suppression systems for ballast systems and have a really strong market position with that. And that's in addition to cranes, to turret mooring systems, to offloading systems. And then another very, very big piece of that is our position in subsea flexible pipe.

Speaker Change: Well, yeah, you know, each one of these is a competitive bidding situation.

Speaker Change: But we usually come into those with a really strong portfolio of technology. The biggest portions of that are around process systems, our gas dehydration, seawater treatment.

Speaker Change: Processes. A lot of experience with a global leader in that area and modules that go into FPSOs to handle those fluids.

Speaker Change: We sell a lot of composite piping systems into those FPSOs for

Speaker Change: Seawater Fire Suppression Systems for ballast systems and have a really strong market position.

Speaker Change: with that, and that's in addition to cranes, to turret mooring systems, to offloading systems. And then another very, very big piece of that is our position in subsea flexible pipes. And that's, the company has a very strong reputation there. So it's several very strong business franchises that sell into that trend.

Clay C. Williams: And that's in addition to cranes, to turret mooring systems, to offloading systems. And then another very, very big piece of that is our position in subsea flexible pipe. And that company has a very strong reputation there.

Clay Williams: And that's coming as a very strong reputation there. So it's several very strong business franchises that sell into that trend. And what I would tell you though is also too with respect to our participation at PSOs is that our wins on purchase orders is a little later than others out there in the space in that it's more sort of product driven. And so a lot of times you know we want to sort of land purchase orders related to FPSOs until you know six months, 12 months, 18 months after FID, for instance. But what our customers are seeing now, particularly in the flexible pipe spaces, is very high utilization of manufacturing plants, not just ours, but others around the world as well.

Speaker Change: And what I would tell you, though, is also, too, with respect to our participation at FBSO's, is that our wins on purchase orders is a little later than others out there in the space in that it's more sort of product driven.

Clay C. Williams: So there are several very strong business franchises that sell into that trend. And what I would tell you, though, with respect to our participation in FPSOs, our wins on purchase orders are a little later than others out there in the space in that it's more sort of product driven. And so a lot of times, you know, we won't necessarily land purchase orders related to FPSOs until, you know, six months, 12 months, 18 months after FID, for instance.

Speaker Change: And so, a lot of times, you know, we won't necessarily land purchasers related to FPSOs until...

Speaker Change: You know, six months, 12 months, 18 months after FID, for instance. But what our customers are seeing now, particularly in the flexible pipe space, is very high utilizations of manufacturing plants, not just ours, but others around the world as well. And so that's becoming an earlier item.

Unknown Executive: And so that's becoming an earlier item. They're going to have to think through in their development project planning a little bit earlier in the process.

Speaker Change: Think through in their development project planning a little bit earlier in the process.

Unknown Executive: Excellent. Appreciate it. I'll throw it back. Thank you, Beth. Thanks, Jim. Thank you.

Clay C. Williams: But what our customers are seeing now, particularly in the flexible pipe space, is very high utilization of manufacturing plants, not just ours but others around the world as well. And so that's becoming an earlier item they're going to have to think through in their development project planning. A little bit earlier in the process. So I appreciate it. I'll turn it back. See you Beth.

Speaker Change: Excellent. Appreciate it. I'll turn it back.

James West: Our next question comes from the line of James West from Evercore. Good morning, Clay Jose. Good morning. I had a question on land rigs, both domestic, the US land rigs and then the fleet that's been re-tooled and built for the international market. So I'm hearing a bit about some upgrades here and there in the US. Some of that software, of course, but there's equipment upgrades and some changes to the rigs. And of course, there's a total re-tool into the fleet internationally.

Speaker Change: See you, Beth. Thanks, Jim.

Operator: Thank you. Our next question comes from the line of James West from Evercore. Hey, good morning, Clay, Jose.

Beth: Thank you.

Beth: Our next question comes from the line of James West from Evercore.

James Carlyle West: Hey, good morning, Clay, Jose.

Unknown Executive: [inaudible] guys, I had a question about land rigs, both domestic US land rigs, and then the fleet that's being retooled and built for the international market. So I'm hearing a bit about some upgrades here and there in the United States. You know, some of that's your software, of course, but there are equipment upgrades and some changes to the rigs. And, of course, there's a total retooling of the fleet internationally. I wondered if you could, I know it's a pretty broad question, but if you could maybe bucket kind of what are the leading kind of upgrades or changes or equipment requests on these these kind of new either upgraded rigs or new rigs?

James Carlyle West: More thanks!

James Carlyle West: So guys, I had a question on land rigs, both domestic U.S. land rigs and then the fleet that's being...

James Carlyle West: Retooled and built for the international market. So I'm hearing a bit about

Speaker Change: There's some upgrades here and there in the U.S., you know, some of that's, you know, software, of course, but there's equipment upgrades and some changes to the rigs, and, of course, there's a total retooling of the fleet.

Clay Williams: I wondered if you could. I know it's a pretty broad question, but if you could maybe buck it, what are the leading upgrades or changes or equipment asks on these new either upgraded rigs or the new rigs? Well, that's a great question, James. As you know, the appetite to spend a lot of capital is pretty limited by North American land growers and access to capital cost capital. That's a factor in their level of appetite for new technologies. We sort of recognize this several years ago. So our development focus around new technologies focused on land drilling have been around bite-sized ways to sort of achieve a rig of the future type performance level with a reasonable sticker cost.

Speaker Change: internationally. I wondered if you could, I know it's a pretty broad question, but if you could maybe bucket kind of what are the the leading kind of upgrades or changes or equipment asks on on these these kind of new either upgraded rigs or the new rigs?

Clay C. Williams: Well, it's a great question, James, as you know, the appetite to spend a lot of capital is pretty limited by North American land drillers and, you know, access to capital, cost of capital, and that's a factor in their level of appetite for new technologies. And we sort of, you know, recognized this several years ago. So our development focus around new technologies focused on land drilling has been around bite-sized ways to sort of achieve a rig of the future performance level with a reasonable sticker cost, if that makes sense.

Speaker Change: Well, that's a great question, James. As you know, the appetite to spend a lot of capital is pretty limited by

Speaker Change: North American Land Rollers and you know access to capital cost capital and that's a that's a factor in their

Speaker Change: We sort of recognize this several years ago, so our development focus around new technologies focused on land drilling have been around bite-sized ways to sort of achieve a rig-of-the-future type performance level.

Clay C. Williams: And we also recognize that digital technologies are going to be a big part of that. And so that's why we introduced our Novos operating system to support our rigs, which really opens up their operations to a lot of applications, some developed by NOV, some developed by others, in a way that can really drive efficiency.

Clay Williams: Did that make sense? And we also recognize that digital technologies were going to be a big part of that. And so that's why we introduced our NOVO operating system to support our rigs, which really opens up their operations to a lot of applications, some developed by NOV, some developed by others in a way that can really drive efficiencies. So I've been seeing a really good uptake on NOVO. So I think Jose quoted some really good numbers in a prepared remarks earlier about the install base, and what's interesting about that, James, is that that provides the digital foundation for automation.

Speaker Change: with a reasonable sticker cost, if that makes sense. And we also recognized that digital technologies were gonna be a big part of that.

Speaker Change: And so that's why we introduced our NOVOIS operating system to support our rigs, which really is...

Jose A. Bayardo: Opens up their operations to a lot of applications, some developed by NOV, some developed by others, in a way that can really drive efficiency. So I've been seeing a really good uptake on NOVOS. I think Jose quoted some really good numbers in the prepared remarks earlier about installed base. And what's interesting about that, James, is that that provides the digital foundation.

Clay C. Williams: So I've been seeing a really good uptake on Novos. I think Jose quoted some really good numbers in the prepared remarks earlier about the installed base. And what's interesting about that, James, is that it provides the digital foundation for automation. So the other thing we've done is developed a very cost-effective way to bring robots to the rig floor and to the racking board and to really create a truly hands-free environment.

Clay Williams: So the other thing we've done is developed a very cost effective way to bring robots to the rig floor and to the racking board and to really create truly a hands free environment and a lot of blood in the industry around that capability. And I would add not just amongst drilling contractors who are excited about it because it helps them manage their workforce and creates higher levels of efficiency, but also amongst operators. And that's really what we're behind the scenes, what we're really seeing drive demand for this. So there's a couple of major IOCs out there that have latched onto this technology and are talking to their drilling contractors about putting it to work.

James Carlyle West: for Automation. So the other thing we've done is developed a very cost-effective way to bring robots to the rig floor.

James Carlyle West: and to the racking board and to really create truly a hands free environment. And a lot of buzz in the industry around that capability. And I would add not just amongst drilling contractors who are excited about it because it helps them manage their workforce and creates

Clay C. Williams: There is a lot of buzz in the industry around that capability, and I would add, not just amongst drilling contractors who are excited about it because it helps them manage their workforce and creates, you know, higher levels of efficiency, but also amongst operators. And that's really what we're behind the scenes, what we're really seeing drive demand for this. So there are a couple of major IOCs out there that have latched onto this technology and are talking to their drilling contractors about putting it to work. And that's both land and offshore, I would add. And I am so excited about that. That's it.

James Carlyle West: You know, higher levels of efficiency, but also amongst operators.

James Carlyle West: And that's really what we're behind the scenes, who we're really seeing drive demand for this. So there's a couple of...

James Carlyle West: Major IOCs out there that have latched onto this technology and are talking to their drilling contractors about putting it to work.

Clay Williams: And that's both land and offshore, Joe would add, and so excited about that. And so that's, I think, kind of shaping what we see in North America around demand for technologies to improve drilling.

Clay C. Williams: So that's, I think, kind of shaping what we see in North America around demand for technologies to improve drilling. If you go overseas, as I said in my prepared remarks, you know, it's interesting, the big rebuild of North America's rig fleet that happened to move to AC technologies, quick move, fit for purpose, higher setback, higher mud pressure type rebuild. That never really happened in most international locations.

James Carlyle West: And that's both land and offshore, too, I would add, and so excited about that. And so that's, I think, kind of shaping what we see in North America around demand for technologies to improve drilling. If you go overseas, as I said in my prepared remarks, you know, it's interesting, the big...

Clay Williams: If you go overseas as I said, my prepared remarks, you know, it's interesting the big rebuild of North American rig fleet that happened to move to AC technologies, quick move, fit for purpose, this higher setback, higher mug pressure type rebuild that never really happened in most international locations. And so what we're seeing now is in OC and operator preference for AC power groups and these technologies that I mentioned. And that's that's driving for demand for those kinds of rigs in those marketplaces, most notably around the Middle East, but also interest in Latin America and a few other places.

James Carlyle West: Rebuild of North American rig fleet that happened to move to AC technologies quick move, fit for purpose, higher setback, higher mud pressure type rebuild that never really happened in most international locations and so what we're seeing now is

Clay C. Williams: And so what we're seeing now is NOC and operator preference for AC-powered rigs, some of these technologies that I mentioned, and that's driving demand for those kinds of rigs in those marketplaces, most notably around the Middle East, but also interest in Latin America, and a few other places. Okay. That's very helpful. And then maybe a follow-up on the Keystone acquisition. We've obviously been watching your interests and the growth of that business, but it seems like you're hitting kind of a real clear milestone here. And that, of course, led to fully rolling the business out. I'm curious, who are you replacing? What's the competition? Who are the incumbents?

James Carlyle West: NOC and operator preference for AC power grids and these technologies that I mentioned and that's that's driving for demand for those those kinds of rigs in in in those marketplaces most notably around the Middle East but also interest in Latin America a few other places.

Unknown Executive: And so what we're seeing now is in the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle of the middle. Okay, got it. That's very helpful.

James West: And then maybe a follow-up on the keystone acquisition. We've obviously been watching your interests and your and the growth of that business, but it seems like you're hitting kind of a real clear milestone here, and that of course led to the fully rolling the business. And I'm curious who you're replacing and what's the competition, who are the incumbents, and is there any technology like yours, like this Spool and Technology in the market? Yeah, great, great question, James. And so obviously there's an instill of base of incumbents that have provided traditional windtowers, both land and offshore markets.

Speaker Change: Okay, got it. That's very helpful. And then maybe a follow-up on the Keystone...

Speaker Change: Acquisition, we've obviously been watching your interest and the growth of that business, but it seems like you're hitting kind of a real clear milestone here, and that of course led to the fully rolling the business.

Speaker Change: I'm curious, who are you replacing, what's the competition, who are the incumbents and is there any technology like yours, like this spooling technology in the market?

Clay C. Williams: And is there any technology like yours, like this balloon technology, in the market? Yeah, great, great question, James. And so, obviously, there's an instilled base of incumbents that have provided traditional wind towers, wind towers, both land and offshore markets. And, you know, it's a slow, heavy fabrication process that's typically used. Design is not optimal, in terms of what they're delivering into the marketplace.

Speaker Change: Yeah, great, great question, James. And so, yeah, you know, the obviously there's an instilled base of incumbents that have provided traditional wind tower, wind towers, both land and offshore markets. And, you know, it's a slow, heavy fabrication process that's typically used.

Clay Williams: And it's a slow, heavy fabrication process that's typically used. Design is not optimal in terms of what they're what they're delivering into the marketplace. And so you know what you've known us for a long time, and you know our mission and life is to increase the efficiencies associated with the production of energy around the world. And we saw that there are better ways to do things in the renewable space. And the renewable space was clearly in need of a lot of time and attention in terms of driving improved economics. Obviously, before us, the industry had done a great job bringing down costs through more standardized manufacturing processes and, you know, getting towers taller and going to bigger turbines.

Speaker Change: Design is not optimal in terms of what they're what they're delivering into the marketplace and so

Clay C. Williams: And so, you know, you've known us for a long time. And, you know, our mission in life is to increase the efficiency associated with the production of energy around the world. We saw that there are better ways to do things in the renewable space, and the renewable space was clearly in need of a lot of time and attention in terms of driving improved economics. Obviously, before us, the industry had done a great job, bringing down costs through more standardized manufacturing processes and, you know, getting towers taller and going to bigger turbines. But they were kind of hitting a wall.

Speaker Change: You've known us for a long time and our mission in life is to increase the efficiencies associated with the production of energy around the world.

Speaker Change: And we saw that there are better ways to do things in the renewable space, and the renewable space was clearly in need of a lot of time and attention in terms of driving

Speaker Change: improved economics. Obviously before us, the industry had done a great job bringing down costs through more standardized manufacturing processes and you know getting towers taller and going to bigger turbines.

Clay C. Williams: And, you know, brilliant scientists and engineers put their hands on their hats and try to identify ways to further drive the improved improvement in economics. And while we were working on our own solutions, we came across this really smart group of individuals that had designed this technology, the spiral weld technology, that not only allows you to manufacture wind turbine towers at a faster rate but also uses less steel, so lower cost, faster production.

Clay Williams: But they were kind of hitting a wall, and you know our brilliant scientists and engineers put their hands on hats on and tried to identify ways to further drive the improved improvement in economics. And while we were working on our own solutions, we came across this really smart group of individuals that had designed this technology, the spiral weld technology that not only allows you to manufacture wind turbine towers at a faster rate but also using less steel, so lower cost, faster production. And what we really got excited about was the longer term potential of building these plants in fields where you can more optimally design these tower sections.

Speaker Change: But they were kind of hitting a wall and, you know, we're brilliant scientists and engineers put their hands on, hats on and try to identify ways to further drive the improved, improvement in economics.

Speaker Change: And while we were working on our own solutions, we came across this really smart group of individuals that had

Clay C. Williams: And what we really got excited about was the longer-term potential of building these plants in fields, where you can more optimally design these tower sections. So, you know, traditional wind towers that are built right now to overcome the logistics of getting up and down the highway, even for the tower heights they're building today, the bottom portion of the tower is using much thicker steel than you should. And ideally, you'd have a wider base with thinner steel. It would be much more efficient. Plus, you could go to much taller heights.

Speaker Change: had designed this technology, the spiral weld.

Speaker Change: technology that not only allows you to manufacture wind turbine towers.

Speaker Change: at a faster rate, but also using less steel, so lower cost, faster production, and what we really got excited about was the longer term potential of

Speaker Change: Building these plants in fields where you can more optimally design these tower sections, so, you know, traditional wind tower.

Clay Williams: So you know traditional wind tower that's built right now to overcome the logistics of getting up and down the highway, even for the tower heights they're building today. The bottom portion of the tower is using much thicker steel than you should. Ideally, you'd have a wider base with thinner steel; would be much more efficient, plus you could get a much taller heights. If you build the tower sections in the field and assemble in the field, you can overcome that issue, have an optimally designed tower and go to much higher heights and utilize bigger turbines, bigger blades, drive much better economics.

Speaker Change: that's built right now.

Speaker Change: To overcome the logistics of getting up and down the highway, even for the tower heights they're building today, the bottom portion of the tower is using much thicker steel than you should. Ideally, you'd have wider base with thinner steel would be much more efficient, plus you could go to much taller heights.

Clay C. Williams: If you build the tower sections in the field and assemble them in the field, you can overcome that issue, have an optimally designed tower, and go to much higher heights and utilize bigger turbines, bigger blades, and drive much better economics. So obviously, our first foray here is to prove out the technology, which we've done. We have sold commercial sections out of our plant, our fixed plant in Pampa, Texas. We're working really hard to scale up those operations to begin making deliveries under the new contract in mid 2025.

Speaker Change: If you build the tower sections in the field and assemble in the field, you can overcome that issue, have an optimally designed tower, and go to much higher heights and utilize bigger turbines, bigger blades, drive much better economics.

Clay C. Williams: And then we'll see where the business takes us. But as I mentioned, we're really excited about those infield manufacturing plants that will come at some point in the future. Great. Fascinating. Thanks, guys. You bet. Thanks, James. Thank you. Our next question comes from the line of Arun Jayaram from JP Morgan. Good morning, Clay.

Clay Williams: So obviously, our first foray here is to prove out the technology, which we've done. We have sold commercial sections out of our plants, our fixed plant, and PAMPA, Texas. We're working really hard to scale up those operations to begin making deliveries under the new contract in mid 2025. And then we'll see where the business takes us, but as I mentioned, we're really excited about those infield manufacturing plants that will come at some point in the future.

Speaker Change: So, obviously, our first foray here is to prove out the technology, which we've done. We have sold commercial sections out of our plant, our fixed plant, in Pampa, Texas. We're working really hard to scale up those operations to begin making deliveries under the new contract in mid-2025.

Speaker Change: And then we'll see where the business takes us, but as I mentioned, we're really excited about those infield manufacturing plants that will come at some point in the future.

Unknown Executive: Thanks, guys. You bet. Thanks, James. Thank you.

Speaker Change: Great. Fascinating. Thanks, guys.

James Carlyle West: You bet. Thanks, James.

Arun Jayaram: Our next question comes from the line of Arun Jayaram from J.P. Morgan. Good morning, Clay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Arun Jayaram from JP Morgan.

Unknown Executive: I wanted to make it kind of a good morning. Clay, I was wondering if you could elaborate on some of the, you know, tailwinds from the organizational-wide re-segmentation, you talked about some new leaders, you've gone to two segments and three, and maybe just an update on where we're at with the 75 million cost out, and maybe you signaled maybe there's more to come on that front. Yeah, thanks, Arun. Yeah, so as you know, I think it was about this time last year, we announced a cost-out program of 75 million that follows a couple other larger ones that we'd executed prior.

Clay Williams: Good morning. Clay is wondering if you could elaborate on some of the tailwinds from the organizational-wide resegmentation. You talked about some new leaders.

Arun Jayaram: Good morning. Clay, I wondered if you could kind of, good morning. Clay, I was wondering if you could elaborate on some of the, you know,

Arun Jayaram: Tailwinds from the organizational-wide re-segmentation, you talked about some new leaders, you've gone to two segments from three, and maybe just an update on where we're at with the $75 million cost out, and maybe, you signaled maybe there's more to come on that front.

Clay Williams: You've gone to two segments from three, and maybe just an update on where we're at with the 75 million cost out, and maybe there's more to come on that front. Yeah, thanks, Arun. Yeah, so you know, think about this time last year, we announced a cost-out program: 75 million. That follows a couple of other larger ones that we'd execute a prior that involved that resegmentation and reorganization. We ended up with a bunch of new business unit leaders here and had some terrific long-serving employees retire and leave us, but a lot of fresh faces and fresh perspectives and new eyes on opportunities.

Unknown Executive: That involved that resegmentation and reorganization; we ended up with a bunch of new business unit leaders here and had some terrific, long-serving employees retire and leave us, but a lot of fresh faces and fresh perspectives and new eyes on opportunities. So we continue to execute that plan that was developed under the prior regime, if you will. But now as we're, you know, here, we're in the middle of 20

Clay C. Williams: Yeah, thanks, Arun. Yeah, so as you know, I think it was about this time last year, we announced a cost-out program, $75 million. That follows a couple other...

Clay Williams: So we continue to execute that plan that was developed under the prior regime, if you will, but now as we're, you know, here we are in the middle of 2024 and they're coming up with additional opportunities. And so some specifics around that would include things like more centralized manufacturing organizations and some re-engineering opportunities on supply chain. Full of the ins and these new technologies, like I talked about in the prepare remarks, utilizing AI to monitor our machine tools, for instance, but then it also involves a process that we're going through with these new leaders to take a fresh look at all of our locations and operations around the world and analyze these from a return on capital standpoint.

Clay C. Williams: And they're coming up with additional opportunities. And so some specifics around that would include things like more centralized manufacturing organizations and some reengineering opportunities in the supply chain, folding in some of these new technologies, like I talked about in the prepared remarks, utilizing AI to monitor our machine tools, for instance. But it also involves a process that we're going through with these new leaders to take a fresh look at all of our locations and operations around the world and analyze them from a return on capital standpoint.

Clay C. Williams: And so I think there'll be continued rationalization. And so that's underway. It'll continue for a while. And as you know, probably better than most, we've been doing a lot of rationalization and a lot of cost reductions here for really the past decade. And so, you know, a lot of the easy things have been done; these are all higher-degree difficulty type things.

Clay Williams: And so I think they'll be continued rationalization. And so that's underway. It'll continue a while. And, as you know, probably better than most, we've been doing a lot of rationalization and a lot of cost reductions here for really the past decade. And so, you know, a lot of the easy things have been done. These are all hard degree difficulty type things, but I think we're going to continue to get better and more efficient.

Clay C. Williams: But I think we're going to continue to get better and more efficient, and that's going to, as I said, be a bit of a tailwind on margins going forward.

Clay Williams: And that's going to, as I said, be a bit of a tailwind on margins going forward.

Unknown Executive: Great.

Clay C. Williams: My follow-up is I'm wondering, Clay, if you could comment on what you're seeing in terms of the rig reactivations and recertifications kind of process, and maybe you could touch on the potential impact to NOV from some of the offshore rig consolidation activity we've seen more recently. Yeah, um, yeah, we saw a pretty good ramp on rig reactivations from 2022 into 2023. It continues to grow, and it's a combination of bringing in our engineers to survey the rigs and figure out what they need to do the special purpose survey work that's required, typically, every five years for those rigs.

Arun Jayaram: My follow up is I want to clay if you could comment on what you're seeing in terms of the rig reactivations, refertifications, kind of process and maybe you could touch on the potential impact to NOV from some of the offshore rig consolidation activity we've seen more recently. Yeah, we saw pretty good ramp on rig reactivations from 2022 into 2023. It continues to grow. And it's a combination of bringing in our engineers to survey the rigs, figure out what they need to do. The special purpose survey work that's required typically every five years for those rigs.

Speaker Change: To do the special purpose survey work that's required typically every five years for those rigs.

Clay C. Williams: Um, and in many cases, to replace equipment, upgrade equipment, so it's kind of an opportunity for those rigs to go into a shipyard to get everything done that they need to get done. And they're suffering kind of the opportunity cost of not drilling during that time.

Clay Williams: And in many cases to replace equipment, upgraded equipment, so it's kind of an opportunity. Those rigs go into a shipyard, figuring done that they need to get done, and they're suffering kind of the opportunity cost of not really during that time. And so that's been a good tailwind to our business. What we're seeing in that process is that, you know, the industry is very rational. And so the first rigs to go back to work are the cheapest and easiest to reactivate that will do the job. And as the industry looks to put more and more risk back to work, the cost per rig is going up.

Speaker Change: And in many cases to replace equipment to upgrade equipment. It was kind of an opportunity as those rigs go into a shipyard to get everything done that they need to get done.

Speaker Change: There are suffering and kind of the opportunity cost of not drilling during that time and so.

That's been a good tailwind to our business what we're seeing.

Speaker Change: And that process is that the <unk>.

Speaker Change: She is very rational.

Clay C. Williams: And so that's been a good tailwind to our business. What we're seeing in that process is that, you know, the industry is very rational. And so the first rigs to go back to work are the cheapest and easiest to reactivate that will do the job. And as the industry looks to put more and more rigs back to work, the cost per rig is going up. And so we certainly benefited from that.

Speaker Change: And so the first rigs to go back to work are the cheapest and easiest to reactivate that will do the job and as the industry.

Speaker Change: It looks to put more and more rigs back to work the cost per rig.

Clay Williams: And so we certainly benefited from that. And we continue to what I would tell you is, despite the fact that we're very busy. There's a lot of I think we're 30 something rigs and shipyards now that are getting reactivated. There's still a lot that could be. And so there are, I think, seven floaters out there that were being constructed, and the construction operations were suspended in the downturn through the past decade, plus another 25 or cold stack. And then, oh, sorry, 14 floaters. And then seven jackups that were being constructed that were suspended, in another 39 that were cold stacked.

Speaker Change: Going up and so we certainly benefited from that and we continue to.

Speaker Change: What I would tell you is despite the fact that we're very busy there's a lot of I think 30 something rigs in shipyards now theyre getting reactivated theres still a lot that could be and so there are I think seven floaters out there that were being constructed in our construction operations were suspended in the downturn through the past decade, plus another 20.

Clay C. Williams: And we continue to, what I would tell you is, despite the fact that we're very busy, there's a lot of, I think we're 30 or so rigs in shipyards now that are getting reactivated, there's still a lot that could be. And so there are, I think, seven floaters out there that were being constructed, and the construction operations were suspended in the downturn through the past decade, And then, oh, sorry, 14 floaters, and then seven jackups that were being constructed that were suspended, and another 39 that were cold stack.

Either cold stack and then.

Speaker Change: I'm, sorry, 14, floaters, and then seven Jackups that were being constructed that were suspended and another 39 that were cold stacked those are all potentially rigs that could be reactivated that we could benefit from now.

Clay Williams: Those are all potentially rigs that could be reactivated that we could benefit from. Now, to be completely candid, probably lots of those; it's not cost-effective to reactivate them. Parties needing a rig might look at new bill at some point along the way, but there's still opportunity for that to grow.

Clay C. Williams: Those are all potentially rigs that could be reactivated that we could benefit from. Now, to be completely candid, probably lots of those; it's not cost-effective to reactivate them. Parties needing a rig might look at a new build at some point along the way, but there's still opportunity for that to grow. And we're delighted to be helping our customers make that happen. With respect to consolidation in the offshore, we know all parties, and all parties have NOV equipment, and I don't think ownership of that equipment is going to drive the need for one direction or the other, quite frankly.

Speaker Change: Completely candid.

Speaker Change: Lots of those it's not cost effective to reactivate them.

Parties needing a rig might look at new build at some point along the way, but there's still opportunity for that to grow and we're delighted to be helping our customers make that happen with respect to the consolidation in the offshore.

Clay Williams: And we're delighted to be helping our customers make that happen with respect to the consolidation in the offshore. You know, we know all parties and all parties have have in OVA equipment. And I don't, I'm not, I don't think our ownership of that equipment is going to drive the need of one direction or the other, quite frankly. We've got great relationships and strong relationships with our very near and dear friends in the offshore drilling space and look forward to continuing to support their operations and drive better efficiency through their operations.

Clay C. Williams: We've got great relationships and strong relationships with our very near and dear friends in the offshore drilling space and look forward to continuing to support their operations and drive better efficiency through their operations. Thank you, Clay.

Speaker Change: We know.

Speaker Change: All parties and all parties have.

Speaker Change: <unk> equipment and <unk>.

Speaker Change: I don't think our ownership of that equipment is going to drive the needle one direction or the other or quite frankly, we've got great relationships and strong relationships with our very near and Dear friends in the offshore drilling space and look forward to continuing to support their operations and drive better efficiency.

Speaker Change: Through their operations.

Unknown Executive: Thanks, Roy.

Kelly: Thanks Kelly.

Unknown Executive: You bet, thank you for that.

Clay C. Williams: You bet. Thank you, Arun. Thank you. Our next question comes from the line of Marc Bianchi from TD Cowen. Hey, thanks.

Kelly: You bet Thanks, Brian.

Marc Bianchi: Thank you.

Kelly: Thank you.

Marc Bianchi: Our next question comes from the line of Marc Bianchi from TD Cowan. Hey, thanks. I'd like to start by following up on A.J.'s question there about the aftermarket services. One of the things that I think has been, thanks.

Kelly: Our next question comes from the line of Marc Bianchi from TD Cowen.

Kelly: Sure.

Unknown Executive: I'd like to start by following up on AJ's question there about the aftermarket services. One of the things that I think has been a, Thanks. I think one of the things that's been a big benefit over the past couple years is the special survey work, which I think if we sort of map out when these rigs were delivered would suggest maybe there's a challenging comp when you get to 2025. Can you talk about that a little bit?

Marc Gregory Bianchi: Hey, thanks.

Speaker Change: I'd like to start by following up on <unk> question there about the.

Speaker Change: The aftermarket services.

Speaker Change: One of the things that I.

Speaker Change: <unk> has been a.

Unknown Executive: Like, is there a slug of revenue that goes away in 2025? And we could see maybe, you know, the aftermarket service have a little bit of a headwind related to that? With respect to the special purpose survey portion of that, Marc, we don't really see it.

Clay Williams: I think one of the things that's been a big benefit over the past couple of years is the special survey work, which I think, if we sort of map out when these rigs were delivered, would suggest maybe there's a challenging comp when you get to 2025. Can you talk about that a little bit? Is there a slug of revenue that goes away in 2025, and we could see maybe the aftermarket service have a little bit of a headwind related to that? I would respect to the special purpose survey portion of that, Marc. We don't we don't really see it.

Speaker Change: I think one of the things that's been a big benefit over the past couple of years as the special survey work, which I think if we sort of map out.

Speaker Change: When these rigs were delivered would put suggest maybe there is that.

Speaker Change: A challenging comp point you get to 2025 can you talk about that a little bit like is there a slug of revenue that that goes away in 2025, and we could see maybe the aftermarket service have a little bit of a headwind related to that.

Speaker Change: With respect to the special purpose survey portion of that Mark We don't we don't really see it and the reason for that is there have been sort of multiple generations of offshore rigs delivered there were a lot of it is.

Clay Williams: And the reason for that is there've been sort of multiple generations of offshore rigs delivered. You know, there were a lot of kind of in the coming out of the supercyclist say 2008, 2009, 2010 around the deliveries. And then again in 2011, 2012, 2013, and then you know, when the music stopped, let's say at the end of 2014, a lot of construction projects underway around the world and rigs continue to be delivered, and those have kind of been spread out over time. But also, these rigs have to come in every five years. And what I would tell you is the 10-year SPS for a rig typically is a bigger ticket item than the five-year SPS.

Unknown Executive: And the reason for that is there have been sort of multiple generations of offshore rigs delivered. You know, there were a lot coming out of the super cycle, let's say 2008, 2009, 2010, a round of deliveries, and then again in 2011, 2012, 2013. And then, you know, when the music stopped, let's say at the end of 2014, a lot of construction projects were underway around the world, and rigs continued to be delivered, and those have kind of been spread out over time.

Speaker Change: Kind of.

Speaker Change: It's coming out of the Super cycle, Let's say 2008, 2009 2010 around the deliveries.

Speaker Change: And then again in 2011 2012, 2013, and then when the music stopped let's say at the end of 2014.

Speaker Change: A lot of construction projects underway around the world and we continue to be delivered and those have kind of been been spread out over time, but also to these rigs have to come in every five years and what I would tell you is the 10 year Sps for a rig typically has a bigger ticket item than the five year Sps and <unk>.

Unknown Executive: But also, too, these rigs have to come in every five years. And what I would tell you is the 10-year SPS for a rig typically is a bigger ticket item than the five-year SPS, and the 15-year SPS is typically a bigger ticket item than the 10-year SPS. I don't know if that makes sense.

Clay Williams: And the 15 year SPS is typically a bigger ticket than the 10 year SPS, if that makes sense. And so that sort of diversity of, you know, what's called birthdays. Plus the fact that some rigs have been interrupted from COVID and other downturns in the industry, let's say, plus the fact that not all SPSs are kind of equal opportunity for, you know, the kind of levels that out more. The key driver for us is the fact that the offshore fleet broadly is going back to work. And the offshore fleet broadly has already cannibalized, and they can cannibalize.

Speaker Change: <unk> year, Sps is typically a bigger ticket and the 10 year Sps if that makes sense and so that sort of diversity of.

Unknown Executive: And so that sort of diversity of, you know, let's call them birthdays, plus the fact that some rigs have been interrupted from COVID and other, you know, downturns in the industry, let's say, plus the fact that not all SPSs are kind of equal opportunity for NOV levels that out more. The key driver for us is the fact that the offshore fleet is broadly going back to work, and the offshore fleet has already cannibalized everything they can cannibalize.

Speaker Change: Let's call them birthdays.

Speaker Change: Plus the fact that some rigs have been interrupted.

From Covid in other downturns in the industry, let's say plus the fact that not all Sps as our kind of equal opportunity for Adobe kind.

Speaker Change: Kind of levels that out more the key driver for US is the fact that the offshore weak broadly is going back to work and the offshore fleet broadly as already cannibalized everything they can cannibalize and so.

Clay Williams: And so a healthier level of activity and not having to compete with overhang of excess supply of spare parts and equipment that can be repurposed is the main driver for any of these businesses. Does that make sense? No, it makes perfect sense.

Unknown Executive: And so a healthier level of activity and not having to compete with an overhang of excess supply of spare parts and equipment that can be repurposed is the main driver for NOV's business. Does that make sense? Yes, it makes perfect sense.

Speaker Change: Healthier level of activity.

Speaker Change: And not having to compete with the overhang of excess supply of spare parts.

Speaker Change: Equipment that can be repurposed.

Speaker Change: As the <unk>.

Speaker Change: Non driver for it.

Speaker Change: These business that makes sense.

Unknown Executive: And I hope that my birthday parties that I'm paying for over the next few years don't go up and up and up. But we'll see. No, I was referring to those referring to my kids.

Speaker Change: No it makes perfect sense and I hope that.

Marc Bianchi: And I hope that my birthday parties that I'm paying for over the next few years don't go up and up and up. But we'll see. I was referring to those referring to my kids in terms of the order outlook here. So for, I think I heard you say play and you're in prepared remarks, you expect greater than one book to bill in the second half. And I just want to make sure that that was, that was what I caught, or were you referring to just a portion of the orders. Okay. And then I think Jose mentioned a couple of wind insulation vessels that are kind of in the pipeline and could be awarded.

Speaker Change: My birthday parties that I'm paying for over the next few years don't go up and up and up but we'll see.

Speaker Change: Yeah.

Yes.

Speaker Change: No we didn't.

Unknown Executive: In terms of the order outlook here, so for, I think I heard you say, Clay, in your prepared remarks, you'd expect greater than one book to bill in the second half. And I just want to make sure that that was what I caught.

Speaker Change: No I was referring to was referring to my kids.

Speaker Change: In terms of the order outlook here. So for I think I heard you say play in your in your prepared remarks, you'd expect greater than one book to Bill in the second half and I just wanted to make sure that that was that was what I caught or were you referring to just a portion of the orders Okay and then.

Unknown Executive: Or were you referring to just a portion of the orders? Okay. And then, I think, Jose, you mentioned a couple of wind insulation vessels that are kind of in the pipeline and could be awarded. Do you need those to convert to get to the greater than one book to bill?

Speaker Change: I think Jose you mentioned a couple of <unk>.

Jose A. Bayardo: Wind installation vessels that are kind of in the pipeline and could be awarded do you need those to convert to get to the greater than one book to Bill or do you think you can get there without those one offs.

Clay Williams: Do you need those to convert to get to the greater than one book to bill, or do you think you can get there without those one off? Well, they would help. There are paths to get there without that support. As we always do, and you're well aware of this mark, these things are big and lumpy. And that's part of the reason we're hesitant to give a lot of order guidance, but I would tell you there's multiple ways to get to book-to-bill north of one. And as we always see in any quarter or six-month period, we land certain orders and we miss certain orders.

Unknown Executive: Or do you think you can get there without those one-offs? Well, they would help. There are paths to get there without that support, as we always do. And you're well aware of this, Marc. You know, these things are big and lumpy. And, and so, and that's part of the reason we're hesitant to get a lot of order guidance. But I would tell you, there are multiple ways to get to book the bill north of one.

Speaker Change: Well they would help.

Speaker Change: There are paths to get there without that support.

Mark: As we always do and you are well aware of this mark.

Things are big and lumpy.

Mark: And so.

And that's part of the reason, we're hesitant to give a lot of order guidance.

Mark: I would tell you theres multiple ways to get to book to Bill North of one.

Mark: And as we always see in any quarter or six month period, we land certain orders and we missed certain orders and so.

Unknown Executive: And, and as we always see in any quarter, six-month period, you know, we land certain orders, and we miss certain orders. And so, but the general feel we're getting from our operations people is the outlook is pretty good for the next couple of quarters on demand. And then, you know, longer term, our view on offshore drilling is very constructive, and international drilling is very constructive. And so that'll, that'll be the driver for future orders. Yep. It's great. Thank you very much.

Unknown Executive: But the general feel we're getting from our operations people is the outlook is pretty good for the next couple of quarters on demand. And then, longer term, our view on offshore is very constructive, and international is very constructive. And so that'll be the driver for future orders. Yep, super. Thank you very much. I'll turn it back. You got thanks, Martin. Thank you.

Mark: But the general feel we're getting from our operations people as the outlook is pretty good.

Mark: For the next couple of quarters on demand and then longer term our view on offshore is very constructive and international is very constructive and so that will that will be the driver for future orders.

Unknown Executive: I'll turn it back. You bet. Thanks, Mark. Thank you. Our next question comes from the line of Luke Lemoine from Piper Sandler and Clay. Good morning, Luke.

Speaker Change: Yes Super Thank you very much I'll turn it back.

Mark: You bet. Thanks Mark.

Speaker Change: Thank you.

Luke Lemoine: Our next question comes from the line of Luke Lemoine from Piper Sandler. And morning, Luke. We're having a hard time here. Oh, there you are. Good. Yeah, you had good orders here in QQ and energy equipment. And you talked about book-to-bill being above, you know, one x in the second half of the year. And I know it's kind of early days, but just kind of a broader, you know, being, you know, it might be difficult to do without quantifying.

Speaker Change: Our next question comes from the line of Luke Lemoine from Piper Sandler.

Luke Michael Lemoine: Hey, good morning.

Luke Michael Lemoine: Yes.

Operator: We're having a hard time hearing. Oh, there you are. Good. Okay, go ahead.

Speaker Change: And more than look we're having a hard time hearing.

Speaker Change: Good Okay go ahead.

Unknown Executive: Yeah, you had good orders here and in 2Q and for energy equipment. And you talked about book to bill being above, you know, 1x and the second. And I know it's kind of early days, but just kind of a broader, you know. It might be difficult to do without quantifying.

Luke Michael Lemoine: Yes, you had good orders here in <unk> in energy equipment, and you talked about book to Bill being above onex in the second half of the year and I know, it's kind of early days, but just kind of a broader <unk> it might be difficult to do without quantifying, but could you just help us kind of frame how you see 2025 shaking out in Europe.

Clay Williams: But could you just help us kind of frame how you see 2025 shaking out and you're brought out. Luke, as I know. Yeah, we're hesitant to quantify this beyond kind of thematically and directionally. We feel good that international and offshore, that that cycle in both areas is going to have some legs. You know, he's going to be a critical participant in that. And so that's curious into a much better year in 2025, better margins, you know, better demand. To me, the wildcard is North America. And, you know, there's a lot of discussion out there about the potential impact of gas drilling, returning to North America, higher LNG takeaway capacity that would help operators' economics a lot.

Unknown Executive: You just help us kind of frame how you see 2025 shaking out and your broad outlook. Yeah, yeah, we're hesitant to quantify this beyond kind of thematically and directionally. We feel good that international and offshore, that the cycle in both areas is going to have some legs. NOV is going to be a critical participant in that. And so that's going to carry us into a much better year in 2025, better margins, you know, better demand. But to me, the wildcard is North America.

Speaker Change: Your broad outlook.

Speaker Change: Yes, yes.

We're hesitant to quantify this beyond kind of the.

Speaker Change: Somatic Lee and Directionally.

Speaker Change: Feel good that international and offshore that that cycle in both areas is going to have some legs.

Speaker Change: And nobody is going to be a critical participant in that and so that's going to carry us into a much better year in 2025 better margins.

Speaker Change: Better demand.

Speaker Change: To me the wildcard is North America.

Clay C. Williams: And, you know, there's a lot of discussion out there about the potential impact of gas drilling, returning to North America, and higher LNG takeaway capacity that would help operators' economics a lot. And then the completion of integration activities between all of the EMPs that are merging and kind of getting back to work would help a lot. But to me, that's the biggest wildcard that we see out there right now is North America.

And.

Speaker Change: Yes.

Speaker Change: There's a lot of.

Speaker Change: Discussion out there about the potential impact of gas drilling returning to North America higher LNG takeaway capacity that would help operators economics, a lot and then.

Jose Bayardo: And then the completion of integration activities between all of the EMPs that are emerging and kind of getting back to work would help a lot. But that's, to me, that's the biggest wildcard that we see out there right now is North America. But I think, on the whole, I think the combination of offshore and international winds dominates and helps more than offset city, any continued pressure we see here in North America.

Speaker Change: Completion of integration activities between all of the E&ps that emerging and kind of getting back to work would help a lot.

Speaker Change: But that's to me that's the biggest wildcard that we see out there right now is North America, but I think on the whole I think the combination of offshore international wins.

Clay C. Williams: But I think on the whole, I think the combination of offshore and international wins and dominance in that helps more than offset any continued pressure we see here in North America. I don't know if you have anything to add to that, No, maybe the only other thing I would add is absolutely agree with everything that Clay just said. North America is the real wildcard.

Speaker Change: <unk> dominates in that helps more than offsets any any continued pressure we see here in North America.

Speaker Change: Anything to add to that.

Jose Bayardo: I don't know if you think I would add, is absolutely agree with everything that Clay just said. North America is the real wildcard. Things continue to look really good from an international offshore standpoint. Obviously, the backlog has been representative of that, but just add a little bit more onto North America. I think that has a big potential effect with a small increase in activity. We think can drive outsized demand for capital equipment in the North American marketplace. So hopefully we're near bottom in terms of overall activity, and we're not certainly not counting on a big uptick, but even a modest uptick into 25, we think we'll drive additional demand for capital equipment.

Speaker Change: Maybe the only other thing I would add is.

Speaker Change: Absolutely agree with everything that Clay just said North America is the real wildcard things continue to look really good from international offshore standpoint, obviously, the backlog has been representative of that but just to add a little bit more on North America I think that has a.

Unknown Executive: Things continue to look really good from an international offshore standpoint, and obviously, the backlog has been representative of that. But just to add a little bit more to North America, I think that has a big potential effect with a small increase in activity, which we think can drive outsized demand for capital equipment in the North American marketplace. So hopefully, we're near a bottom in terms of overall activity. And we're certainly not counting on a big uptick, but even a modest uptick into 25, we think will drive additional demand for capital equipment. And so it sort of feels like there's a big overhang of completion equipment that's out there. But we would argue that things are tighter than they appear.

Speaker Change: A big potential.

Speaker Change: Effect with.

Speaker Change: A small increase in activity, we think can drive outsized demand for capital equipment in the North American marketplace. So hopefully we're near a bottom in terms of overall activity and.

Speaker Change: We're not certainly not counting on a big uptick, but even a modest uptick in the 25.

Speaker Change: It will drive additional demand for.

Speaker Change: Capital equipment, so it sort of feels like there's a big overhang of completion equipment. That's out there, but we would argue that things are tighter than they appear we're still delivering new frac units.

Jose Bayardo: So it sort of feels like there's a big overhang of completion equipment that's out there, but we would argue that things are tighter than they appear. We're still delivering new frack units. And really that's a result of how hard this equipment has been working out in the field, and really the real limited capacity that really exists just from an age and usability standpoint. So again, at these levels, we're not anticipating certainly the road bookings for North America for completion equipment, but a little pickup absorbing the capacity that's out there. And I think we'll cause a lot of demand for new equipment, as a lot of the tired stuff just needs to be replaced on forward.

Unknown Executive: We're still delivering new frack units, and really, that's a result of how hard this equipment has been working out in the field and really the real limited capacity that really exists just from an age and usability standpoint. So again, at these levels, we're not anticipating heroic bookings for North America for completion equipment but a little pickup to absorb the capacity that's out there. And I think it will cause a lot of demand for new equipment as a lot of the tired stuff just needs to be replaced going forward. Okay, I got it.

Speaker Change: And really that's a result of how hard this equipment has been working out in the field and really the real limited capacity that really exist just from a from the age and usability standpoint. So again at these levels, we're not anticipating.

Speaker Change: Certainly bookings for North America for completion equipment, but a little tick up absorbing the capacity that's out there.

Speaker Change: And I think it will cause a lot of demand for new equipment as lot of the tired stuff just needs to be replaced on forward.

Luke Lemoine: Okay, got it. Thanks so much. Thanks, Luke. Thank you.

Speaker Change: Okay.

Speaker Change: Got it thanks, so much.

Luke Michael Lemoine: Thanks Luke.

Luke Michael Lemoine: Thank you.

Stephen Gengaro: Our next question comes from the line of Stephen Gengaro from Steve Ful. Thanks for morning, everybody. So two quick words for me. Just first on the cash flow side, obviously free cash flow was strong in the quarter.

Unknown Executive: Thanks. Thanks for the conversation. Thank you. Our next question comes from the line of Stephen Gengaro from Steve. Thanks. Good morning, everybody.

Stephen David Gengaro: Our next question comes from the line of Stephen <unk> from Stifel.

Stephen: Thanks, Good morning, everybody.

Operator: All right, Stephen. So two quick ones for me, just first on the cash flow side, obviously free cash flow is strong in the quarter. Maybe for Jose, when we think about the rest of the year and you kind of think about the journey you've been on recently to get to this point and the confidence level in free cash generation, how should we think about sort of just the key components of it over the next couple of quarters? And I imagine your confidence level is clearly increasing here on cash generation over the next couple of years. Yeah, absolutely, Stephen.

Steven: Hi, Steven.

Stephen: So two quick ones from me just first on the cash flow side, obviously free cash flow was strong in the quarter.

Jose Bayardo: Maybe for Jose, when we think about the rest of the year and you kind of think about the journey you've been on recently to get to this point and the confidence level and free cash generation, how should we think about sort of just the key components of it over the next couple of cores and imagine your confidence levels clearly increasing here on cash generation over the next couple of years. Yeah, absolutely, Stephen. So look, a couple of quarters ago, we started to have really strong conviction that we had turned the quarter and then for the next several years we would start throwing off really meaningful levels of free cash flow.

Stephen: Maybe for Jose when we think about the rest of the year and you kind of think about the journey <unk> been on risk weighted to get to this point.

Speaker Change: And the confidence level and free cash generation, how should we think about sort of just the key components of it over the next couple of quarters and I imagine your conference host clearly increasing here.

Cash generation over the next couple of years.

Jose A. Bayardo: So, you know, look, a couple of quarters ago, we started to have really strong conviction that we had turned the corner, and then for the next several years, we would start throwing off really meaningful levels of free cash flow. And that's obviously what we're able to demonstrate here in the second quarter and, to a smaller effect, frankly, back in Q4 of last year. So we're in a great place. But just like orders, free cash flow can be lumpy as well, depending on the time of delivery and when we collect certain receivables when we hit specific milestone payments.

Speaker Change: Yes, absolutely Stephen So look a couple of quarters ago.

Speaker Change: We started to have really strong conviction that we had turned the quarter turned the corner and then for the next several years, we would start throwing off really meaningful levels of free cash flow and that's obviously, what we're able to demonstrate here in the second quarter into a smaller effect frankly back in Q4 of last year.

Jose Bayardo: And that's obviously what we're able to demonstrate here in the second quarter, into a smaller effect, frankly, back in Q4 last year. So we're in a great place. But just like orders, free cash flow can be lumpy as well, depending on the time of deliveries, on when we collect certain receivables, when we hit specific milestone payments. And so the guidance is still the same as it has been, which is that we will convert at least 50% of our EBITDA to free cash flow during the year. I think we got a little bit of a pull forward into Q2.

Speaker Change: So we're in a great place, but just like orders.

Speaker Change: Free cash flow can be lumpy as well depending on the time of delivery is on when we collect certain receivables when we hit spa.

Jose A. Bayardo: And so, you know, the guidance is still the same as it has been, which is that we will convert at least 50% of our EBITDA to free cash flow during the year. I think we got a little bit of a pull forward into Q2. So expect a decent step down into Q3. And then, as usual, another strong free cash flow quarter in the fourth quarter. And as we go forward beyond 2024, as I've said before, I don't see any reason why we shouldn't continue to generate, you know, free cash flow at a rate that's sort of equal to or better than 50% of our EBITDA. So I feel really great about things.

Speaker Change: Specific milestone payments and so the guidance still the same as it has been wishes that we will convert.

Speaker Change: At least 50% of our EBITDA to free cash flow during.

Speaker Change: During the year.

Speaker Change: I think we got a little bit of a pull forward into Q2.

Jose Bayardo: So expect a decent step down into Q3. And then, as usual, another strong free cash flow in the fourth quarter. And as we go forward beyond 2024, as I've said before, don't see any reason why we shouldn't continue to generate free cash flow letter rate that's sort of equal to or better than that 50% of our EBITDA. So feel really great about things. Obviously, we've been working on working capital. There's more opportunity on that front in terms of where the cash comes from. But also just obviously higher levels of profitability drive more free cash, even without a material movement in our working capital balances.

Speaker Change: So expect a decent step down into Q3, and then as usual another strong free cash flow quarter in the fourth quarter and as we go forward beyond 2024, and as I've said before don't see any reason why we shouldnt continue to generate.

Speaker Change: Free cash flow at a rate, that's sort of equal to or better than that 50% of our EBITDA. So feel really great about things obviously, we've been.

Unknown Executive: Obviously, we've been, you know, working on working capital. There's more opportunity on that front in terms of where the cash comes from. But also, obviously, higher levels of profitability drive more free cash, even without a material movement in our working capital balances. So things look really good from a free cash flow standpoint that will ultimately translate into what we return to our shareholders. Great. Now, that's very helpful.

Speaker Change: <unk> been working on working capital there is more opportunity on that thought in terms of where the cash comes from but also just obviously higher levels of profitability.

Speaker Change: Drive more free cash even without a material movement in our working capital balances. So things look really good from a free cash flow standpoint that will ultimately translate into what we returned to our shareholders.

Jose Bayardo: So things look really good from a recast flow standpoint that will ultimately translate into what we return to our shareholders.

Jose Bayardo: Great. Now that's very helpful.

Unknown Executive: And the other quick question, just from a macro perspective, you talked a little bit about North America land and, you know, the uncertainty next year. In your view, and you guys have looked at this for a long time, what do you think needs to happen? I mean, do you think it's just the M&A kind of pause that's creating some of the apprehension along with gas prices? Do you think there's anything else at work, which is kind of leading to maybe lower activity than at least we would have thought at this point in the year? That's a really good question.

Speaker Change: Great.

Speaker Change: Very helpful.

Stephen Gengaro: And the other just quick question, just from a macro perspective, you talk a little bit about North America land and the uncertainty next year. In your view, and you guys have looked at this a long time, what do you think needs to happen? I mean, do you think it's just the M&A kind of pause that's creating some of the apprehension, along with gas prices? You think there's anything else at work, which is kind of leaning to maybe lower activity, that at least we would have thought at this point of the year. That's a really good question.

Speaker Change: Just a quick question just from a macro perspective, you've talked a little bit about North America land.

Speaker Change: Uncertainty next year.

Speaker Change: In your view you guys have looked at this a long time.

Speaker Change: Why do you think needs to happen I mean, do you think it's just the M&A kind of pause thats, creating some of the apprehension along with gas prices do you think there's anything else at work, which is kind of leading to lower carry that at least we would have thought at this point of the year.

Clay C. Williams: Certainly, certainly gas would help a lot. I think gas has taken a big toll. Even liquids producers, you know, have exposure to gas prices, and that's affected activity here. Beyond that, in terms of what kind of lights up the North American rig count again, now, I'm not sure I have a good guess as to what that might be, other than to just point out the fact that this is a very, very creative and entrepreneurial group of producers here in North America. And man, they, they always seem to come up with something.

Speaker Change: That's a really good question certainly certainly gas would help a lot I think gas has taken a big toll uneven liquids producers.

Clay Williams: Certainly, certainly, gas would help a lot. I think gas is taking a big toll; even liquids producers have exposure to gas prices. And that's affected activity here.

<unk> has exposure to gas prices.

Speaker Change: And.

Speaker Change: And thats affected activity here beyond that in terms of what kind of lights up the north American rig count again now.

Clay Williams: Beyond that, in terms of what kind of lights up the North American rig count again, now I'm not sure I have a good gas as to what that might be other than to just point out the fact that this is a very, very creative and entrepreneurial group of producers here in North America. And then they always seem to come up with. and 20 years ago it looked like North America was continuing to drift down and had its best days when the rear of your mirror and then all of a sudden you had the shale revolution here.

Speaker Change: Im not sure I have a good.

Speaker Change: Guess as to what that might be other than to.

Speaker Change: Just point out the fact that this is a very very creative and entrepreneurial group of producers here in North America and man.

Speaker Change: They always seem to come up with something and 20 years ago. It looked like North America was continuing to drift down and had its best days are in the rearview mirror and then all of a sudden you have the shale Revolution here I don't know what the next revolution looks like but I can tell you theres a awful lot of smart people in the E&P community.

Clay C. Williams: And you know, 20 years ago, it looked like North America was continuing to drift down and that its best days were in the rear view mirror. And then all of a sudden, you have the shale revolution here. I don't know what the next revolution looks like.

Clay Williams: I don't know what the next revolution looks like, but I can tell you there's an awful lot of smart people in the EMP community focused on making that happen. In terms of what would help us a lot, is our customers here in North America have gotten really good. We did a capital discipline and have really limited their expenditures on new technology. We're continuing to try to figure out what's next in that space, and as I mentioned earlier, I think higher levels of automation and drilling, and there's some IOC, some major oil company, senior leaders who share that vision, and so I'm pretty excited about the opportunity in front of us to help lift the automation.

Clay C. Williams: But I can tell you there are an awful lot of smart people in the EMP community focused on making that happen. In terms of our, you know, what would help us a lot is that our customers here in North America have gotten really good at capital discipline and have really, you know, limited their expenditures on new technology. We're continuing to try to figure out what it is, you know, what's next in that space.

Speaker Change: <unk> focused on making that happen.

Speaker Change: In terms of our.

Help us a lot.

Speaker Change: As our customers here in North America have gotten really good at capital discipline and.

Speaker Change: Have really.

Speaker Change: Limited their expenditures on new technology, where we're continuing to trying to figure out what is the what's next in that space and as I mentioned earlier, I think I think higher levels of automation and drilling and Theres. Some theres some IOC some major oil company.

Clay C. Williams: And as I mentioned earlier, I think higher levels of automation in drilling, and there are some IOCs, some major oil company senior leaders who share that vision. And so I'm pretty excited about the opportunity in front of us to help improve the automation and the digital tools that are used to optimize drilling across, you know, rigs all across the US and North America. And, and, you know, the drillers here, I'm sure they're going to do it again this quarter, talk about improving efficiency and continue to get better at what they do. And so we're looking for opportunities to help support them do that. Excellent. Thanks for the call.

Speaker Change: Sure.

Speaker Change: Senior.

Speaker Change: Leaders, who share that vision and so I'm pretty excited about the opportunity in front of us to help lift the automation in the digital.

Clay Williams: In the digital tools that are used to optimize drilling across the US and North America and the drillers here, I'm sure they're going to do it again this quarter. Talk about improving efficiency and continue to get better at what they do, and so we're looking for opportunities to help support them do that.

Speaker Change: <unk>.

Speaker Change: Tools that are used to optimize drilling cros.

Speaker Change: Rigs all across the U S and North America.

Speaker Change: The drillers here.

Speaker Change: I'm sure they're going to do it again this quarter talk about improving efficiency and continuing to get better at what they do and so we're looking for opportunities to help support them to do that.

Unknown Executive: Excellent. Thanks for the car.

Speaker Change: Excellent thanks for the color.

Clay Williams: Thank you.

Clay C. Williams: You bet. Thank you, Stephen. Thank you. At this time, I would now like to turn the conference back over to Clay Williams for closing remarks.

Speaker Change: You bet. Thank you Steven.

Speaker Change: Thank you at this time I would now like to turn the conference back over to Clay Williams for closing remarks.

Clay Williams: At this time, I would now like to turn the conference back over to Clay Williams for closing remarks. Thanks, QG. We appreciate everyone joining us this morning, and we look forward to sharing our third quarter results with you in October.

Clay C. Williams: Thanks, QG. We appreciate everyone joining us this morning, and we look forward to sharing our third quarter results with you in October. I hope you have a great day.

Clay C. Williams: Thank you P. J, we appreciate everyone joining us this morning, and we look forward to sharing our third quarter results with you in October and I Hope you have a great day. Thank you.

Unknown Executive: I hope you have a great day. Thank you.

Unknown Executive: This concludes today's conference call. Thank you for participating.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. The Ultimate Parody Site! .

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

Unknown Executive: You may now disconnect. Thank you.

Clay C. Williams: [music].

Unknown Executive: Thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us Thank you so much for joining us today Thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us Thank you so much for joining us today Thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you so much for joining us today, thank you .

Clay C. Williams: [music].

Unknown Executive: .. Do you love JoBlo movie clips? Subscribe now!!

Operator: Click on the bell for the latest notifications! Updated daily from Monday to Friday. Updated daily from Monday to Friday. Updated daily, Monday to Friday, https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk Good day, and thank you for standing by. Welcome to the Q2 NOV Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Amie D'Ambrosio: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amie D'Ambrosio, Director of Investor Relations. Please go ahead.

Unknown Executive: Good day, and thank you for standing by. Welcome to Q2NOV Inc. Earnings Conference Call.

Speaker Change: Good day, and thank you for standing by and welcome to Q2 and No V Inc. Earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Unknown Executive: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker Change: Ill ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advisory. Your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like turn the conference over to your speaker today.

Unknown Executive: Please be advised that today's conference is being recorded.

Amie D'Ambrosio: I would now like to hand the conference over to your speaker today. Amie D'Ambrosio, Director of Investor Relations, please go ahead. Welcome everyone to NOV's second 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.

Amie D'Ambrosio: Welcome everyone to NOV's second quarter 2024 earnings. With me today are Clay Williams, our Chairman, President, and CEO, and Jose Bayardo, our Senior Vice President. Before we begin, I would like to remind you that some of today's comments are forward-looking, within the meaning of the federal securities laws. They involve risks and uncertainty, and actual results may differ. No one should assume these forward-looking statements will remain valid later in the quarter or later in the year.

Unknown Executive: 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. 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.

Amie D'Ambrosio: 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. On a U.S. GAAP basis, for the second quarter of 2024, NOV reported revenues of $2.22 billion and a net income of $226 million, Our use of the term EBITDA throughout this morning's call corresponds with the term Adjust, as defined in our. 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. Now, let me turn the call over to you. Thank you, Amie.

Unknown Executive: Our comments also include non-GAT measures. Reconciliation to the nearest corresponding GAT measures is in our earnings release available on our website. On a US GAT basis, for the second quarter of 2024, NOV reported revenues of $2.22 billion and a net income of $226 million, or $57 cents 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.

Unknown Executive: 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.

Clay Williams: Now, let me turn the call over to Clay. Thank you, Amy. NOV's second quarter revenues of $2.2 billion increased 6% compared to the second quarter of 2023. As year over year, double-digit growth in international markets and 6% growth in the offshore easily overcame a modest 1% decline in North American sales. The company posted fully diluted GAT earnings for the second quarter of $0.57 per share, a $0.18 year over year, helped by gains from our divestiture of our poll products business during the quarter. Second quarter EBITDA improved 15% year over year to $281 million. Strong sequential EBITDA leverage of 66% was driven by the impact of cost reductions undertaken over the past several months, along with the pull forward of some work and very good execution.

Unknown Executive: NOB's second quarter revenues of $2.2 billion. The company posted a fully diluted GAP. Second quarter EBITDA improved 15% year-over-year to $280,000, along with a pull forward of some work and was very good due to the cost savings. Exploration and New Oshawa, and International Development of Uncommissioned Oil, emerging as a primary growth driver. Stable oil prices and a strong long-term outlook for natural gas and LNG demand are supporting EMP. In fact, industry forecasts are calling for several additional final investment decisions or FID. For Big Offshore Projects Following This Significant Ramp, Transcribed by National Oil Company, RENO-C's have been, CP operators need better drilling, stimulation, and production equipment, such as those Developed and Honed in North America's Uncommissioned Shale Labs.

Clay Williams: Consolidated EBITDA margin of 12.7% improved sequentially and year over year due to the cost savings and rising margins of NOV's revenue out of backlog, which accounted for about 25% of our revenue mix during the second quarter. Exploration in new offshore basins, greenfield and brownfield offshore development for both willing gas, and international development of unconventional resources are emerging as the primary growth drivers for NOV. As the strength and duration of this cycle remains on display. Stable oil prices and strong long-term outlook for natural gas and LNG demand are supporting EMP investments in these. In fact, industry forecasts are calling for several additional final investment decisions or efforts.

Clay Williams: by D's for big offshore projects following the significant ramp of the past three years, which are expected to drive sharply higher demand for offshore production assets like FPSOs. National oil companies or NOCs have been clear about their higher spending plans to achieve ambitious goals to boost production. These trends have important implications for NOV's business. For international land developments, EMP operators need better drilling, stimulation, and production equipment and technologies, like those developed and honed in North America's unconventional shale laboratory through the past two decades. As a reminder, the U.S. shale revolution began with a retooling of its drilling fleet to AC power and high-spec capabilities early in the century.

Unknown Executive: And as a reminder, the U.S. shale revolution began with a retooling of its drilling fleet to A.C. power and high-spec capabilities, followed by the build-out of substantially more and more efficient hydraulic fracturing. Transcribed by https://otter.ai, New international wells also need miles of corrosion-resistant concrete, is a leading global I'm sure EMP operators need drilling rigs to be reactivated, but it accelerates the corrosion cause.

Clay Williams: That was step one, followed by the build-out of substantially more and more efficient hydraulic fracturing equipment; two things that never happened across the Middle East, Asia Pacific, or Latin America. New international wells also need miles of corrosion-resistant flow line, plus chokes, valves, processing equipment, and the line. NOV is a leading global provider of all of these. Offshore EMP operators need drilling rigs to be reactivated after long periods of inactivity, which accelerates the corrosion caused by salt air, and these also need to be retrofitted with drill pipe bits and drilling tools. Our organization supports the majority of the global offshore drilling fleet as a leading drilling equipment OEM.

Unknown Executive: These also need to be... DrillPipeBits.com, an organization that supports the majority of the global offshore drilling fleet as a leading drilling equipment manufacturer. Billing Rig Reactivation Activity has been strong over the past, offshore operators also need platforms and FPSO. Flowline, and NOV is a leading global provider of OV's opportunity per FPSO production vessel ranges from $100 million in benign, $1,700,000,000, Work-to-bill was nearly 180%, driven by strong demand for flexible pipe for deepwater FPSOs. Bookings were also held by demand for well intervention equipment for both offshore and onshore applications, and a large order for wind towers at Jose Bayardo's. Offshore tendering and drilling activity continues to be strong in the Middle East. Transcription by Transcription Outsourcing, LLC.

Clay Williams: Drilling rig reactivation activity has been strong over the past few quarters, as we've worked to put assets back to work. Offshore operators also need platforms and FPSOs and subsea flow lines, and production kit ranging from flexible and composite piping systems to gas treatment pumps, valves, and chokes. Again, NOV is a leading global provider of these, and we are now also seeing rising demand for production technologies we provide, which drove the strong level of order in NOV's opportunity for FPSO production vessel ranges from $100 million in benign waters up to $700 million in harsh environments. Book to Bill was nearly 180% in the second quarter.

Clay Williams: Driven by strong demand for flexible pipe for deep water FPSO developments, bookings were also helped by demand for well-intervention equipment for both offshore and international markets, and a large order for windtowers that Jose will speak to later. Onshore tindering and drilling activity continues to be strong in the Middle East, and is rising in Latin America and Asia as NOCs pursue aspirational production targets, particularly around gas, and employ unconventional production technology, many for the first time. Most of these customers understand that the economics of unconventional technology work best with modern AC powered rigs supported by advanced control systems, with downhill bits and friction reduction tools that enable longer laterals and higher production per well, and with safe and efficient pressure pumping spreads and cool tubing units that de-risk completions.

Unknown Executive: Most of these customers understand that the economics of uncommissional technology work best with modern AC powered rigs supported by advanced technology, such as downhole bits and friction reduction tools that enable longer laterals, and they understand the fluid handling and corrosion challenges of high flow back rates of fluids carrying heavy abrasive loads. They understand that NOV can help them navigate these challenges with our unconventional production technology that enables them. The MOVIE is well positioned to capitalize on the building, offshore, and international momentum. In North America, we see a different and more challenging picture of the Second World War.

Clay Williams: They understand the fluid handling and corrosion challenges of high flow back rates of fluids carrying heavy abrasive loads through their processing plants. They understand that NOV can help them navigate these challenges with our unconventional production technology that enables profitable development of their resources. NOV is well positioned to capitalize on the building offshore and international momentum.

Clay Williams: On the other hand, in North America we see a different and more challenging picture to the second. and half of 2024. Entrepreneur activity in the U.S. continues to slow due to EMP merger integrations and low natural gas prices. As a market awaits more LNG export takeaway capacity slated for 2025. Low natural gas prices and NGL prices, particularly in West Texas, reduced the realized wellhead revenues for operators and diminished their cash flows, their well bore construction economics and their appetite can drill. Certain of our North American oilfield service customers are facing more price pressure as fleet utilization falls, and most are increasingly cautious about their purchases, which led to an 8% decline in energy equipment revenues for the region year over year, and drove North America and mixed down to 25% of segment revenue in the second quarter of 2024.

Unknown Executive: Interactivity in the U.S. continues to slow due to EMP, merger integrations, and low natural gas emissions; the market awaits more LNG export takeaway capacity slated Low Natural Gas Prices and NGL, Particularly in the West, Will Produce Realized Wellhead Revenues for Operators and Diminish Their Cash Flows, Their Well- Unknown Executive, Arun Jayaram, Blake McCarthy, Amie DAMbrosio, National Most are increasingly cautious about their purchases, which led to an increase in North America and mixed down to 25%.

Clay Williams: In energy products and services, with 51% of its mix from North America, you'd expect an even bigger impact from this trend. However, with market share gains in North America, rising from new products and technologies, along with revenues from our first quarter acquisition of Extract, North America revenues for our energy products and services segment were actually up 3% year on year. So to sum it up, we're very pleased with bookings during the quarter and 129% book-to-bill through the first half. While we are increasingly cautious about continued headwinds in North America, we think continued rising demand and offshore and international space will yield a book-to-bill greater than one for the second half of 2024.

Unknown Executive: Energy Products and Services with 51%. However, with market share gains in North America rising from new products and technologies along with revenues from our first quarter acquisition. North American revenues for our energy business So to sum it up, we're very pleased with bookings. We are increasingly cautious about continued headwinds in North America.

Unknown Executive: Continued rising demand in offshore and international space, book to build greater than one for the, and we do not accept. Turning to cost savings, to date, we have substantially achieved the $75 million annualized News Segment. We recognize we are facing a more challenging market in North America. Please see the complete disclaimer at https://sites.google.com/policies/privacy/ for the reduced cost.

Clay Williams: As they typically are, though, orders will continue to be lumpy quarter to quarter, and we do not expect a repeat of the second quarter's barn burner bookings again in Q3.

Clay Williams: Turning to cost savings to date, we have substantially achieved the $75 million annualized cost reduction initiatives we announced last year through our new segment structure, workforce reductions, and our facilities closures. But we recognize we are facing a more challenging market in North America, and to achieve acceptable returns on capital, we can't stop here. So we're developing additional opportunities to further reduce costs and drive better efficiencies, focusing on what we can control. As always, that includes keeping an eye out for merging technologies that we can bring to bear in our own operations as well as our customers' technologies like AI, artificial intelligence.

Unknown Executive: As always, that includes keeping an eye out for emerging technologies that we can bring to bear in our own operations. For the past few years, we've helped our customers optimize their drilling with AI through our, We've used AI to help write code here for a number of new NOVs. More recently, we've begun to apply it to our own operations across more than 50 of our manufacturing facilities using a proprietary AI. N.O.V.

Clay Williams: For the past few years, we've helped our customers optimize their drilling with AI through our Kaisen app, and we've used AI to help write code here for a number of new NOV software products. More recently, we've begun to apply it to our own operations across more than 50 of our manufacturing facilities globally using a proprietary AI platform we call a RIDIA that we've developed internally to optimize capacity, improve machine tool utilization, and drive better absorption and efficiency. The platform leverages NOV's proprietary max edge devices to collect real time data from sensors affixed to manufacturing machinery and our plants.

Unknown Executive: 's proprietary MaxEdge devices to collect real-time data, and then feeds that data to AI prescriptive models that identify. These models remove the guesswork to allow our operations team to quickly respond to the several hundred that are using it today to help us improve utilization. No Visibility to Quickly Scale or Operation; You're also using AI to drive better.

Clay Williams: The platform then feeds that data to AI prescriptive models that identify opportunity costs caused by throughput quality or reliability issues. These models remove the guesswork to allow our operations teams to quickly respond to issues and opportunities. The platform is highly scalable, and we plan to connect all our manufacturing machines worldwide beyond the several hundred that are using it today to help us improve utilization and results. NOV's ability to quickly scale our operations as cycles dictate is a competitive strength that this system will enhance. We are also using AI to drive better who are forecasting. The supply chain drama rising from the COVID pandemic highlighted shortcomings in our lead time estimation and planning.

Unknown Executive: Flight Chain Drama Rising from the COVID Pandemic Highlighted Shortcomings in our Lead Time Estimation, Transcripts provided by Transcription Outsourcing, LLC, inventory on hand when and where For more information, visit www.narang.com. We think steadily rising market demand and key offshore and international markets dormant for a together with these technology-driven operating Products and Technologies. We're bringing Cost Improvements, or the The company is very well positioned to support and enhance our customers' operations to drive better efficiency and reduce emissions. Before I turn the call over to Jose, I want to...

Clay Williams: In response, we are developing an AI solution to more accurately predicted managed vendor lead times to ensure we have inventory on hand, when and where we need it. This will further optimize working capital while maintaining high reliability and logistical efficiency. We think steadily rising market demand a key offshore and international market dormant for a decade plus, together with these technology driven operating efficiency initiatives, new products and technologies we are bringing to the market, and further cost improvements, are the prominent features that will guide in these journey to better margins and returns. Our company is very well positioned to support and enhance our customer's operations to drive better efficiency, to reduce emissions, and to improve their safety for the next several years.

Clay Williams: Before I turn the call over to Jose, I want to take a moment to thank our employees who may be listening this morning. As I just noted, we have a big opportunity in front of us as our offshore and international customers get back to work and as our North American customers continue to look to us for solutions to improve their business. They're counting on us to deliver, and I appreciate your hard work and creativity to support them. Thank you for the great job that you do.

Unknown Executive: Thank our employees who may be, Just know that we have a big opportunity. Transcript by Rev.com Page of Counting on us to appreciate your hard work and creativity. Thank you for the great job that you do. Jose, thank you. NOV's consolidated EBITDA improved 15% year over year to $281 million, with margins improving 100 basis points to 12.7%, reaching the highest level since 20 by our $75 million cost. CapEx totaled $82 million, leading to free cash flow of $350 million.

Jose Bayardo: Jose? Thank you, Clay. NOV has consolidated the EBITDA on improved 15% year over year to 281 million, with margins improving 100 basis points to 12.7% of sales, reaching the highest level since 2015, supported by our $75 million cost out program, which, as Clay mentioned, was substantially completed during the second quarter. Cash flow from operations was a healthy 432 million due to improvements in working capital and profitability. CapEx totaled 82 million, leading to free cash flow of 350 million. And we continue to expect that we will convert over 50% of EBITDA to free cash flow for the year.

Unknown Executive: We continue to expect that we will convert over 50%. The much-improved cash flow realized in the second quarter reinforces our already strong confidence in the Capital Light Business Model. Last quarter, we unveiled our return of capital. As a reminder, priority one is to defend the, As expected, during the second quarter, our net debt to EBITDA leverage ratio fell below one, and our gross... Transcribed by https://otter.ai, [inaudible] Second, we aim to properly maintain our asset base and invest in organic growth opportunities that drive superior performance. During the second quarter, the bulk of our $82 million in capital expenditures was invested in building out our ability to support more of our latest efficiency.

Jose Bayardo: Much improved cash flow realized in the second quarter reinforces our already strong confidence that NOV's capital light business model will generate substantial amounts of free cash flow over the coming years. Last quarter, we unveiled our return of capital framework that is aligned with our long-standing capital allocation priorities. As a reminder, priority one is to defend the balance sheet. As expected, during the second quarter, our net debt to EBITDA leverage ratio fell below one, and our gross debt leverage ratio remained below two. Meaning we now consider the balance sheet to be an optimal condition, which paves the way to return a large portion of our future cash generation to shareholders while maintaining adequate financial flexibility.

Jose Bayardo: Second, we aim to properly maintain our asset base and invest in organic growth opportunities that drive superior risk-adjusted returns. During the second quarter, the bulk of our 82 million in capital expenditures was invested in building out our ability to support more of our customers with our latest efficiency enhancing tools, technologies, and services. Next, we always want to remain opportunistic regarding acquisitions that can accelerate strategic growth initiatives at attractive returns. In the second quarter, we completed our acquisition of Keystone Tower Systems, which I'll talk more about in a moment, and are continuing to evaluate rifle shot technology acquisitions that improve our strategic positioning.

Unknown Executive: Next, we always want to remain opportunistic regarding acquisitions and can accelerate strategic growth initiatives at a rapid pace. In the second quarter, we completed our acquisition of Keystone, which I'll talk more about in a moment, and we're continuing to evaluate rifle shot technology. Lastly, we remain committed to returning at least 50% of our excess free cash flow, defined as cash flow from operations less, to our shareholders. During the quarter, we stepped up our return of capital by increasing our dividend by 50%, which amounted to $30 million. We also bought back 2 million shares at an average price of $18.50 per share, totaling an additional $30 million.

Jose Bayardo: Lastly, we remain committed to returning at least 50% of our excess free cash flow, defined as cash flow from operations less cash flow. Capital expenditures and other investments to our shareholders on an annual basis. During the quarter, we stepped up our return of capital by increasing our dividends 50%, which amounted to $30 million paid in the quarter. We also bought back two million shares and an average price of $18.50 per share, totaling an additional $37 million. In some, we returned $67 million of capital to our shareholders during the second quarter. As I just mentioned, during the quarter, we completed the acquisition of the remaining minority interest and Keystone Tower Systems. With NOV's help, Keystone developed a proprietary spiral welding manufacturing technology that we think will be a game changer in the wind industry, due to not only its potential to reduce the cost and time to manufacture wind towers, but even more so due to its potential to enable the manufacturing of towers in the field.

Unknown Executive: In sum, we returned $67 million of capital. As I just mentioned, during the quarter, we completed the acquisition of the remaining minority interest in Keystone. With NOV's help, Keystone developed a proprietary spiral welding manufacturer due to not only its potential to reduce the cost and time to manufacture wind turbines, but even more so due to its potential to enable the manufacturing of towers. This avoids the logistical challenges that prevent land wind farms from using taller towers.

Jose Bayardo: This avoids the logistical challenges that prevent land wind forms from using taller towers, which can access stronger, more steady winds and utilize larger turbines. Using taller towers can significantly improve the economics of wind power and therefore expand the geographical areas where you can cost-effectively produce wind power outside of the wind belt and into regions with higher populations and energy demand. We made our initial investment in Keystone during 2019 and increased our financial investment over time, becoming the majority shareholder in 2023. We also increased our investment with human capital over time by sharing our manufacturing expertise to help produce and sell Keystone's first commercial tower sections and position the operation to be able to win a contract for 398 meter tall wind towers from a major wind turbine OEM.

Unknown Executive: Transcribed by https://otter.ai, Using taller towers can significantly improve the economics of wind power and therefore expand the geographical areas where you can build them and into regions with higher population. We made our initial investment in Keystone during 2019 and increased our financial investment, becoming the majority shareholder. We also increased our investment with human capital over time by sharing our manufacturing, producing, and selling Keystone's First Commercial Tower and preparing the operation to be able to win a contract for 398-meter-tall wind turbines from a major wind turbine manufacturer.

Jose Bayardo: With this wind, we elected to exercise an option to buy out the remaining minority shareholders, and we are now working to significantly expand Keystone's manufacturing capacity to begin making deliveries on this contract beginning mid 2025.

Unknown Executive: With this win, we elected to exercise an option to buy out the remaining minority, and we are now working to significantly expand Keystone's manufacturing and begin making deliveries on this contract. This operation is really just getting started, but we're excited about the long term. Moving on to our, Our energy products and services segment generated revenues of $1.050 billion. EBITDA decreased $14 million to $184 million year-over-year or $17.

Jose Bayardo: This operation is really just getting started, but we're excited about the long-term potential of this business.

Jose Bayardo: Moving on to our segment results. Our energy products and services segment generated revenues of 1.050 billion in the second quarter, a 2% increase compared to the second quarter of 2023. EBITDA decreased 14 million to 184 million year-over-year, or 17.5% of sales, due to a less favorable sales mix and a more challenging North American market. Sequentially, the segment realized 3% growth with 30% EBITDA flow-through. As a reminder, our energy products and services segment generates income from three revenue streams: services and rentals, consumable products, and sales of shorter-lived capital equipment. The segment sales mix for the quarter was 48% service and rentals, 20% product sales, and 32% capital equipment sales.

Unknown Executive: Due to a less favorable sales mix and a more challenging North America. As a reminder, our energy products and services segment generates income from three revenue sources, Services and Rentals, Consumable Products, and Sales of Shorter-Lived Capital. The segment sales mix for the quarter was 48% service and rentals, 20% product.

Unknown Executive: 32% cap. Revenue from service and rentals includes tubular coating and inspection. Drilling Data Acquisition, Analytics, and Optimization Services, and Rentals of our Downhole Drilling Tools, Drill. During the second quarter, revenue from NOV service and rental businesses increased in the low single digits. With market share gains in the U.S., strong demand from international markets, and the contribution from our new artificial lift business more than offsetting, excluding the contribution from our artificial... Revenues from service and rentals declined in the US, but revenue from drill bit rentals in the US held flat from the second quarter of 2023, despite the 17% decline.

Jose Bayardo: Revenue from service and rentals includes tubular coding and inspection services, solid control services, drilling data acquisition, analytics and optimization services, and rentals of our downhole drilling tools, drill bits, and artificial lift equipment. During the second quarter, revenue from NOV service and rental businesses increased in the low single digits year-over-year. With market share gains in the U.S., strong demand from international markets, and the contribution from our new artificial lift business, more than offsetting the 12% decline in North American drilling activity. Excluding the contribution from our artificial. with Business, revenues from service and rentals declined in the low single digits year-over-year.

Jose Bayardo: Revenue from drill bit rentals in the U.S. held flat from the second quarter of 2023, despite the 17 percent decline in the U.S. recount. We realize strong growth in the Permian Basin from the rapid adoption of our latest bit and cutter designs, which coincide with many operators re-evaluating performance, bit designs, and vendors as they optimize hole sizes across much of the basin. Growth in the Permian offset declines in other areas of the U.S. resulting from lower activity and gas basins, and the cooling effect consolidation among oil and gas producers continues to have on activity. Internationally, bit rentals and borehole and mortgment services improve slightly, on increasing activity in the Middle East, more than offsetting lower activity in Latin America.

Unknown Executive: We've realized strong growth in the Permian Basin from the rapid adoption of our latest bit and cutter, which coincides with many operators re-evaluating performance, bit designs, and vendors. Growth in the Permian offsets declines in other areas of the U.S., resulting from lower activity in gas.

Unknown Executive: Internationally, Bit Rentals and Borehole Enlargement Services improved slightly on increasing activity in the Middle East more than offsetting lower revenue from downhole tool rentals. We realized a low- to mid-single-digit decline in North America as a result of rapidly growing adoption of our latest drilling technologies that allow operators to more efficiently... Demand for our tools is generally driven by footage. Higher levels of drilling complexity require more of our technology.

Jose Bayardo: Revenue from down-hole tool rentals improved 3 percent from the second quarter of 2023. We realized a low to mid-single digit decline in North America against a recount decreased 12 percent. A result of rapidly growing adoption of our latest drilling technologies that allow operators to more efficiently drill high pressure and long lateral wells. Demand for our tools is generally driven by footage drilled, but higher levels of drilling complexity require more of our technologies for efficient operations. For example, as customers push beyond two mile laterals, they are realizing the benefit of running multiples zero pressure drop agitators in their bottom hole assembly.

Unknown Executive: For example, as customers push beyond two-mile laterals, they're realizing the benefit of running multiple zero-pressure-drop agitators in their bottom line. Wells Drilled With Rotary Steerable Tools, Our Positrack Torsional Vibration Mitigation Tool Enables Operators To Maintain Higher Weight on the Bit, Allowing Them To Drill Further Without Damaging, All international revenue from downhole rentals was mostly flat. We expect to realize strong growth over the mid to long term, driven by increasing activity in an unconventional, revenue from solid control services realized a low single-digit growth rate compared to the second quarter. In North America, rapid adoption of NOV's new Alpha Shell Shaker, which offers significantly higher cuttings, handles...

Jose Bayardo: And for wells drilled with rotary steerable tools, our Positract torsional vibration mitigation tool enables operators to maintain higher weight on bit, allowing them to drill further without damaging the BHA. Well, international revenue from down-hole rentals was mostly flat year over year. We expect to realize strong growth over the mid-to-long term, driven by increasing activity in the unconventional plays of the Middle East. Revenue from solid control services realized a low single-digit growth rate compared to the second quarter of 2023. In North America, rapid adoption of NOV is new alpha-shell shaker, which offers significantly higher cuttings handling capacities, greater safety, and lower costs, mostly offset meaningfully lower drilling activity in North America.

Unknown Executive: Revenues from the Eastern Hemisphere improved on a higher act... Increasing Adoption of New Customers to eliminate the cost, meeting all environmental. Revenues from rentals of our drilling data acquisition systems improved year over year with a low single-digit decline in North America being more than offset by improved activity, Downhole Broadband Solutions, and Wire Drill gearing up for a big... As noted in our significant achievements, we signed a framework agreement with a major Norwegian oil and gas company.

Jose Bayardo: Revenue is from the eastern hemisphere improved on higher activity levels and increasing adoption of new technologies, including the alpha-shaker and or ANOVA-tharm waste treatment system, which efficiently treats oil-based drilling waste at the well site, allowing customers to eliminate the costly transport costs while meeting all environmental requirements for disposal. Revenue from rentals of our drilling data acquisition systems improved year over year, with a low single-digit decline in North America being more than offset by improved activity in the eastern hemisphere. Our down-hole broadband solutions, wire drill-type services operation is gearing up for a big 2025. Sequential revenues were mostly flat, but profitability declined, with the operation beginning to carry additional costs as it raised itself for significant growth.

Jose Bayardo: As noted in our significant achievements, we signed a framework agreement with a major Norwegian oil and gas producer associated with their intent to deploy our services across their rig fleet. We also recently had two additional significant customer wins with our DBS offering. After completing a drilling campaign months ahead of schedule and with better well placement than the customer expected, leading to improved productivity. An operator extended its contracts with us for another two years, and earlier this week, after realizing strong results from a trial with our DBS services, a major NOC in the Middle East awarded us contracts for one offshore and one land rig to begin operations at the end of the year.

Unknown Executive: [inaudible] We also recently had two additional significant customer wins, completing a drooling campaign months ahead of schedule, Leading to Improved Productivity. Operator extended its contracts with us for another, and earlier this year, Realizing Strong Results from a Trial with our DBS Service. A major NOC in the Middle East awarded us contracts for one offshore and one land. Lastly, our tuboscope operations experienced a low to mid single-digit decline. However, revenue from product sales, which include consumable products used in drilling and completion operations, improved in the mid to low 20% range year over year.

Jose Bayardo: Lastly, our Tuboscope operations experienced a low-to-mid single-digit decline in revenues on lower demand for inspections of oil field tubulars and for dual-type coating in the U.S. Revenue from product sales, which include consumable products used in drilling and completion operations, improved in the mid to low 20% range year-over-year, and excluding the acquisition of our artificial lift business was up low single digits. The small year-over-year increase was primarily the result of higher product sales in the Eastern Hemisphere from our tuboscope operations, including our pipe connection systems and sleeves and bulk powder coating shipments. A low 20% increase in sales of completion tools with significant gains in the Middle East, North Sea, and North America, and an increase of bulk drill bit sales into Africa and Asia.

Unknown Executive: Excluding the acquisition of our artificial lift business, the low, small year over year increase was primarily the result of higher product sales in the Eastern Hemisphere from our two, including our pipe connection system, a low 20% increase in sales of completion, and the Middle East, North Sea, and North America, increase in bulk drill. These increases were partially offset by lower sales of fishing tools. Sales of capital equipment within the segment, including composite pipes Drill Pipe, Conductor Pipe, Shell Shakers, and Managed Pressure Drilling do primarily to lower drilling costs, Set By Improving Demand From the Internet.

Jose Bayardo: These increases were partially offset by lower sales of fishing tools and components for managed pressure drilling equipment. Sales of capital equipment within the segment, including composite pipe and tanks, drill pipe, conductor pipe, shell shakers, and managed pressure drilling equipment, fell in the low-to-mid single digits compared to the prior year. Due primarily to lower drill pipe sales, which declined in the low 20% range due to a sharp fall-off in demand from the U.S. land markets, partially offset by improving demand from international land markets. The decline in our drill pipe business was more than offset by higher deliveries of MPD equipment and a modest improvement in sales of fiberglass equipment, where there's growing demand from composite pipe in the oil and gas fields of the Middle East and for corrosion resistant composite tubulars and tanks for use in FPSOs.

Unknown Executive: The decline in our drill pipe business was more than offset by higher deliveries of MPD. Modest Improvement and Sales, bookings for our fiberglass business increased 25. Includes orders for 462 kilometers of Fiberspar spoolable, and 128 kilometers of Bondstrand pipe destined. For the third quarter, we expect revenues for our energy products and services segment to be flat to up in the low single-digit percent range when compared to the third quarter of 2022, with EBITDA between $175 and $190. Our energy equipment segment generated revenues of $1.204 billion in the second quarter of 2016.

Jose Bayardo: Bookings for our fiberglass business increase 25% sequentially and include orders for 462 kilometers of fiber spore spoolable pipe and 128 kilometers of bond strand pipe destined for the Middle East.

Jose Bayardo: For the third quarter, we expect revenues for our energy products and services segment to be flat to up in the low single-digit percent range when compared to the third quarter of 2023, with EBITDA between 175 and 190 million.

Jose Bayardo: Our energy equipment segment generated revenues of 1.204 billion in the second quarter of 2024, an 87 million or 8% increase year over year compared to the second quarter of 2023. EBITDA improved 43 million to 142 million or 11.8% of sales, representing an incremental flow through a 49%. The outside incremental margin was a result of cost savings, the improvement quality of our backlog, and a more favorable sales mix. Double digit revenue growth from both international land and offshore markets more than offset a flight decline in sales into the North American land market year over year. Normalizing for the divestiture of the segment's poll products business, revenue increased roughly 10% year over year.

Unknown Executive: $87 million, which increased year over year compared to the second quarter. EBITDA improved $43 million to $142 million or 11.8% of sales, representing an incremental flow-through of $49. The outsized incremental margin was a result of cost, The Proven Quality of Our Backlog, and I'm. Double-digit revenue growth from both international land and offshore markets more than offset a slight decline in sales into North American landmarks. Normalizing for the divestiture of the segment's pull product, revenue increased roughly 10%. As a reminder, this segment is primarily a later-cycle capital equipment business that has two... Sales and Aftermarket. During the second quarter, equipment sales accounted for approximately 54%.

Jose Bayardo: As a reminder, the segment is primarily a later cycle capital equipment business that has two revenue streams: equipment sales and aftermarket sales and services. During the second quarter, equipment sales accounted for approximately 54% of the segment's revenues. Aftermarket sales and service accounted for their remaining 46%. Segment's capital equipment sales increased in the mid-single digit Agit, percent range, or roughly 10% when normalized for the investor of our poll products business, and aftermarket revenue improved in the upper single digits relative to the second quarter of 2023. Most of our aftermarket revenue comes from our large install based of drilling equipment and intervention stimulation equipment.

Unknown Executive: Aftermarket sales and service accounted for the remaining, segment's capital equipment sales increased in the mid-single digit, roughly 10% when normalized for the divestiture of our pull product. Aftermarket Revenue Improved in the Upper Single Digit. Most of our aftermarket revenue comes from our large installed base of drilling rigs. Intervention Stimulus' rig equipment business saw a high teens percent for Market Revenue, Euro, led by Hire Spare Unknown Speaker 00.

Jose Bayardo: Our rig equipment business saw a high teens percent increase in its aftermarket revenue year over year, led by higher spare parts sales and the significant increase in projects to reactivate, recertify, and upgrade offshore rigs. As offshore rigs have gone back to work and idle rigs that could have been cannibalized for parts have diminished, excess inventories of spare parts have been depleted by our customers, and their fleets of active rigs are now providing steady demand for spare parts, recertifications, and special purpose survey work, which are typically done once every five years. And as the global fleet ages, recertifications are requiring more ports and services, leading to strong aftermarket demand for NOV at the leading OEM in the space.

Unknown Executive: I'm going to start with the N. D. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. S. N. As offshore rigs have gone back to work, and idle rigs that could have been cannibalized for parts have diminished. Access Inventories of Spare Parts have been depleted by our, Unknown Executive, Arun Jayaram, Blake McCarthy, Amie D'Ambrosio, National Oilwell Varco Inc., typically done once.

Unknown Executive: And as the global fleet ages, recertifications are requiring more ports, leading to strong aftermarket demand for NOV. In addition to traditional aftermarket spares and service, we're building a steady stream of recurring revenues. Production Services that includes support from our 24-7 remote, currently monitoring 244 off, regular updates, and support from our novice multi machine control and process automation, currently have 125 systems, 26 being installed and another 63 in, and support for our recently introduced Rapid Adoption. Including new orders for another, Intervention and Stimulation Equipment Units Aftermarket were down in the low teens year-over-year.

Jose Bayardo: In addition to traditional aftermarket spares and service, we're building a steady stream of recurring revenues from subscription services that include support from our 24-7 remote support center, which is currently monitoring 244 offshore rigs, regular updates and support from our NOVOS multi-machine control and process automation systems where we currently have 125 systems deployed, 26 being installed, and another 63 in our backlog. And support for our recently introduced robotic systems that have seen rapid adoption during the second quarter, including new orders for another 10 systems from eight different drilling contractors. Our intervention and stimulation equipment units aftermarket revenues were down in the low teens year over year due to declines in North American activity.

Unknown Executive: Due to declines in North America, While we may not have quite reached the bottom in demand for aftermarket parts and services in North America, moving into capital equipment. As we mentioned in our last call, we had a significant order slip from Q1, which contributed to a very strong level of orders and a book-to-bill of $190,000. The book bill for the first half of 2024 was $120,000, orders for large pieces of capital. Transcribed by https://otter.ai; We're hearing from them that we can expect bookings to remain.

Jose Bayardo: While we may not have quite reached the bottom in demand for aftermarket parts and services in the North American completions market, demand from international markets continues to improve and should begin to more than offset sluggish demand in North America. Moving to the capital equipment side of the business, as we mentioned in our last call, we had a significant order slip from Q1 and Q2, which contributed to a very strong level of orders and a book-to-bill of 177 percent during the second quarter. Book to bill for the first half of 2024 was 129 percent. Orders for large pieces of capital equipment are inherently lumpy, so we don't get too excited about bookings in any individual quarter, but instead focus on what our customers are telling us related to their upcoming needs.

Jose Bayardo: And what we're hearing from them suggests that we can expect bookings to remain solid in the second half of the year. During the second quarter, we posted a significant year-over-year improvement in sales of drilling equipment. Land deliveries increased on improved progress on Saudi new builds and a sizable increase in top drive and iron rough neck deliveries. Offshore capital sales growth has been driven by pull through from rig reactivations and a general uptick and automation upgrades. Offshore activity remains strong, and we expect continued reactivations and recertifications from the aging fleet to drive upgrades that will require meaningful capital equipment orders.

Unknown Executive: During the second quarter, posted a significant year over year improvement in sales. Land deliveries increased on improved progress on Saudi new builds and a sizable increase in top drive, offshore capital sales growth has been driven by pull through from rig reactivations and a general The offshore activity remains strong and we expect continued reactivations and recertifications from the aging fleet to drive upgrades that will require meaningful, Revenue for Marine Construction Business Higher Revenues from Cableway Vessels and Electric Cranes Not Quite, orders were solid for offshore wind and, We booked a repeat order for our NG-20,000 WTIV design and jacking system for Europe's largest...

Jose Bayardo: Revenue for marine construction business posted a flight decline compared to the second quarter of 2023, with higher revenues from cable A vessels and electric cranes, not quite offsetting lower revenues from wind turbine installation vessels. Orders were solid for offshore wind and Construction Business, and we booked a repeat order for our NG-2000 WTIV design and jacking system for Europe's largest installation vessel owner in the offshore wind space. Despite delayed FIDs and inflationary impact on developers' projects, the outlook for orders of WTIVs, CableA vessels, and heavy lift equipment for FPSOs and offshore construction vessels remains promising, with the possibility of one to two more vessels in the second half of the year.

Unknown Executive: Despite delayed FIDs and inflationary impacts, the outlook for orders of WTIVs, cable lay vessels, and heavy lift equipment for FPSOs and offshore construction vessels remains promising. Capital Equipment Sales by our Intervention and Stimulation Equipment business improved almost 10% compared to the second quarter.

Jose Bayardo: Capital equipment sales by our intervention, stimulation equipment, and business improved almost 10% compared to the second quarter of 2023. Solid execution from the business units, growing backlog of waterline equipment, and higher shipments of coil tubing equipment more than offset only slightly lower shipments of pressure pumping equipment. Despite soft demand from North America, the business posted its fourth straight quarter with a book to build better than one on continued strength and demand for waterline and coil tubing equipment from international markets. Our process systems operation achieved a low single-digit revenue increase year-over-year, resulting from the strong execution on a large processing module for the North Sea.

Unknown Executive: Solid Execution from the Business Unit's Growing Backlog of Wirelines. Transcribed by https://otter.ai, Despite soft demand from North America, the business posted its fourth straight quarter with a book-to-bill better-than-one on continues. The Process Systems Operation achieved a low single-digit revenue increase year-over-year resulting from the strong... Processing Model.

Jose Bayardo: We expect a modest step down revenues from this operation in the third quarter, but longer term outlook for this operation is bright, and we're seeing growing demand for new mono-ethylene glyclogues units, which are sizeable higher margin FPSOs modules where our process systems team provides unmatched capabilities and experience. Our production and midstream business saw a mid-teens percentage improvement in revenue compared to the second quarter of 2023, with a large increase in shipments of production chokes in the Middle East outweighing softer demand for chokes and pumps in North America. Lastly, our subsea flexible pipe business unit continued to capitalize on robust demand for subsea flexible pipe.

Unknown Executive: We expect a modest step down in revenues from this operation in the third quarter, but longer-term, the outlook for this operation... growing demand for new monoethylene glycol and sizable higher margin FPSO modules where our process systems team provides unmanaged. Production, Midstream Business saw a mid-teens percentage improvement, a large increase in shipments of production chokes in the Middle East outweighing soft, Lastly, our subsea flexible pipe business unit continued to capitalize on robust demand, and it has increased its backlog by more than 80%. Much Improved Mortgage.

Jose Bayardo: The business has increased its backlog by more than 80% over the last year, achieving an all-time high and providing a clear path to significant top line growth with much improved margin.

Jose Bayardo: This is the beginning of 2020-25. Awareness of limited remaining industry production capacity is driving operators to place orders further in advance, creating a positive outlook for additional orders, some of which are now for delivery stretching into 2027.

Unknown Executive: Awareness of limited remaining industry production capacity is driving for their positive Out, some of which are now for delivery. For the third quarter, we expect revenues for energy equipment, eBitDA, between $140 and $160 million.

Jose Bayardo: For the third quarter, we expect revenues for our energy equipment segment to be flat to up a couple percent compared to the third quarter of 2023, with EBITDA between 140 and 160 million.

Unknown Executive: With that, we'll now open the call to questions. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by when we compile the Q&A roster.

Operator: With that, we'll now. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Unknown Executive: Please stand by while we compile the Q&A raw. Our first question comes from the line of Jim Rollyson from Raymond James. Hey, good morning, Clay and Jose. Morning, Dan.

James Rollyson: Our first question comes from the line of Jim Rollison from Raymond James. Hey, good morning, Clay and Jose. Good morning, Jim. Obviously, pretty solid results and fantastic bookings, which I guess we kind of expected some benefit from the slippage. But Clay, maybe you replaced kind of more than 20% of your backlog in a quarter from new bookings. And obviously we've been on this trajectory through conversation and results of margins embedded in backlog actions getting better. And if I did the math correctly, you gave 3Q guidance, and if you kind of back into 4Q from the annual guidance, your EBITDA margins are moving into the 14 plus percent range in 4Q.

Clay C. Williams: So, obviously, pretty solid results and a fantastic book. I guess we kind of expected some benefit from the slippage, but Clay, maybe, you know, you replaced kind of more than 20% of your backlog in a quarter from new bookings. And obviously, we've been on this trajectory through conversation and results of margins embedded in backlogs. Transcription by https://otter.ai Yeah, and as we've discussed before, Jim, at the bottom of the pandemic, we ended up with some frame agreements that weren't as inflation-protected as we'd hoped and had more difficult payment terms and the like, and during a pretty soft time.

Clay Williams: So just maybe some color around that margin trajectory in backlog and kind of how backlog pricing is even trending in real. Yeah, and as we've discussed before, Jim, at the bottom of the pandemic, we ended up with some frame agreements that weren't as inflation protectors we'd hoped and had more difficult payment terms and the like, and during a pretty soft time. And those are, we continue to, we continue to deliver on those, but they're becoming less and less of our revenue stream quarter by quarter, and we're bringing in new work as we get this quarter, that's at much better terms and margins.

Clay C. Williams: And those are continued to, we continue to deliver on those, but they're becoming less and less of our revenue stream quarter by quarter. And we're bringing in new work, as we did this quarter, that's at much better terms and margins. And so I'm very pleased to see that happen.

Clay Williams: And so, very pleased to see that happen. And as Jose said, as we get into 2025 in particular, there's a big one, a couple big ones that will dissipate and should help prompt additional margin expansion as we move through 2025 in a big way. So, yeah, we've been more broadly, we've been very focused on margins here. That $75 million cost out is certainly helping the improvement of our, and by the way, we have, we have more to come. We're not going to quantify that for you, but we've got a bunch of new leaders here coming out of our reorganization, and they're looking at new ways to improve margins, very focused on locations that are underperforming, actually with respect to the return on capital and for which margin is kind of a proxy.

Clay C. Williams: And as Jose said, you know, as we get into 2025, in particular, there's a big one, a couple of big ones that will dissipate and should help prompt additional margin expansion as we move through 2025 in a big way. So yeah, we've been, more broadly, we've been very focused on margins here, and that $75 million cost out is certainly helping. The improvement of our, and by the way, we have, we have more to come. We're not going to quantify that for you.

Clay C. Williams: But we've got a bunch of new leaders here coming out of our reorganization, and they're looking at new ways to improve margins, very focused on locations that are underperforming, actually, with respect to return on capital, and for which margin is kind of a proxy. But I think that will help drive better margins in the future. So, so yeah, our outlook is pretty, is pretty strong. With respect to the exit margins in Q4, yeah, I think right around that 14% range is kind of what we're looking at this point.

Clay Williams: But I think that will help drive better margins in the future. So, yeah, our outlook is pretty, is pretty strong with respect to the exit margins in Q4. Yeah, I think right around that 14% range is kind of what we're going to at this point. And so, an expectation is that, you know, set aside the seasonality Q4s usually are best for respect to margin that the company should see upward trend on margins for the next few years, given us the strengths that we see in offshore and international.

Clay C. Williams: And so, the expectation is that, you know, set aside the seasonality, Q4 is usually our best quarter with respect to margin, and the company should see an upward trend on margins for the next few years, given the strengths that we see in offshore and international. Got it, that's helpful.

Unknown Executive: Got it, that's helpful.

Clay C. Williams: And then kind of an interesting question that you prompted me with the slides just on the FPSO side. So if you believe some of the forecasts like RISDAT has almost 50 incremental FPSOs in the next five years, and you're talking about a revenue opportunity of between 100 million and 700 million per FPSO, depending on, Transcribed by https://otter.ai. Well, yeah, you know, each one of these is a competitive bidding situation.

Clay Williams: And then kind of an interesting question that, that, what you prompted me with the slides, just on the FPSO side. So, if you believe some of the forecasts, like right, that has almost 50 incremental FPSOs in the next five years, and you're talking about revenue opportunity of between 100 million and 700 million per FPSO depending on, you know, the size, scale, how far offshore, et cetera. But curious what your typical win rate is, and, you know, those are pretty potentially pretty big numbers just in one small segment of what you do. So, just curious, your view on that.

Clay C. Williams: But we usually come into those with a really strong portfolio of technology. The biggest portions of that are around process systems, our gas dehydration, and seawater treatment processes, a lot of experience with a global leader in that area, and modules that go into FPSOs to handle those fluids. We sell a lot of composite piping systems into those FPSOs for seawater, fire suppression systems, and ballast systems, and we have a really strong market position with that.

Clay Williams: Well, yeah, you know, each one of these is a competitive bidding situation. But we usually come into those with a really strong portfolio of technology. The biggest portions of that are around process systems, our gas dehydration, sea water treatment, processes. A lot of experience with the global leader in that area and modules that go into FPSOs to handle those fluids. We sell a lot of composite piping systems into those FPSOs for sea water, fire suppression systems for ballast systems, and have a really strong market position with that. And that's in addition to cranes, to turret mooring systems, to offloading systems. And then another very, very big piece of that is our position in subsea flexible pipe.

Clay C. Williams: And that's in addition to cranes, to turret mooring systems, to offloading systems. And then another very, very big piece of that is our position in subsea flexible pipe. And that company has a very strong reputation there.

Clay Williams: And that's coming as a very strong reputation there. So, it's several very strong business franchises that sell into that trend. And what I would tell you, though, is also, too, with respect to our participation at FPSOs, is that our wins on purchase orders is a little later than others out there in the space. In that, it's more sort of product driven. And so, a lot of times, we won't necessarily land purchase orders related to FPSOs until six months, 12 months, 18 months after FID, for instance. But what our customers are seeing now, in particular in the flexible pipe space, is very high utilization of manufacturing plants, not just ours, but others around the world as well.

Clay C. Williams: So there are several very strong business franchises that sell into that trend. And what I would tell you, though, with respect to our participation in FPSOs, our wins on purchase orders are a little later than others out there in the space in that it's more sort of product driven. And so a lot of times, we won't necessarily land purchase orders related to FPSOs until six months, 12 months, 18 months after FID, for instance.

Clay Williams: And so, that's becoming an earlier item. They're going to have to think through in their developed project planning a little bit earlier in the process.

Unknown Executive: Excellent.

Unknown Executive: Appreciate it.

James West: I'll throw it back.

Clay Williams: See you back.

Clay C. Williams: But what our customers are seeing now, particularly in the flexible pipe space, is very high utilization of manufacturing plants, not just ours but others around the world as well. And so that's becoming an earlier item they're going to have to think through in their development project planning. A little bit earlier in the process. So I appreciate it. I'll turn it back. See you, Beth.

Jose Bayardo: Thanks, Jim.

Unknown Executive: Thank you.

Marc Bianchi: Our next question comes from the line of James West from Evercore. Hey, good morning, Clay. Jose, good morning. So guys, I had a question on land rigs, both domestic, the US land rigs, and then the fleet that's been re-tooled and built for the international markets. So I'm hearing a bit about, there's some upgrades here and there in the US. You know, some of your software, of course, but there's equipment upgrades and some changes to the rigs. And of course, there's a total re-tool into the fleet. International, I wondered if you could. I know it's a pretty broad question, but if you could maybe bucket kind of what are the leading kind of upgrades or changes or equipment asks on these kinds of new either upgraded rigs or the new rigs.

Operator: Thank you. Our next question comes from the line of James West from Evercore. Hey, good morning, Clay, Jose.

Unknown Executive: [inaudible] guys, I had a question about land rigs, both domestic US land rigs and the fleet that's being retooled and built for the international market. So I'm hearing a bit about, there are some upgrades here and there in the US, you know, some of that is your software, of course, but there are equipment upgrades and some changes to the rigs. And of course, there's a total retooling of the fleet. Internationally, I wondered if you could, I know it's a pretty broad question, but if you could maybe bucket kind of what are the leading kind of upgrades or changes or equipment requests on these these kind of new either upgraded rigs or new rigs?

Clay Williams: Well, it's a great question, James. As you know, the appetite to spend a lot of capital is pretty limited by North American land growers and access to capital cost capital. That's a factor in their level of appetite for new technologies. And we sort of, you know, recognize this several years ago. So our development focus around new technologies focused on land drilling have been around bite-sized ways to sort of achieve a rig of the future type performance level with a reasonable sticker cost. Did that make sense? And we also recognize that digital technologies were going to be a big part of that.

Clay C. Williams: Well, it's a great question, James. As you know, the appetite to spend a lot of capital is pretty limited by North American land drillers, and, you know, access to capital costs capital. And that's a factor in their level of appetite for new technologies. And we sort of, you know, recognized this several years ago. So our development focus around new technologies focused on land drilling has been around bite-sized ways to sort of achieve a rig of the future performance level with a reasonable sticker cost, if that makes sense.

Clay C. Williams: And we also recognize that digital technologies are going to be a big part of that. And so that's why we introduced our Novos operating system to support our rigs, which really opens up their operations to a lot of applications, some developed by NOV, some developed by others, in a way that can really drive efficiency.

Clay Williams: And so that's why we introduced our Novo's operating system to support our rigs, which really opens up their operations to a lot of applications, some developed by NFV, some developed by others in a way that can really drive efficiencies. So I've been seeing a really good uptake on Novo's. I think Jose quoted some really good numbers in a prepared remarks earlier about about install base and and what's interesting about that. James is that that that provides the digital foundation for automation. So the other thing we've done is develop a very cost effective way to bring robots to the rig floor and to the racking board and to really create truly a hands-free environment.

Clay C. Williams: So I've been seeing a really good uptake on Novos. I think Jose quoted some really good numbers in the prepared remarks earlier about the installed base. And what's interesting about that, James, is that that provides the digital foundation for automation. So the other thing we've done is developed a very cost-effective way to bring robots to the rig floor and to the racking board and to really create a truly hands-free environment.

Clay Williams: And a lot of bud in the industry around that capability. And I would add not just amongst drilling contractors who are excited about it, because it helps them manage their workforce and creates higher levels of efficiency, but also amongst operators. And that's really what we're behind the scenes, what we're really seeing drive demand for this. So there's a couple of major IOCs out there that have latched onto this technology and are talking to their drilling contractors about putting it to work. And that's both land and offshore to go with that. And so excited about that.

Clay C. Williams: There is a lot of buzz in the industry around that capability, and I would add not just amongst drilling contractors who are excited about it because it helps them manage their workforce and creates, you know, higher levels of efficiency, but also amongst operators. And that's really what we're behind the scenes, what we're really seeing drive demand for this. So there are a couple of major IOCs out there that have latched onto this technology and are talking to their drilling contractors about putting it to work. And that's both land and offshore, I would add. And I am so excited about that. That's it.

Clay C. Williams: So that's, I think, kind of shaping what we see in North America around demand for technologies to improve drilling. If you go overseas, as I said in my prepared remarks, you know, it's interesting, the big rebuild of North America's rig fleet that happened to move to AC technologies, quick move, fit for purpose, higher setback, higher mud pressure type rebuild. That never really happened in most international locations.

Clay Williams: And so that's, I think, kind of shaping what we see in North America around demand for technologies to improve drilling.

Clay Williams: And if you go overseas, as I said, my prepared remarks, you know, it's interesting, the big rebuild of North American rig fleet that happened to move to AC technologies, quick move fit for purpose, higher setback, higher mud pressure type rebuild that never really happened in most international locations. And so what we're seeing now is, you know, see an operator preference for AC power groups and these technologies that I mentioned, and that's driving for demand for those, those kinds of rigs in those marketplaces, most notably around the Middle East, but also interest in Latin America and a few other places.

Clay C. Williams: And so what we're seeing now is NOC and operator preference for AC-powered rigs, some of these technologies that I mentioned, and that's driving demand for those kinds of rigs in those marketplaces, most notably around the Middle East, but also interest in Latin America, and a few other places. Okay. That's very helpful. And then maybe a follow-up on the Keystone acquisition. We've obviously been watching your interests and the growth of that business, but it seems like you're hitting kind of a real clear milestone here. And that, of course, led to fully rolling the business out. I'm curious, who are you replacing? What's the competition? Who are the incumbents?

Unknown Executive: Okay, got it. That's very helpful.

James West: And then maybe a follow-up on the keystone acquisition. We've obviously been watching your interests and your and the growth of that business, but it seems like you're hitting kind of a real clear milestone here, and that of course led to the fully rolling the business. And I'm curious who you're replacing and what's the competition, who are the incumbents, and is there any technology like yours, like discipline technology in the market? Yeah, great, great question, James. And so obviously there's an instill based of incumbents that have provided traditional windtowers both land and offshore markets. And it's a slow, heavy fabrication process that's typically used.

Clay C. Williams: And is there any technology like yours, like this spooling technology, in the market? Yeah, great, great question, James. And so, yeah, obviously, there's an instilled base of incumbents that have provided traditional wind towers for both land and offshore markets. And, you know, it's a slow, heavy fabrication process that's typically used. Design is not optimal, in terms of what they're delivering to the marketplace.

Clay Williams: Design is not optimal in terms of what they're delivering into the marketplace. And so what you've known us for a long time and our mission and life is to increase the efficiencies associated with the production of energy around the world. And we saw that there are better ways to do things in the renewable space, and the renewable space was clearly in need of a lot of time and attention in terms of driving improved economics. Obviously, before us, the industry had done a great job bringing down costs through more standardized manufacturing processes and getting towers taller and going to bigger turbines.

Clay C. Williams: And so, you know, you've known us for a long time. And, you know, our mission in life is to increase the efficiency associated with the production of energy around the world. We saw that there are better ways to do things in the renewable space, and the renewable space was clearly in need of a lot of time and attention in terms of driving improved economics. Obviously, before us, the industry had done a great job, bringing down costs through more standardized manufacturing processes and, you know, getting towers taller and going to bigger turbines. But they were kind of hitting a wall.

Clay C. Williams: And, you know, brilliant scientists and engineers put their hands on their hats and try to identify ways to further drive the improved improvement in economics. And while we were working on our own solutions, we came across this really smart group of individuals that had designed this technology, the spiral weld technology, that not only allows you to manufacture wind turbine towers at a faster rate but also uses less steel, so lower cost and faster production.

Clay Williams: But they were kind of hitting a wall, and brilliant scientists and engineers put their hands on, hats on, and tried to identify ways to further drive the improvement in economics. And while we were working on our own solutions, we came across this really smart group of individuals that had designed this technology, the spiral weld technology, that not only allows you to manufacture wind turbine towers at a faster rate, but also using less steel, so lower cost, faster production. And what we really got excited about was the longer term potential of building these plants in fields where you could more optimally design these tower sections.

Clay C. Williams: And what we really got excited about was the longer-term potential of building these plants in fields, where you could more optimally design these tower sections. So, you know, traditional wind towers that are built right now to overcome the logistics of getting up and down the highway, even for the tower heights they're building today, the bottom portion of the tower is using much thicker steel than you should. Ideally, you'd have a wider base with thinner steel. It would be much more efficient.

Clay Williams: So, you know, traditional wind tower that's built right now to overcome the logistics of getting up and down the highway, even for the tower heights they're building today. The bottom portion of the tower is using much thicker steel than you should. Ideally, you'd have a wider base with thinner steel; would be much more efficient. Plus, you could go to much taller heights. If you build the tower sections in the field and assemble in the field, you can overcome that issue, have an optimally designed tower and go to much higher heights and utilize bigger turbines, bigger blades, drive much better economics.

Clay C. Williams: Plus, you could go to much taller heights. If you build the tower sections in the field and assemble them in the field, you can overcome that issue, have an optimally designed tower and go to much higher heights and utilize bigger turbines, bigger blades, and drive much better economics.

Clay C. Williams: So, obviously, our first foray here was to prove out the technology, which we did. We sold commercial sections out of our plant, our fixed plant in Tampa, Texas. We're working really hard to scale up those operations to begin making deliveries under this new contract in mid-2025. And then we'll see where the business takes us. But as I mentioned, we're really excited about those infield manufacturing plants that will come at some point in the future. Fascinating.

Clay Williams: So, obviously, our first foray here is to prove out the technology, which we've done. We have sold commercial sections out of our plant, our fixed plant, and pamphatexes. We'll work in really hard to scale up those operations to begin making deliveries under this new contract in mid 2025. And then we'll see where the business takes us, but as I mentioned, we're really excited about those infield manufacturing plants that will come at some point in the future. Thanks, guys. You bet, thanks, James. Thank you.

Arun Jayaram: Our next question comes from the line of Arun Jury Arun from JP Morgan.

Unknown Executive: Thanks, guys. You bet. Thanks, James. Thank you. Our next question comes from the line of Arun Jayaram from JP Morgan. Good morning, Clay. I wanted to get kind of a good morning.

Clay Williams: Good morning, Clay. I wanted to know if you could elaborate on some of the, you know, tailwinds from the organizational wide resegmentation. You talked about some new leaders. You've gone to two segments from three. And maybe just an update on where we're at with the 75 million cost out. And maybe you signal, maybe there's more to come on that front. Yeah, thanks, Arun. Yeah. So you know, I think it's about this time last year. We announced a cost out program of 75 million. That follows a couple of other larger ones that we'd execute prior that involved that resegmentation and reorganization.

Clay C. Williams: Clay is wondering if you could elaborate on some of the, you know, tailwinds from the organizational-wide re-segmentation, you talked about some new leaders, you've gone to two segments and three, and maybe just an update on where we're at with the 75 million cost out, and maybe you signaled maybe there's more to come on that front. Yeah, thanks, Arun. Yeah, so as you know, I think it was about this time last year, we announced a cost-out program of 75 million that follows a couple other larger ones that we'd executed prior.

Clay C. Williams: That involved that resegregation and reorganization; we ended up with a bunch of new business unit leaders here, and had some terrific, long-serving employees retire and leave us, but a lot of fresh faces and fresh perspectives and new eyes on opportunities. So we continue to execute that plan that was developed under the prior regime, if you will.

Clay Williams: We ended up with a bunch of new business unit leaders here and had some terrific long-serving employees retire and leave us. But a lot of fresh faces and fresh perspectives and new eyes on opportunities. So we continue to execute that plan that was developed into the prior regime, if you will. But now, as we're, you know, here we are in the middle of 2024, and they're coming up with additional opportunities. And so some specifics around that would include things like more centralized manufacturing organizations and some re-engineering opportunities on supply chain. Follow the ins from these new technologies like I talked about in the prepare of remarks, utilizing AI to monitor our machine tools, for instance.

Clay C. Williams: But now, you know, here, we're in the middle of 2024, and they're coming up with additional opportunities. And so some specifics around that would include things like more centralized manufacturing organizations and some reengineering opportunities in the supply chain, folding in some of these new technologies, like I talked about in the prepared remarks, utilizing AI to monitor our machine tools, for instance.

Clay Williams: But then it also involves a process that we're going through with these new leaders to take a fresh look at all of our locations and operations around the world and analyze these from a return on capital standpoint. And so I think they'll be continued rationalization. And so that's underway. It'll continue a while. And, as you know, probably better than most, we've been doing a lot of rationalization and a lot of cost reductions here for really the past decade. And so, you know, a lot of the easy things have been done. These are all hard degree difficulty type things.

Clay C. Williams: But then there's a process that we're going through with these new leaders to take a fresh look at all of our locations and operations around the world and analyze them from a return on capital standpoint. And so I think there'll be continued rationalization. And so that's underway. It'll continue for a while. And as you know, probably better than most, we've been doing a lot of rationalization and a lot of cost reductions here for really the past decade. And so, you know, a lot of the easy things have been done; these are all higher-difficulty type things.

Clay C. Williams: But I think we're going to continue to get better and more efficient, and that's going to, as I said, be a bit of a tailwind on margins going forward.

Clay Williams: But I think we're going to continue to get better and more efficient. That's going to, as I said, be a bit of a tailwind on margins going forward.

Clay C. Williams: My follow-up is, I'm wondering, Clay, if you could comment on what you're seeing in terms of the rig reactivations and recertifications kind of process, and maybe you could touch on the potential impact to NOV from some of the offshore rig consolidation activity we've seen more recently. Yeah, um, yeah, we saw a pretty good ramp on rig reactivations from 2022 into 2023. It continues to grow, and it's a combination of bringing in our engineers to survey the rigs, figure out what they need to do the special purpose survey work that's required, typically, every five years for those rigs.

Clay Williams: Great.

Clay Williams: My follow-up is I want to clarify if you could come in on what you're seeing in terms of the rig reactivations, recertifications kind of process. And maybe you could touch on the potential impact to NOV from some of the offshore rig consolidation activity we've seen more recently. Yeah, we saw a pretty good ramp on rig reactivations from 2022 into 2023. It continues to grow. And it's a combination of bringing in our engineers to survey the rigs, figure out what they need to do the special purpose survey work that's required, typically every five years for those rigs.

Clay C. Williams: And, and in many cases, to replace equipment, to upgrade equipment. So it's kind of an opportunity. Those rigs go into a shipyard to get everything done that they need to get done. And they're suffering kind of the opportunity cost of not drilling during that time.

Clay Williams: And in many cases, to replace equipment to upgrade equipment. So it's kind of an opportunity; those rigs go into a shipyard to get everything done that they need to get done. And they're suffering kind of the opportunity cost of not really entering that time. And so that's been a good tailwind to our business. What we're seeing in that process is that the industry is very rational. And so the first rigs to go back to work are the cheapest and easiest to reactivate that will do the job. And as the industry looks to put more and more rigs back to work, the cost per rig is going up.

Clay C. Williams: And so, um, that's been a good tailwind for our business. What we're seeing, um, in that process is that the industry is very rational, and so the first rigs to go back to work are the cheapest and easiest to reactivate that will do the job.

Clay Williams: And so we certainly benefited from that, and we continue to. What I would tell you is, despite the fact that we're very busy, there's a lot of, I think we're 30-something rigs in shipyards now that are getting reactivated. There's still a lot that could be. And so there are, I think, seven floaters out there that were being constructed, and the construction operations were suspended in the downturn through the past decade, plus another 25 or cold stack. And then, oh, sorry, 14 floaters. And then seven jackups that were being constructed that were suspended, in another 39 that were cold stack.

Clay C. Williams: And as the industry, um, uh, looks to put more and more rigs back to work, the cost per rig is going up, and so we certainly benefit from that. We, and we continue to, um, what I would tell you is, despite the fact that we're very busy, there's a lot of, I think we're 30 something rigs in shipyards now that are getting reactivated. There's still a lot that could be.

Clay C. Williams: And so there are, I think, seven floaters out there that were being constructed, and the construction operations were suspended in the downturn through the past decade, plus another 25 that are cold stack. And then, um, uh, oh, sorry, 14 floaters.

Clay Williams: Those are all potentially rigs that could be reactivated that we could benefit from. Now, to be completely candid, probably lots of those. It's not cost-effective to reactivate them. Parties needing a rig might look at that new bill at some point along the way, but there's still opportunity for that to grow, and we're delighted to be helping our customers make that happen. With respect to the consolidation and the offshore, you know, we know all parties and all parties have, have NOV equipment and I don't, I don't think our ownership of that equipment is going to drive the needle one direction or the other, quite frankly.

Clay C. Williams: And then seven jackups that were being constructed that were suspended and another 39 that were cold stacks. Those are all potentially rigs that could be reactivated that we could benefit from. Now to be completely candid, probably lots of those, it's not cost effective to reactivate them. Parties needing a rig might look at a new build at some point along the way, but there's still opportunity for that to grow. And we're delighted to be helping our customers make that happen with respect to consolidation and the offshore.

Clay C. Williams: Um, you know, we, we, we know, um, all parties and all parties have, uh, have NOV equipment, and I, I don't, I'm not, I don't think ownership of that equipment is going to drive the need for one direction or the other. Quite frankly, we've got great relationships, um, and strong relationships with our very near and dear friends in the offshore drilling space and look forward to continuing to support their operations and drive better efficiency through their operations. [inaudible] You bet. Thanks, everyone.

Clay Williams: We've got great relationships and strong relationships with our very near and dear friends in the offshore drilling space and look forward to continuing to support their operations and drive better efficiency through their operations. You bet.

Arun Jayaram: Thanks, Arun.

Unknown Executive: Thank you. Our next question comes from the line of Marc Bianchi from TD Cowan. Hey, thanks. I'd like to start by following up on A.J.'s question there about the aftermarket services. One of the things that I think has been a thanks. I think one of the things that's been a big benefit over the past couple of years is the special survey work, which I think, if we sort of map out when these rigs were delivered, would suggest maybe there's a challenging comp when you get to 2025. Can you talk about that a little bit? Is there a slug of revenue that goes away in 2025, and we could see maybe the aftermarket service have a little bit of a headwind related to that?

Operator: Thank you. Our next question comes from the line of Marc Bianchi from TD Cowen. Hey, thanks.

Unknown Executive: I'd like to start by following up on AJ's question there about the aftermarket services. One of the things that I think has been a, Thanks. I think one of the things that's been a big benefit over the past couple years is the special survey work, which I think if we sort of map out when these rigs were delivered would suggest maybe there's a challenging comp when you get to 2025. Can you talk about that a little bit?

Unknown Executive: Like, is there a slug of revenue that goes away in 2025? And we could see maybe, you know, the aftermarket service have a little bit of a headwind related to that? With respect to the special purpose survey portion of that, Marc, we don't really see it. And the reason for that is that there have been sort of multiple generations of offshore rigs delivered. You know, there were a lot of kind of coming out of the super cycle, let's say 2008, 2009, 2010, a round of deliveries, and then again in 2011, 2012, 2013.

Marc Bianchi: I would respect to the the special purpose survey portion of that, Marc. We don't, we don't really see it, and the reason for that is there've been sort of multiple generations of offshore rigs delivered. You know, there were a lot of kind of a in the coming out of the supercyclists. 2008, 2009, 2010 around the deliveries and then again in 2011, 2012, 2013. And then you know when the music stopped, let's say at the end of 2014, a lot of construction projects underway around the world and rigs continued to be delivered, and those have kind of been spread out over time.

Unknown Executive: And then, you know, when the music stopped, let's say at the end of 2014, a lot of construction projects were underway around the world, and rigs continued to be delivered, and those have kind of been spread out over time. But also, too, these rigs have to come in every five years. And what I would tell you is the 10-year SPS for a rig typically is a bigger ticket item than the five-year SPS, and the 15-year SPS is typically a bigger ticket item than the 10-year SPS.

Clay Williams: But also, these rigs have to come in every five years, and what I would tell you is the 10-year SPS for a rig typically is a bigger ticket item than the five-year SPS. And the 15-year SPS is typically a bigger ticket than the 10-year SPS, if that makes sense. And so that sort of diversity of what's called birthdays plus the fact that some rigs have been interrupted from COVID and other downturns in the industry, let's say, plus the fact that not all SPSs are kind of equal opportunity for you know the kind of levels that out more.

Unknown Executive: I don't know if that makes sense. And so that sort of diversity of, you know, let's call them birthdays, plus the fact that some rigs have been interrupted from COVID and other, you know, downturns in the industry, let's say, plus the fact that not all SPSs are kind of equal opportunity for NOV levels that out more. The key driver for us is the fact that the offshore fleet is broadly going back to work, and the offshore fleet has already cannibalized everything they can cannibalize.

Clay Williams: The key driver for us is the fact that the offshore fleet broadly is going back to work, and the offshore fleet broadly has already cannibalized everything and cannibalized. And so a healthier level of activity and not having to compete with an overhang of excess supply of spare parts and equipment that can be repurposed is the main driver for inner these business. Does that make sense?

Unknown Executive: And so a healthier level of activity and not having to compete with an overhang of excess supply of spare parts and equipment that can be repurposed is the main driver for NOV's business. Does that make sense? Yes, it makes perfect sense.

Marc Bianchi: No, it makes perfect sense, and I hope that my birthday parties that I'm paying for over the next few years don't go up and up and up, but we'll see. No, I was referring to my kids.

Unknown Executive: And I hope that my birthday parties that I'm paying for over the next few years don't go up and up and up. But we'll see. No, I was referring to those referring to my kids.

Unknown Executive: In terms of the order outlook here, so for, I think I heard you say, Clay, in your prepared remarks, you'd expect greater than one book to bill in the second half. And I just want to make sure that that was what I caught.

Clay Williams: In terms of the order outlook here so for I think I heard you say plain you're in reprepared remarks you'd expect greater than one book to bill in the second half and I just want to make sure that that was that was what I caught or were you referring to just a portion of the orders. Okay, and then I think Jose mentioned a couple of wind insulation vessels that are kind of in the pipeline and could be awarded. Do you need those to convert to get to the greater than one book to bill, or do you think you can get there without those one off?

Unknown Executive: Or were you referring to just a portion of the orders? Okay. And then, I think, Jose, you mentioned a couple of wind insulation vessels that are kind of in the pipeline and could be awarded. Do you need those to convert to get to the greater than one book to bill?

Clay Williams: Well, they would help. There are paths to get there without that support. As we always do, and you're well aware of this mark, these things are big and lumpy. And that's part of the reason we're hesitant to give a lot of order guidance, but I would tell you there's multiple ways to get to look to build north of one. And as we always see in any quarter, six-month period, we land certain orders and we miss certain orders. But the general feel we're getting from our operations people is the outlook is pretty good for the next couple of quarters on demand.

Unknown Executive: Or do you think you can get there without those one-offs? Well, they would help. There are paths to get there without that support, as we always do. And you're well aware of this, Marc. You know, these things are big and lumpy. And, and so, and that's part of the reason we're hesitant to get a lot of order guidance. But I would tell you, there are multiple ways to get to book the bill north of one.

Unknown Executive: And, and as we always see in any quarter, six-month period, you know, we land certain orders, and we miss certain orders. And so, but the general feel we're getting from our operations people is the outlook is pretty good for the next couple of quarters on demand. And then, you know, longer term, our view on offshore drilling is very constructive, and international drilling is very constructive. And so that'll, that'll be the driver for future orders. Yep, that's super. Thank you very much.

Clay Williams: And then, longer term, our view on offshore is very constructive and international is very constructive. And so that will that will be the driver for the future orders. Yep, super. Thank you very much. I'll turn it back. Thanks more. Thank you.

Unknown Executive: I'll turn it back. You bet. Thanks, Marc. Thank you. Our next question comes from the line of Luke Lemoine from Piper Sandler. [inaudible] Good morning, Luke.

Luke Lemoine: Our next question comes from the line of Luke Lemoine from Piper Sandler. Clay. Morning, Luke. We're having a hard time here. Oh, there you are. Good. Go ahead. Yeah. You had good orders here in, in two queue, and energy equipment. And you talked about book-to-bill being above, you know, one x in the second half of the year. And I know it's kind of early days, but just kind of a broader, you know, being, you know, might be difficult to do without quantifying. But could you just help us kind of frame how you see 2025 shaking out and you're brought out.

Operator: We're having a hard time hearing. Oh, there you are. Good. Okay, go ahead.

Unknown Executive: Yeah, you had good orders here and in 2Q and for energy equipment. And you talked about book to bill being above, you know, 1x and the second. And I know it's kind of early days, but just kind of a broader, you know. It might be difficult to do without quantifying.

Unknown Executive: Can you just help us kind of frame how you see 2025 shaking out in your broad outlook? Yeah, yeah, we're hesitant to quantify this beyond kind of thematically and directionally. We feel good that the international and offshore that the cycle in both areas is going to have some legs. NOV is going to be a critical participant in that. And so that's going to carry us into a much better year in 2025, better margins, you know, better demand. But to me, the wildcard is North America.

Clay Williams: Look, as I know. Yeah, we're hesitant to quantify this beyond kind of thematically and directionally. We feel good that international and offshore, that that cycle in both areas is going to have some legs. You know, he's going to be a critical participant in that. And so that's going to carry us into a much better year in 2025. Better margins, you know, better demand.

Jose Bayardo: To me, the wildcard is North America. And, you know, there's a lot of discussion out there about the potential impact of gas drilling, returning to North America, and higher LNG takeaway capacity that would help operators' economics a lot. And then the completion of integration activities between all of the EMTs that are merging, kind of getting back to work would help a lot. But that's, to me, that's the biggest wildcard that we see out there right now is North America. But I think on the whole, I think the combination of offshore and international winds and dominates in that help more than offset city, any continued pressure we see here in North America.

Clay C. Williams: And, you know, there's a lot of discussion out there about the potential impact of gas drilling, returning to North America, and higher LNG takeaway capacity that would help operators' economics a lot. And then the completion of integration activities between all of the EMPs that are merging and kind of getting back to work would help a lot. But to me, that's the biggest wildcard that we see out there right now is North America.

Clay C. Williams: But I think on the whole, I think the combination of offshore and international wins and dominance in that helps more than offset any continued pressure we see here in North America. I don't know if you have anything to add to that. No, maybe the only other thing I would add is absolutely agree with everything that Clay just said. North America is the real wildcard.

Jose Bayardo: I don't know if you get any needs to add to that. No, maybe the only other thing I would add is absolutely agree with everything that Clay just said. North America is the real wildcard. Things continue to look really good from an international offshore standpoint. Obviously, the backlog has been representative of that, but just add a little bit more on to North America. I think that has a big potential effect with a small increase in activity. We think can drive outsized demand for capital equipment in the North American marketplace. So hopefully we're near bottom in terms of overall activity.

Unknown Executive: Things continue to look really good from an international offshore standpoint, and obviously, the backlog has been representative of that. But just to add a little bit more to North America, I think that has a big potential effect; a small increase in activity, we think, can drive outsized demand for capital equipment in the North American marketplace. So hopefully, we're near a bottom in terms of overall activity. And we're not certainly not counting on a big uptick, but even a modest uptick into 25, we think will drive additional demand for capital equipment.

Jose Bayardo: And we're certainly not counting on a big uptick, but even a modest uptick into 25, we think we'll drive additional demand for capital equipment. So it sort of feels like there's a big overhang of completion equipment that's out there, but we would argue that things are tighter than they appear. We're still delivering new frack units. And really that's a result of how hard this equipment has been working out in the field, and really the real limited capacity that really exists just from an age and usability standpoint. So again, at these levels, we're not anticipating certainly the road bookings for North America for completion equipment, but a little pickup absorbing the capacity that's out there.

Unknown Executive: And so it sort of feels like there's a big overhang of completion equipment that's out there, but we would argue that things are tighter than they appear. We're still delivering new frack units. And really, that's a result of how hard this equipment has been working out in the field and really the real limited capacity that really exists just from an age and usability standpoint.

Unknown Executive: So again, at these levels, we're not anticipating heroic bookings for North America for completion equipment but a little pickup absorbing the capacity that's out there. And I think it will cause a lot of demand for new equipment as a lot of the tired stuff just needs to be replaced going forward. Okay.

Luke Lemoine: And I think we'll cause a lot of demand for new equipment as a lot of the tired stuff just needs to be replaced going forward. Okay, got it. Thanks so much. Thanks, Luke. Thank you.

Unknown Executive: Thanks. Thanks for listening. Thank you. Our next question comes from the line of Stephen Gengaro from Steve. Thanks. Good morning, everybody.

Stephen Gengaro: Our next question comes from the line of Stephen Gengaro from Steeple. Thanks. Good morning, everybody. So, two quick words from me. Just first on the cash flow side. Obviously, free cash flow was strong in the quarter.

Operator: All right, Stephen. So two quick ones for me, just first on the cash flow side, obviously free cash flow is strong in the quarter. Maybe for Jose, when we think about the rest of the year and you kind of think about the journey you've been on recently to get to this point, and the confidence level in free cash generation, how should we think about sort of just the key components of it over the next couple of quarters? And I imagine your confidence level is clearly increasing here on cash generation over the next couple of years. Yeah, absolutely, Stephen.

Jose Bayardo: Maybe for Jose, when we think about the rest of the year and you kind of think about the journey you've been on recently to get to this point and the confidence level and free cash generation, how should we think about sort of just the key components of it over the next couple of quarters and imagine your confidence levels clearly increasing here on cash generation over the next couple of years. Yeah, absolutely, Stephen. So, look, a couple of quarters ago, we started to have really strong conviction that we had turned the quarter and then for the next several years we would start throwing off really meaningful levels of free cash flow.

Jose A. Bayardo: So, you know, look, a couple of quarters ago, we started to have really strong conviction that we had turned the corner, and then for the next several years, we would start throwing off really meaningful levels of free cash flow. And that's obviously what we're able to demonstrate here in the second quarter and, to a smaller effect, frankly, back in Q4 last year. So we're in a great place. But just like orders, free cash flow can be lumpy as well, depending on the time of delivery and when we collect certain receivables when we hit specific milestone payments.

Jose Bayardo: And that's obviously what we're able to demonstrate here in the second quarter, into a smaller effect, frankly, back in Q4 last year. So, we're in a great place, but just like orders, free cash flow can be lumpy as well, depending on the timing of deliveries, on when we collect certain receivables, and when we hit specific milestone payments. And so, you know, the guidance is still the same as it has been, which is that we will convert at least 50% of our EBITDA to free cash flow during the year. I think we got a little bit of a pull forward into Q2.

Jose A. Bayardo: And so, you know, the guidance is still the same as it has been, which is that we will convert at least 50% of our EBITDA to free cash flow during the year. I think we got a little bit of a pull forward into Q2, so expect a decent step down into Q3.

Jose Bayardo: So, expect a decent step down into Q3 and then, as usual, another strong free cash flow in the fourth quarter. And as we go forward beyond 2024, as I've said before, don't see any reason why we shouldn't continue to generate free cash flow at a rate that's sort of equal to or better than that 50% of our EBITDA. So, feel really great about things. Obviously, we've been working on working capital. There's more opportunity on that front in terms of where the cash comes from, but also just obviously higher levels of profitability, drive more free cash even without a material movement in our working capital balances.

Jose A. Bayardo: And then, as usual, another strong free cash flow quarter in the fourth quarter. And as we go forward beyond 2024, as I've said before, I don't see any reason why we shouldn't continue to generate, you know, free cash flow at a rate that's sort of equal to or better than 50% of our EBITDA. So I feel really great about things.

Jose A. Bayardo: Obviously, we've been, you know, working on working capital; there's more opportunity on that front in terms of where the cash comes from. But also, obviously, higher levels of profitability drive more free cash, even without a material movement in our working capital balances. So things look really good from a free cash flow standpoint that will ultimately translate into what we return to our shareholders. Great. Now, that's very helpful.

Jose Bayardo: So, things look really good from a recast flow standpoint that will ultimately translate into what we return to our shareholders. Right. Now, that's very helpful.

Unknown Executive: And the other quick question, just from a macro perspective, you talked a little bit about North America land and, you know, the uncertainty next year. In your view, and you guys have looked at this for a long time, what do you think needs to happen? I mean, do you think it's just the M&A kind of pause that's creating some of the apprehension along with gas prices? Do you think there's anything else at work, which is kind of leading to maybe lower activity than at least we would have thought at this point in the year? That's a really good question.

Stephen Gengaro: And the other just quick question, just from a macro perspective, you talk a little bit about North America land and the uncertainty next year. In your view, and you guys have looked at this a long time, what do you think needs to happen? I mean, do you think it's just the M&A kind of pause that's creating some of the apprehension, along with gas prices? You think there's anything else at work, which is kind of leaning to maybe lower activity than at least we would have thought at this point of the year. That's a really good question.

Clay C. Williams: Certainly, certainly gas would help a lot. I think gas has taken a big toll. Even liquids producers, you know, have exposure to gas prices.

Clay Williams: Certainly, gas would help a lot. I think gas is taking a big toll. Even liquids producers have exposure to gas prices. And that's affected activity here. Beyond that, in terms of what kind of lights up the North American rig count again, now, I'm not sure I have a good guess as to what that might be, other than to just point out the fact that this is a very, very creative and entrepreneurial group of producers here in North America, and then they always seem to come up with something. and, you know, 20 years ago it looked like North America was continuing to drift down and had its best days when the rear view mirror and then all of a sudden you had the the shale revolution here.

Clay C. Williams: And, and that's affected activity here. Beyond that, in terms of what kind of lights up the North American rig count again, now, I'm not sure I have a good guess as to what that might be, other than to just point out the fact that this is a very, very creative and entrepreneurial group of producers here in North America. And man, they, they always seem to come up with something. And, you know, 20 years ago, it looked like North America was continuing to drift down and that its best days were in the rear view mirror.

Clay C. Williams: And then all of a sudden, you have the shale revolution here. I don't know what the next revolution looks like. But I can tell you there are an awful lot of smart people in the EMP community focused on making that happen. In terms of our, you know, what would help us a lot is that our customers here in North America have gotten really good at capital discipline and have really, you know, limited their expenditures on new technology.

Clay Williams: I don't know what the next revolution looks like, but I can tell you there's a lot of smart people in the EMP community focused on making that happen. And in terms of our, you know, what would help us a lot is, is our customers here in North America have gotten really good at capital discipline and have really, you know, limited their expenditures on new technology work. We're continuing to try to figure out what is, you know, what's next in that space. And as I mentioned earlier, I think, I think higher levels of automation in drilling, and there's some, there's some IOC, some major oil company senior leaders who share that vision.

Clay C. Williams: We're continuing to try to figure out what is it, you know, what's next in that space. And as I mentioned earlier, I think higher levels of automation in drilling, and there are some IOCs, some major oil company, senior leaders who share that vision. And so I'm pretty excited about the opportunity in front of us to help improve the automation and the digital tools that are used to optimize drilling across, you know, rigs all across the US and North America.

Clay Williams: And, and so I'm pretty excited about the opportunity in front of us to help lift the automation and the digital tools that are used to optimize drilling across, you know, the rigs all across the US and North America. And, and, you know, the, the drillers here, I'm sure they're going to do it again this quarter, talk about improving efficiency and continue to get better at what they do. And so we're, we're looking for opportunities to help support them do that.

Clay C. Williams: And, and, you know, the drillers here, I'm sure they're going to do it again this quarter's talk about improving efficiency and continuing to get better at what they do. And so we're looking for opportunities to help support them do that.

Unknown Executive: Excellent. Now, thanks for the color. Thank you.

Unknown Executive: Excellent. Thanks for the call. You bet.

Unknown Executive: Thank you, Stephen. Thank you. At this time, I would now like to turn the conference back over to Clay Williams for closing remarks. Thanks, QG. We appreciate everyone joining us this morning. And we look forward to sharing our third quarter results with you in October. I hope you have a great day. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Clay Williams: At this time, I would now like to turn the conference back over to Clay Williams for closing remarks. Thanks, QG. We appreciate everyone joining us this morning, and we look forward to sharing our third quarter results with you in October.

Unknown Executive: I hope you have a great day. Thank you.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.