Q2 2025 NOV Inc Earnings Call

Operator: you for standing by. Welcome to NOV's second quarter 2025 earnings call.

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Good day, and thank you for standing by. Welcome to nov second quarter 2025 earnings call.

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Operator: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded.

Amie Dambrosio: I would now like to hand the conference over to your speaker today, Amie Dambrosio, Director of Investor Relations. Please go ahead.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session to ask a question during the session. You 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 once again, please be advised. Today's conference is being recorded. I would like to end the conference, over to your speaker today. Amy De Ambrosio director of investor relations. Please go ahead.

Amie Dambrosio: Welcome, everyone, to NOV's second quarter 2025 earnings conference.

Amie Dambrosio: With me today are Clay Williams, our Chairman and Chief Executive Officer, Jose Bayardo, our President and Chief Operating Officer, and Rodney Reed, our Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities law. They involve risks and uncertainty, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year.

Welcome everyone to noves second quarter 2025 earnings conference call. With me today are clay Williams, our chairman and chief executive officer, Jose Bardot, our president, and Chief Operating Officer and Rodney Reid, our senior vice president and Chief Financial Officer.

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.

Amie Dambrosio: For a more detailed discussion of the major risk factors affecting our business, please refer to our latest forms 10-K and 10-Q, filed with the Securities and Exchange Commission. Our comments also include non-GAP measures. Reconciliations to the nearest corresponding gap measures are in our earnings release available on our website. On a U.S.

No 1 should assume these forward-looking statements remain valid later in the quarter or later in the year.

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

Our comments also include non-GAAP measures.

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

Clay Williams: gap basis for the second quarter of 2025, NOV reported revenues of $2.2 billion and net income of $108 million, or $0.29 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 report.

On a U.S. GAAP basis, for the second quarter of 2025, NOV reported revenues of $2.2 billion and net income of $108 million, or $0.29 per fully diluted share.

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

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

Clay Williams: Now, let me turn the call over to Clay. Thank you, Amie. For the second quarter of 2025, revenue of $2.2 billion was up 4% from the first quarter of 2025 and down 1% from the second quarter of 2024. EBITDA was $252 million or 11.5% of sales. Our energy equipment segment grew revenues 5% sequentially. A strong execution of capital equipment sales were able to more than offset a significant reduction in demand for aftermarket parts and services. However, the resulting unfavorable mixed shift drove margins sequentially lower. Nevertheless, the segment delivered its 12th straight quarter of year over year margin expansion.

Later in the call we will host a question and answer session. Please let yourself to 1 question and 1 follow up to permit more participation.

Now, let me turn the call over to Clay. Thank you, Amy, for the second quarter of 2025 revenue of 2.2 billion was up 4% from the first quarter of 2025 and down 1% from the second quarter of 2024, even though I was 252 million or 11.5% of sales,

Our energy equipment segment grew revenues, 5% sequentially as strong execution of Capital Equipment. Sales were able to more than offset a significant reduction in demand for aftermarket parts and services.

Clay Williams: Energy products and services solid 3% sequential top line growth handily outperformed a 6% decline in global drilling activity. buoyed by higher capital equipment sales and greater penetration of our efficiency enabling technologies and key markets. That strength was partially offset by sharply lower demand for quick-term consumable drilling and completion products in North America, Saudi Arabia, and Latin America, along with tariff-related and inflationary cost pressure, factors that together compress segment margins.

However the resulting unfavorable mixed shift drove margins sequentially lower. Nevertheless, the segment delivered its 12th straight quarter of year-over-year margin expansion.

Clay Williams: Against this backdrop, both segments remain focused on structural cost reduction and process improvement.

Clay Williams: Jose will provide additional detail on these initiatives later in the call. The 6% sequential decline in global drilling activity underscores market conditions that are growing more challenging. Macroeconomic uncertainty, the rapid unwinding of OPEC Plus production quotas, and conflict in the Middle East have made customers more. In North America, exploration and production companies moved decisively to curtail short-cycle activity. The U.S. oil-directed rig count declined roughly 9 percent since March, and modest gas rig additions could not fully offset the decline. Pricing pressure is intensified. Internationally, conventional activity also eased. Saudi Arabia suspended additional onshore rigs, and Argentina operators shifted focus from mature Commodoro operations toward the unconventional Guacamayo.

Energy products and services grew a solid 3% sequentially. Topline growth handily outperformed a 6% decline in global drilling activity, buoyed by higher capital equipment sales and greater penetration of our efficiency-enabling technologies. In key markets, that strength was partially offset by sharply lower demand for quick-turn consumable drilling and completion products in North America, Saudi Arabia, and Latin America, along with tariff-related and inflationary cost pressure factors that together compressed segment margins. Against this backdrop, both segments remain focused on structural cost reduction and process improvement. Jose will provide additional detail.

Detail on these initiatives later in the call.

The 6% sequential decline in global drilling activity underscores market conditions that are growing more challenging. Macroeconomic uncertainty, the rapid unwinding of OPEC+ production quotas, and conflict in the Middle East have made customers more cautious.

In North America, expiration and production companies moved to decisively to curtail short cycle activity. The US oil directed rig count, decline roughly 9%, since March and modest. Gas rig editions, could not fully offset, the drop pricing pressure is intensifying

Clay Williams: In offshore markets, tariffs and cost inflation are prompting some operators to slow walk certain projects, which probably delays some final investment decisions. Importantly, we aren't seeing these projects cancel, and we are continuing to advance discussions and feed studies on multiple deepwater programs. Our offshore drilling contractor customers expect their whitespace utilization challenges to ease in 2026. On the whole, the remainder of 2025 will be tough. We expect North American shale activity to drift modestly lower through year-end while Saudi conventional drilling may not reaccelerate before 2026. We think global drilling activity will slow further through the second half.

Operations toward the unconventional vak America play.

In offshore markets, terrorists and cost inflation are prompting. Some operators to slow, walk certain projects, which probably delay some final investment. Decisions importantly, we aren't seeing these projects cancel and we are continuing to advance discussions and feed studies on multiple deep water programs.

Our offshore drilling contractor. Customers expect their white space utilization challenges to ease in 2026.

Clay Williams: Nevertheless, we expect NOB's backlog and fourth quarter seasonal bulk tool purchases from international markets to support second half sales that are flat to up modestly compared to the first For the third quarter, we forecast year-over-year consolidated revenue to decline between 1 to 3 percent with adjusted EBITDA to land in the range of $230 million to $250 million. Looking past near-term turbulence, NOV's opportunity landscape is comp We expect offshore activity to accelerate in 2026 and our Healthy Pipeline, a prospective FPSO award should drive demand for NOV's production technology. Globally, the push for secure, affordable energy is accelerating investment in LNG and uncommissional gas, areas where our composite pipe, high-pressure, high-temperature solutions, and gas processing equipment exist.

On the whole the remainder of 2025 will be tough. We expect North American Shale activity to drift modestly lower through year end while Saudi conventional drilling may not re accelerate before 2026. We think Global drilling activity will slow further to the second half.

Nevertheless, we expect, you know, these backlog and fourth quarter, seasonal, bulk tulle purchases from International markets to support. Second half sales that are flat to up modestly compared to the first half.

For the third quarter, we forecast year-over-year, Consolidated Revenue to decline between 1, to 3%, with adjusted ebida, to land in the range of 230 million to 250 million.

Looking past near-term turbulence in ob's Opportunity, landscape is compelling. We expect offshore activity to accelerate in 2026 and our healthy pipeline of perspective. Fpso Awards should drive demand for noves Production Technologies.

Clay Williams: Our expanding digital automation platform is delivering measurable efficiency gains for customers. Importantly, our significant backlog and strong balance sheet give us the confidence and capacity to invest in these technologies. Overall, growing offshore drilling and development activity, stabilizing rig counts in the Middle East, incremental growth in Middle Eastern and Latin American unconventionals set up a more favorable market for 2026 in our view, assuming commodity prices are reasonably well-banked.

Globally. The push for secure affordable energy is accelerating investment in LNG and uncommon gas areas where our composite pipe, high pressure, high temperature Solutions and gas processing equipment, Excel

Clay Williams: To all my fellow NOV employees listening today, I want to thank you for the terrific job that you are doing. Our customers count on you and me every day to help them navigate tough markets. And Jose, Rodney, Amie, and I appreciate all that you do to support them.

Our expanding digital automation platform is delivering measurable efficiency gains for customers importantly, our significant backlog and strong balance sheet. Give us the confidence and capacity to invest in these Technologies. Overall growing offshore drilling and development activity. Stabilizing recounts in the Middle East, incremental growth in Middle Eastern and Latin American and unconventional set up a more favorable market for 2026. In our view, assuming commodity prices are reasonably well behaved.

Rodney Reed: With that, let me turn it over to Rodney to review the results for the second... Thank you, Clay. Second quarter consolidated revenue increased 4% sequentially and decreased 1% year on year. These results reflect strong execution on our capital equipment backlog that was largely offset by lower aftermarket spare parts and consumable product sales due to softer oil and gas activity, all of which drove an unfavorable change in mix across our business. Consolidated Adjusted EBITDA was $252 million or 11.5% of sales. Margins were pressured by this less favorable sales mix, higher tariffs, inflation driven cost headwinds, and certain charges in Latin America.

To all my fellow NOV employees listening today, I want to thank you for the terrific job that you are doing. Our customers count on you and me every day to help them navigate tough market conditions, and Jose, Rodney, Amy, and I appreciate all that you do to support them and each other. With that, let me turn it over to Rodney to review the results for the second quarter. Thank you, Clay. Second quarter consolidated revenue increased 4% sequentially and decreased 1% year on year. These results reflect strong execution on our capital equipment backlog, which was largely offset by lower aftermarket, spare parts, and consumable products sales due to softer oil and gas activity, all of which drove an unfavorable change in mix across our businesses.

Rodney Reed: During the quarter, we generated free cash flow of $108 million, resulting in our team converting 83% of our EBITDA to free cash flow over the last 12 months. We continue to execute well on structural improvements to our working capital, including improved cash conversion cycle and inventory turns, which have resulted in a 300 basis point improvement year over year in working capital as a percentage of revenue. Over the first half of 2025, we repurchased 10.9 million shares for $150 million. Since we announced our share repurchase program during the second quarter of 2024, we've repurchased approximately 25 million shares.

Consolidated, adjusted EBITDA was $252 million, or 11.5% of sales. Margins were pressured by this less favorable sales mix, higher tariffs, inflation-driven cost headwinds, and certain charges in Latin America.

During the quarter, we generated free cash flow of $108 million, resulting in our team converting 83% of our EBITDA into free cash flow over the last 12 months. We continue to execute well on structural improvements to our working capital, including improved cash conversion cycle and inventory turns, which have resulted in a 300 basis point improvement year-over-year in working capital as a percentage of revenue.

Rodney Reed: Also during the quarter, we paid a quarterly base dividend of 7.5 cents per share and a supplemental dividend of 21 cents per share, resulting in dividends paid year-to-date of $135 million. Between share buybacks and dividends, we've returned $602 million to our shareholders while increasing our cash balance by $612 million since March 31, 2024. That's a total of over $1.2 billion in free cash flow during the last five quarters. Our tariff expense for the second quarter was approximately $11 million. Since our April earnings call, there have been many announcements impacting trade policy, including a June increase in the rate of Section 232 steel tariffs from 25% to 50%.

Over the first half of 2025, we repurchased 10.9 million shares for 150 million. Since we announced our share repurchase program. During the second quarter of 2024, we've repurchased a approximately 25 million shares. Also during the quarter, we paid a quarterly based dividend of 7 and a half cents per share and the supplemental dividend of 21 cents per share. Resulting in dividends paid year-to-date of 135 million.

Between share BuyBacks and dividends we've returned 602 million to our shareholders. While increasing our cash balance by 612 million since March, 31st 2024

That's a total of over 1.2 billion dollars in free. Cash flow during the last 5. Quarters.

Rodney Reed: We continue to leverage our supply chain experience, versatile manufacturing footprint, and opportunities to apply USMCA to further reduce our tariff expense. Assuming current tariff policies, we expect the impact of tariffs in the third quarter will rise to between $20 million and $25 million, and then to between $25 million and $30 million in the fourth quarter, where it should level out. Of course, the trade policy situation remains very fluid, and the impact could be greater if tariffs go higher. Operationally, we're heavily engaged in rewiring our supply chain to whittle down the impact. As a result of tariffs and persistent inflation in our supply chains, we're implementing cost reduction initiatives across the organization.

Our tariff expense for the second quarter was approximately $11 million since our April earnings call. There have been many announcements impacting trade policy, including a June increase in the rate of Section 232 tariffs from 25% to 50%. We continue to leverage our supply chain experience, versatile manufacturing footprint, and opportunities to apply USMCA to further reduce our tariff expense.

Impact could be greater if tariffs go higher operationally were heavily engaged in rewiring our supply chain to whittle down the impact.

Rodney Reed: Jose will cover specific actions we're taking. We expect the results of these initiatives will remove over $100 million in annual costs by the end of 2026. However, increasing tariffs and inflation remain headwinds, which will offset a portion of the savings.

As a result of tariffs and persistent inflation in our supply chains were implementing cost reduction initiatives across the organization.

Rodney Reed: During the quarter, our tax rate was positively impacted by certain discrete items. We expect our full-year tax rate to be between 26% and 28%. Also, we expect eliminations and corporate costs during the third quarter to remain in line with the second quarter of 2025.

Jose will cover specific actions. We expect the results of these initiatives will remove over $100 million in annual costs by the end of 2026. However, increasing tariffs and inflation remain headwinds that will offset a portion of the savings.

Rodney Reed: Moving on to segment results. Our energy products and services segment generated revenue of $1.03 billion, a 2% decrease compared to the second quarter of 2024 due to lower global activity levels, which are partially offset by higher sales from the segment's capital equipment offerings. Adjusted EBITDA declined $38 million to $146 million, or 14.2% of sales. The higher decrementals were primarily the result of less favorable sales mix, tariffs, and inflationary pressures, along with certain charges in Latin America. Year-on-year, product sales declined 20%, offset by improved sales of capital equipment. Sequentially, segment revenues were 3% higher, with stronger results from capital equipment sales, including our drill pipe and composite solution business.

During the quarter, our tax rate was positively impacted by certain discrete items. We expect our full-year tax rate to be between 26% and 28%. Also, we expect eliminations and corporate costs during the third quarter to remain in line with the second quarter of 2025.

Moving on to segment results.

Our energy products and services segment generated revenue of $1.03 billion, a 2% decrease compared to the second quarter of 2024.

Due to lower Global activity levels, which are partially offset by higher sales from the segments, Capital Equipment offerings, adjusted ibida decline, 38 million to 146 million, or 14.2% of sales.

The higher decremental were primarily the result of less favorable sales mix tariffs and inflationary pressures along with certain charges in Latin America.

Year-on-year, product sales declined 20%, offset by improved sales of Capital Equipment.

Rodney Reed: For the second quarter, the sales mix of energy products and services was 50% services and rental, 34% capital equipment, and 16% products. Revenue from services and rentals held flat year over year due to market share gains and new product expansions offsetting the impact of reduced rig count. Our downhole tools business grew rental revenue low single digits compared to the prior year. Growing adoption of our high-performance drilling motors and our downhole setting tools in North America, along with increased rentals in international unconventional developments, helped to overcome the effect of drilling activity declines in other markets. Similarly, rentals of our drill bits grew low double digits year over year as operators in the U.S.

Sequentially, revenues were 3% higher, driven by stronger results from Capital Equipment Sales, including our drill pipe and composite solution businesses.

For the second quarter, the sales mix of energy products and services was 50% services and rental, 34% capital equipment, and 16% product sales.

Revenue from services and rentals Health flat year-over-year due to market share gains and new product, expansions all setting the impact of reduced rig counts.

Rodney Reed: continue to achieve higher rates of penetration and longer runs per bit using our high-performance bit cutter technology. U.S. land drill bit revenues grew over 30% year over year compared to a U.S. rig count decline of 5%. Tubular coating and inspection had a solid quarter, with service revenue up mid-single digits year over year. Increased tubular coating throughput and growing traction of NOV's high-temperature TK-Dracone coating drove a low double-digit percent increase in North America coating revenue for Tubiscope year over year. The improvement in North America coding operations was partially offset by lower inspection revenues in Latin America.

Our downhole tools business, grew rental Revenue, low single digits compared to the prior year, growing adoption of our high-performance drilling Motors and our downfall setting Tools in North America along with increased rentals and international unconventional. Developments helped to overcome the effect of drilling activity declines and other markets. Similarly, rentals of our drill bits grew low double digits year-over-year as operators in the US, continue to achieve higher rates of penetration and longer runs per bit using our high-performance bit cutter, technology us land drill, bit revenues grew over 30% year-over-year compared to a US rig count, decline, 5%,

Tubular coating and inspection had a solid quarter with service Revenue. Up mid single digits year-over-year, increased tubular coating, throughput and growing traction of noves high temperature. TK drakkon, coating drove a low double-digit percent increase in North America coding revenue for Tuboscope year-over-year.

Rodney Reed: Solids control and waste management services declined by mid-single digits versus the prior year, primarily due to reduced activity in Mexico and Argentina's Commodore conventional play. Higher solids control service and rental revenue in Africa and increased drilling activity in the UAE partially offset these declines. Capital equipment sales increased low single digits year over year, primarily due to strong growth in NOV's composite solutions business, which more than offset a managed pressure drilling capital sale in the prior year that did not repeat. Composite solutions for oil filled infrastructure in the Middle East and North America, FPSOs and underground fuel handling tanks all realized robust sales.

Improvement in North America. Coding operations were partially offset by lower inspection revenues in Latin America.

Solids control and waste management services are expected to decline by mid-single digits compared to the prior year, primarily due to reduced activity in Mexico and Argentina's Comedouro conventional play.

Higher solids, control service, and Rental Revenue in Africa, and increased drilling activity in the UAE partially offset these declines.

Capital Equipment Sales increased low single digits year-over-year, primarily due to strong growth in the NOV Composite Solutions business, which more than offset a managed pressure drilling capital sale in the prior year that did not repeat.

Rodney Reed: We expect increased growth in our composite solutions business due to continued infrastructure build out in international unconventional markets and fuel handling markets in North America.

Rodney Reed: Turning to product sales within energy products and services, revenue decreased 20% compared to the second quarter of 2024, primarily driven by market uncertainty, which amplified the effects of the decline in global market activity, with customers pumping the brakes on relatively quick-term consumable purchases, mostly related to drilling.

Composite solutions for oil field infrastructure in the Middle East and North America, FPSO, and underground fuel handling tanks all realized robust sales. We expect increased growth in our Composite Solutions business due to continued infrastructure buildout in international unconventional markets and fuel handling markets in North America.

Rodney Reed: For the third quarter, we expect revenues from our energy products and services segment to be flat to down 2% when compared to the third quarter of 2024 with EBITDA between $130 million and $150 million. Moving to our energy equipment segment, revenue for the second quarter of 2025 was $1.21 billion, nearly unchanged from the second quarter of 2024. Despite the flat revenue, EBITDA increased $16 million to $158 million, resulting in 130 basis point increase in EBITDA margins to 13.1% of sales, driven by higher margin backlog and operational efficiencies that more than offset an unfavorable mixed shift that resulted from a sharp decline in aftermarket sales.

Returning to product sales, revenue from energy products and services decreased by 20% compared to the second quarter of 2024, primarily driven by market uncertainty, which amplified the effects of the decline in global market activity. Customers are pumping the brakes on relatively quick-turn consumable purchases, mostly related to drilling.

for the third quarter. We expect revenues from our energy products and services segment to be flat to down 2% when compared to the third quarter of 2024 with, EBA between 100 million and 150 million dollars.

Rodney Reed: As Clay mentioned, this was the 12th straight quarter of year-over-year margin growth for energy equipment sectors. Capital equipment sales accounted for approximately 62% of the segment's revenue mix in the second quarter of 2025, up nearly 8 percentage points year-over-year, driven by production and drilling equipment. Aftermarket sales and services accounted for the remaining 38% of energy equipment revenue in the second quarter. In our drilling equipment business, aftermarket revenues were down sharply year over year due to customers reducing spending in response to global trade uncertainty and lower oil price. Spare parts bookings fell sharply during the quarter.

More than offset an unfavorable mix shift. That resulted from a sharp decline, in aftermarket sales

As Clay mentioned, this was the 12th straight quarter of year-over-year margin growth for the energy equipment segment.

Capital Equipment Sales, accounted for approximately, 62% in the segments for Revenue. Mix in the second quarter of 2025 up, nearly 8% points, year-over-year driven by production and drilling equipment.

After market, sales, and services accounted for the remaining 38% of energy equipment revenue in the second quarter.

In our drilling equipment business, aftermarket revenues were down sharply year-over-year due to customers reducing spending in response to global trade uncertainty and lower oil prices.

Rodney Reed: We do not expect these level of spare parts bookings are sufficient for the industry long term, despite the pullback we've seen in rig counts globally. Additionally, service utilization fell due to a slowdown of projects in China, but recertifications and upgrades remain active in Europe, Africa, the U.S., and Brazil.

Rodney Reed: We're seeing automation upgrade opportunities, which Jose will cover in more detail. Revenue from aftermarket parts and services for intervention stimulation equipment was down high single digit percentage year over year due to the decline in North America completion activity. Turning to capital equipment portion of the energy equipment segment, revenue grew low double digits year over year, led by growth from our process systems, subsea flexible pipe, and marine and construction business.

Spare parts and bookings fell sharply during the quarter. We do not expect these levels of spare parts bookings to be sufficient for the industry long term, despite the pullback we've seen in rig counts globally. Additionally, service utilization fell due to a slowdown of projects in China, but research vacations and upgrades remain active in Europe, Africa, the US, and Brazil. We're seeing automation upgrade opportunities, which Jose will cover in more detail.

Revenue from aftermarket parts and services for intervention and stimulation equipment was down high single-digit percentage year-over-year due to the decline in North America completion activity.

Rodney Reed: Bookings declined 4% sequentially to $420 million. Customers are trying to assess longer-term impact of recent volatility in commodity prices, geopolitical conflicts, cost inflation, and trade policy uncertainty, which have resulted in certain projects pushing to the right. While uncertainty may continue to impact timing of investment decisions, currently, we're not seeing projects being canceled. Second quarter revenue and our subsea flexible pipe business reached an all-time high, growing significantly year over year with robust EBITDA flow-through resulting from higher margin projects. The capacity in the market remains tight and the outlook for our subsea flexible pipe business remains constructive.

Turning to capital equipment, a portion of the energy equipment segment, revenue grew low double digits year-over-year, led by growth from our process systems, subsea flexible pipe, and marine and construction businesses.

Bookings declined 4% sequentially to $420 million.

Customers are trying to assess the longer-term impact of recent volatility in commodity prices, geopolitical conflicts, cost inflation, and trade policy uncertainty, which have resulted in certain projects being pushed to the right. While uncertainty may continue to impact the timing of investment decisions, currently we're not seeing projects being canceled.

Rodney Reed: Our process systems business also achieved record high revenues with significant year-over-year growth. Bookings were solid and included a monoethylene glycol unit for an operator in the eastern Mediterranean in support of the global gas infrastructure build-out. While forecasts for FPSO, FIDs, and 2025 have moderated, the outlook remains encouraging. The onshore production market continues to be active for large international gas fields, and we're actively pursuing several projects that we expect to be awarded over the next 12. Our process systems and subsea flexible pipe business combined have booked $1.6 billion in orders over the last five quarters. Our production and midstream business also reached its highest quarterly revenue since 2019 due to growth in unconventional gas markets and strong execution.

In the second quarter, revenue in our Subsea Flexible Pipe business reached an all-time high, growing significantly year-over-year. The robust EBITDA flow resulted from higher margin projects. The capacity in the market remains tight, and the outlook for our Subsea Flexible Pipe business remains constructive.

Our process systems business also achieved record-high revenues with significant year-over-year growth. Bookings were solid and included a monoethylene glycol unit for an operator in the Eastern Mediterranean and support of the global gas infrastructure buildout.

While forecast for fpso fids in 2025 of moderated, the Outlook Remains the onshore production Market continues to be active for large International, gas fields and we're actively pursuing several projects that we expect to be awarded over the next 12 months.

Our process systems and Subsea flexible pipe business combined have booked $1.6 billion in orders over the last five quarters.

Rodney Reed: Targeted R&D and investments in our production-related offerings has resulted in our SEPSI flexible pipe process systems and production midstream business revenues increasing from less than 20% of energy equipment revenue in 2021 to approximately 30% of the segment's revenue in 2025, evidence that our innovation is driving growth and delivering solutions the industry depends on. Capital equipment sales from our intervention simulation equipment business decreased double digits year over year due to a steep drop in demand for pressure pumping equipment in North America, partially offset by solid demand for coil tubing and wireline equipment in international markets. We continue to see a growing number of opportunities for sales of completion equipment into international markets, particularly for the growing unconventional plays in the Middle East and Latin America.

Our production and Midstream business. Also reached its highest quarterly revenues since 2019, due to growth in unconventional, gas, markets and strong execution.

Targeted R&D and investments in our production-related offerings have resulted in our Cepsa flexible pipe process systems and production, Midstream business revenues increasing from less than 20% of energy equipment revenue in 2021 to approximately 30% of the segment's revenue in 2025. This evidence shows that our innovation is driving growth and delivering solutions. The industry depends on.

Rodney Reed: Revenue from our drilling capital equipment increased in the mid-teens year over year due to greater progress on projects.

Capital Equipment Sales from our intervention. Stimulation equipment, business, decreased double digits year-over-year, due to a steep drop in demand for pressure pumping, equipment in North America, partially offset by solid demand for Coil Tubing, and wiring equipment and international markets. We continue to see a growing number of opportunities, for sales of completion, equipment into International markets, particularly for the growing unconventional plays in the Middle East and Latin America.

Rodney Reed: The outlook for drilling capital equipment orders remains modest given market uncertainty. Our marine and construction business experienced a high single-digit increase in revenue compared to the second quarter of 2024, driven by greater progress on crane and cable lay projects. After booking an order for a cable lay vessel in the first quarter, we received an order for a wind turbine installation vessel in the second quarter.

Revenue from our drilling Capital Equipment, increased in the mid-, teens year-over-year, due to Greater progress on projects, the outlook for drilling Capital Equipment, orders remains modest given Market uncertainties.

Our marine and construction business experienced a high single digit increase in Revenue. Compared to the second quarter of 2024 driven by greater progress on Crain and cable, a projects.

Rodney Reed: We continue to have active dialogue with customers for both cable lay vessels and wind installation vessels, and we see a healthy demand for our electric For the third quarter, we expect energy equipment segment revenue to decrease between 1% to 3% compared to the third quarter of 2024, with EBITDA in the range of $145 million to $160 million.

After booking an order for a cable vessel in the first quarter, we received an order for a wind turbine installation vessel in the second quarter. We can continue to have active dialogue with customers for both cable vessels and wind installation vessels, and we see a healthy demand for our electric cranes driven by new build activity for multi-purpose supply vessels.

Jose Bayardo: With that, I'll turn the call over to Jose. Thank you, Rodney. As we respond to a softening global marketplace, we remain focused on positioning the company to capitalize on three longer term trends that we believe will drive the industry over the next decade. One, offshore production, supplanting U.S. unconventional resources as the dominant incremental source of global oil supply. Two, accelerating demand for natural gas, driving meaningful growth from global unconventional gas resources. And three, the application of modern technologies to drive additional efficiencies in oil field operations. Today, uncertainty is driving extreme fiscal austerity and a greater emphasis on operational efficiencies.

145 million to 160 million.

With that, I'll turn the call over to Jose.

Thank you, Rodney.

As we respond to a softening Global Marketplace, we remain focused on positioning the company to capitalize on 3 longer term trends that we believe will drive the industry over the next decade, 1 offshore production, supplanting us unconventional resources as the dominant incremental source of global oil supply.

2. Acceleration in demand for natural gas is driving meaningful growth from global unconventional gas resources. 3. The application of modern technologies is driving additional efficiencies in oil field operations.

Jose Bayardo: Customers are pushing their procurement teams to negotiate better pricing, but are also looking to and willing to invest in solutions that improve recovery rates, lower costs, improve safety, and reduce environmental footprint. In offshore markets, IOC and NOC customers remain confident in the mid to longer term outlook due to plateauing North American production, offshore break evens that are sub $50 per barrel, and growing demand for cost effective, secure and reliable sources of energy. Existing projects continue to move forward at a healthy rate. And as Rodney mentioned, our businesses are executing exceptionally well on our healthy backlog of offshore production related projects, driving a 9% sequential and 6% year over year increase in revenues from offshore markets.

Today, uncertainty is driving extreme fiscal austerity and a greater emphasis on operational efficiencies. Customers are pushing their procurement teams to negotiate better pricing, but they are also looking to, and willing to invest in solutions that improve recovery rates, lower costs, improve safety, and reduce environmental footprints.

In offshore markets, IOC and NOOC customers remain confident in the mid- to long-term outlook due to plateauing North American production offshore break-evens that are sub-$50 per barrel and growing demand for cost-effective, secure, and reliable sources of energy.

Jose Bayardo: Entering 2025, our customers had ambitious expectations regarding offshore FIDs and were planning to advance 13 FPSOs during the year. Supply constraints, including long lead times for gas turbines and compressors, congestion in shipyards, inflation, and macroeconomic uncertainties have caused customers to delay certain FIDs. We are collaboratively sharpening our pencils to help offset project costs that have increased 10 to 15% through more standardization and better coordination of order timing. These actions would allow us to build the same structures for multiple projects on one production run, improving efficiencies, throughput and cost. While we've seen FIDs push to the right, to our knowledge, none have been canceled, and the mid- to longer-term outlook remains bright.

Existing projects continue to move forward at a healthy rate. As Rodney mentioned, our businesses are executing exceptionally well on our healthy backlog of offshore production. Related projects are driving a 9% sequential and 6% year-over-year increase in revenues from offshore markets.

Entering 2025, our customers had ambitious expectations regarding offshore FIDs, and we're planning to advance 13 FPS during the year. Supply constraints, including long lead times for gas turbines and compressors, congestion, shipyard inflation, and macroeconomic uncertainties have caused customers to delay certain FIDs.

We are a collaboratively sharpening. Our pencils to help offset project costs that have increased 10 to 15% through more standardization and better coordination of order timing.

Actions would allow us to build the same structures for multiple projects on one production run, improving efficiency, throughput, and cost.

Jose Bayardo: Industry forecasts call for more offshore FIDs this year and see the potential for up to 50 FPSOs through the end of the decade. Additionally, demand related to LNG products remains solid, as evidenced by a sizable award NOV received during the second quarter for a large submerged swivel and yoke system for a floating LNG project in Argentina. Delays of offshore production vessel deliveries continue to have knock on effects in the drilling space resulting in the near term white space utilization challenge that our customers face over the next couple of quarters. As Rodney mentioned, our aftermarket business experienced a double digit percent decrease in revenues driven by a sharp reduction in spare part bookings during the second quarter.

While we've seen fids push to the right to our knowledge, none have been canceled and the mid to longer term, Outlook remains bright.

Industry forecasts call for more offshore FIDs this year and see the potential for up to 50 FPSOs through the end of the decade. Additionally, demand related to LNG products remains solid, as evidenced by a sizable award NOV received during the second quarter for a large submerged swivel and yoke system for a floating LNG project in Argentina.

Delays in offshore production and vessel deliveries continue to have knock-on effects in the drilling space, resulting in the near-term utilization challenges that our customers face over the next couple of quarters.

Jose Bayardo: Customers tapped the brakes while digesting the macroeconomic and geopolitical volatility and after some of them gave themselves a little breathing room after making extra purchases in the first quarter to get in front of higher tariff costs. While this pullback was sharper than anticipated, we expect a slight rebound in the third and fourth quarters. For the full year, we now expect our drilling equipment aftermarket businesses' revenue will decline in the mid-teens. While near-term expectations have been tempered, our offshore drilling contractor customers remain confident in a meaningful recovery beginning in the second half of 2026, which would spur additional demand for spare parts, upgrades, and other projects as rigs prepare to move on to new contracts.

As Rodney mentioned our aftermarket business experienced double-digit percent decrease in revenues driven by a sharp reduction in spare part bookings. During the second quarter,

Customers tap the brakes while digesting the macroeconomic and geopolitical volatility. After some of them gave themselves a little breathing room, having made extra purchases in Q1 to get in front of higher tariff costs.

Well, this pullback was sharper than anticipated. We expect a slight rebound in the third and fourth quarters for the full year. We now expect our drilling equipment aftermarket business revenue to decline in the mid-teens.

We're already seeing some signs of this through a growing number of projects we are planning to execute in the second half of the year. Consistent with the themes I previously mentioned, customers are investing in enhanced capabilities that drive operational efficiencies, such as increasing hook load capacity and automation. There's strong demand for deep water rigs that have seventh-gen high-spec capabilities, including hook load capabilities of 1,400 tons or more, and enhanced automation. We've had quite a few inquiries regarding additional hook load upgrades, and we recently commissioned four automation packages, including one with a robotic system that allows for completely hands-free tripping.

While near-term expectations have been tempered for offshore drilling contractors, customers remain confident in a meaningful recovery beginning in the second half of 2026, which would spur additional demand for spare parts, upgrades, and other projects as rigs prepare to move on to new contracts. We're already seeing some signs of this through a growing number of projects we are planning to execute in the second half of the year. This is consistent with the themes I previously mentioned: customers are investing in enhanced capabilities that drive operational efficiencies, such as increasing hook load capacity and automation. There is strong demand for deepwater rigs that have seventh-generation, high-spec capabilities, including hook load capacities of 1,400 tons or more and enhanced automation.

We've had quite a few inquiries regarding additional hook load upgrades. We recently commissioned four automation packages, including one with a robotic system that allows for completely hands-free tripping.

We now have robotic systems active on 4 rigs, with another 11 in the pipeline, and we continue to see growing interest from our customer base.

International land markets remain mixed in the Middle East, with growing activity in the UAE, Qatar, and Oman, along with demand for investments and infrastructure and capital equipment for the emerging unconventional basin, offsetting a stronger than anticipated deceleration in Saudi Arabia.

Increasing numbers of rigged suspensions in Saudi Arabia have led to a sharp decline in revenues for our shorter cycle energy products and services segment in the Kingdom.

To differentiate solutions that drive operational efficiencies, such as the order we received for several surface automation systems that use our NOVOS multi-machine control system and Kaizen drilling optimizer.

Additionally, while NOCs are increasingly leaning on major OFS companies for lump-sum Turnkey work, those OFS companies are increasingly turning to NOV for access to our technology to lower their R&D expenses and reduce investments in their asset base.

Demand for capital equipment in the Middle East remains resilient as

Customers can continue to invest in upgrading and modernizing drilling and completion equipment needed to efficiently develop unconventional resources.

Investment in production infrastructure is needed for future development. It also remains a strong driver of healthy demand for composite pipes in our jokes.

Despite the potential for additional rigs, suspensions, and continued investments in equipment and infrastructure, along with some early discussions related to upcoming tendering, we remain optimistic for a potential rebound in activity by mid-2026.

Similar to the Middle East, conditions in Latin America are also mixed. Mexico, Colombia, and Ecuador will remain challenged, and in Argentina, we are seeing a slowdown in the mature conventional Comedouro field and a shift to the unconventional resources of the Vaca and the Nico Basin. As Rodney touched on, this required us to incur some charges as we repositioned our operations in the country.

While the slowdown in the comedouro has had a negative effect on our business. Over the past year, the longer term Outlook in Argentina, remains very promising.

We continue to see solid demand for our completion equipment and downhole tools that drive efficiencies and extend lateral wells. This has recently enabled our customer to achieve multiple drilling and completion records in the Vaka Morta.

America's operators have moved decisively to curtail oil-directed activity, only partially offset by an increase in gas-directed drilling.

Or businesses out before changes in activity levels through continued market share gains. But the environment is becoming more challenging, with many North American service companies and operators implementing restructuring and cost-saving programs.

Land-focused oil field service customers are limiting capital equipment purchases while running equipment, making it extremely hard to cannibalize stacked equipment as the source of spare parts, potentially setting up an inevitable replacement cycle.

ENTPs are shrinking capital plans and are seeking pricing concessions, but they continue to prefer best-in-class products that drive efficiencies. They are designing well-constructed plans to achieve the lowest possible cost per foot.

We've recently seen a push by multiple operators to reduce hole sizes and clearances to optimize hydraulics, drill faster, lower material costs, and reduce environmental impact.

This shift created opportunities for us to gain share with several customers who took the time to reassess the effectiveness of the components in their bottom hole assemblies. They recognized the superior performance of NOV's offerings and ultimately standardized on our kit.

Customers are also looking to gain an edge through the use of better digital solutions. During the quarter, a major land drilling contractor decided to standardize on NOV's Next Generation Electronic Drilling Recorder and Remote Drilling Monitoring applications, powered by our Max platform. This will enable the customer to reduce complexity and offer advanced digital capabilities to its clients.

The decline in oil activity in the U.S. has been partially offset by an increase in gas-directed drilling as operators target deeper, higher-pressure wells with higher bottom hole temperatures, particularly in the Haynesville and Eagle Ford. We're seeing increasing adoption of our Drakon thermal insulated pipe coating and our Tundra Max mud chillers, each of which significantly enhances the performance and longevity of bottom hole assemblies.

While our latest generation of performance-enhancing technologies are commanding solid demand with creative margins, the market environment has grown more price competitive over time. Our better technologies have taken share from competitors, and some are now using price concessions to try to win back work in a market of tariffs or increasing product costs.

Our team has done an outstanding job managing through the complexities of the continuously changing tariff policies, and we continue to do all we can to mitigate as much of the roughly $300 million in annual tariff costs that we would incur if we sat still.

As Rodney mentioned, we recognize a total of $11 million in tariff expense. During the second quarter, roughly 70% of this expense is hitting our Energy Products and Services segment.

We expect tariff expense to step up over the next two quarters and level off between $25 million to $30 million during the fourth quarter.

We'll continue to identify additional measures to mitigate these costs or pass them on to our customers. But this will continue to be challenging given current market dynamics.

In order to offset these margin pressures, we're ramping up efforts to drive internal efficiencies and reduce costs across NOV.

We've identified over 100 million of savings that we expect to capture by the end of 2026, through 1, simplifying, standardizing and centralizing business processes.

The goal of lowering costs, reducing time, and further improving our customers' experience doing business with NOV.

This will be a multi-year effort, but we have begun executing process changes and expect to begin realizing savings from this initiative later this year.

To strategic sourcing tied into the efforts to standardize our processes. We are working to further leverage our spend in the organization to maximize our economies of scale through high-quality, low-cost sourcing, which is shifting under evolving trade policies.

3 business and facility consolidations during the second quarter, we began. Consolidating our completion tools operation, into our downhole tools business and we merged our grant prideco and Excel systems conductor pipe, casing and connector businesses. Into a new unit called tubular products.

The consolidations allow us to better share resources between product lines and drive efficiencies and cost savings.

With another business unit, we're consolidating facilities to unlock further efficiencies from lower overhead, rent, and utilities, and better utilization of our asset base.

4. Exit lines in certain markets.

We're exiting product lines and markets in which we do not see a near-term path to generating an appropriate rate of return. The exiting markets will reduce total revenue and EBITDA. These actions will be accretive to our margins and return on capital.

We also continue to work on plant-level operational efficiencies with a relentless focus on operational excellence. For example, in one of our plants, we're investing in an initiative where we expect to take our manufacturing cycle time down from 60 days to less than 20. This will lower our costs, free up working capital, and allow us to be more responsive to demand.

Near term, it will be difficult for these actions to outpace the effect of lower activity, higher tariffs, and other inflationary costs. But over time, our efforts to better harness the power of NOV's platform will drive higher profitability, allow us to continue to generate significant levels of free cash flow, and further improve responsiveness to our customers.

Technology and innovation remain core to NOV, and the actions we are taking will increase collaboration across our businesses. This will enable us to better leverage the unique combination of capabilities and data that reside under NOV's roof.

I'm confident our efforts will accelerate innovation and pioneer technologies to address the most pressing needs of our customers.

Clay mentioned noves future is compelling the incredibly smart talented and dedicated people of nov or continuously driving improvements. Across the organization. Positioning us exceptionally well to capitalize on longer term trends that will require more of noves technology and services to develop affordable, secure, reliable and cleaner sources of energy to power the world.

With that, we'll open the call to questions.

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press *1, 1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press *1, 1 again. We will pause for a moment while we compile our Q&A roster.

Our first question comes from Jim Rowley, with Raymond James. Your line is open.

Hey, good morning, guys, and thanks for all the details as usual. Clay, when you kind of step back and look at all the changes that have been going on, it seems like non-stop for several quarters.

And the things you've been doing and and there's a look at margin, they obviously have come down from kind of the trajectory we were hoping to be getting towards mid teens and kind of indicated to go down a bit further at least through 3Q. I'm just curious as you stand back and look you know, we revenues were actually pretty pretty decent this quarter relative to the the range. Yeah. And you look at kind of mixed changes that have been going on and and maybe where that leads you into 26. You look at the cost of that Jose and and Rodney just spend a bunch of time going over and and the impact that has like how are you thinking about where margins, you know, maybe could possibly bottom here in the next handful of quarters and then you know what ultimately gets you to starting to ramp that back up. Do you think because like like completely list blacking potential, but

Results. So, um, um, but Jose importantly, Jose really stepped you through our plan to address, which is to continue to take costs out. I'm very um, um, optimistic about that. Um, I think that's going to, um, going to going to, uh, for stall further margin declines to the second half of the year, but most importantly set us up for Recovery in 2026 when the offshore goes back to work. And, um, and we can get back on making, uh, better better margin progress. But, you know, if you, if you step back, if you kind of, get out of all of the headwinds and the drama around tariffs, and, uh, economic growth and excess supply of oil, um, you know, I I could not be more excited about the future of this company. There are 2, big things going on in the oil field that are really going to drive in obese Fortunes in the next decade. And the first is you know after 20 years of honing unconventional technology in North America and extending laterals from a few thousand feet out to a

mile out to 2 miles to 3 Mi and now 4 miles based on uh technology that nov and others have provided on on on really honing the unconventional technologies that made the Shale Revolution possible. You, you're really seeing this applied to Shale basins in international markets in Earnest by serious expert enp, unconventional Drillers. So people like, uh, uh, EOG and oxy and Continental going to a lot of different places. This is just isn't

Just, uh, Saudi Arabia and, um, uh, Argentina. Now we've, we've got, uh, a lot of people applying this this, uh, amazing technology to places like turkey, and Oman and Australia to Pakistan, the UAE to buchrain to Algeria. And and so uh, you know,

A successful unconventional development requires a lot of infrastructure build out which is right in nobes wheelhouse wheelhouse and and so I think that's really setting us up to support that effort and very excited about that. And of course, the other big thing that is going to drive, our fortunes is the re-emergence of deep water activity which has sort of been AWOL for the past decade or so. But as Exxon has proved in Guyana and others are starting to prove. Uh, there's still a lot of very economic reserves to find and deep water basins, and you've seen serious expiration and discoveries that are going to be developed in Namibia in uh, synagogue and Suriname, uh, Eastern Mediterranean. You're seeing more gas activity in Asia, the paleogene and the Gulf of America. Um all of this also requires the sophisticated tools and Technology. That's right in noves wheelhouse as well and it's going to continue to grow. So uh, strong economics. Um, you know, economic below, $50 a barrel.

Because they said, uh, expectation is Deepwater is going to continue to grow up to 13 million barrels a day or so by the end of 2026. It's going to supplant North America's shale as the new incremental source of production. And, uh, so I think we have much, much brighter days ahead. We got, you know, we do have some drama in the next few quarters, March and challenges with tariffs and inflation, etc. But I'm very confident we're going to power through that and see rising demand in these other areas.

And I I I guess I'll shift gears since you just laid that out. I presume the Deep Water Market is the bigger of the 2 next 5 to 10 year opportunities. That's for you. Um, probably but both yeah, probably. But I think both big trends will require a lot of nov technology and tools. And so we're we're uh we're here to make that happen.

I appreciate that. Thanks, Clay. You bet. Thanks, Jen. One moment for our next question.

Our next question comes from Stephen Jenaro with Steal. Your line is open.

Uh, thanks. Good morning everybody. Good to see you all.

So I was curious, at a high level, Clay, like when we think about the macro work, constantly trying to find a bottom and look for signs. What are you focused on over the next?

2,344 quarters, that kind of signifies to you that things are turning a corner. How do you sort of think about the market and maybe?

I know it’s maybe a little hard, but how does it compare to prior cycles? You’ve seen...

In the second half of 2026. We're going to start getting more inbound calls around equipment projects, spare parts. And we'll see that in the drilling side of our, our business, the production side of our business and energy equipment, um, despite low orders in Q2, which, which contributed a little bit to bill, um, the production side of our, our business is super healthy and executing very, very well and, and we expect, that'll that'll, uh, that'll continue. But for for right now, you know, this is, we're just in a market that, uh, um, with with, uh, pressure on commodity prices uncertainty and uh, demand growth, uh, OPEC bringing back so many barrels. There's just, no, it's taking a lot of urgency out of, uh, of our customers plans. And so that's that's what we're seeing. I think that will start to come back once we get into 2026, the excess barrels are cleared. Um the the industry continues to to prosecute the LNG projects that it's working on. Um and I think things will have a. Like I said I think a lot of much brighter Outlook.

Great, and thanks. And then the other question I had was around around cash generation. Can you sort of share kind of an updated thoughts on how we should think about working capital uh, as as the year evolves and and maybe kind of a, a normalized level of capex. We should be thinking about over the next couple of quarters.

Yes, Stephen. This is Rodney. Uh, thanks for that question. So so yeah, really really proud of the teams uh you know efforts over the last 12 months. We we highlighted a really strong and free cash flow conversion uh on a trailing 12-month basis of of of over 80% uh Q3 working capital as a percentage of Revenue, uh, at 30%, it's about a 300 basis, point Improvement uh, year on year.

Uh, as we look at the second half of the year, the the couple of data points. Uh, we mentioned, uh, you know, previously, you know, capex, uh, to be, uh, relatively consistent to last year, maybe slightly up and we've mentioned working capital as a percentage of sales for a full year uh basis to be uh in the in the range of 27% to 29%. So as we look at that in terms of free cash flow conversion uh on a on a full year basis, um, sort of getting to the to the top end of that range, in terms of 29% of working capital as a as a percent of Revenue, uh, that would, you know, get us to a free cash flow conversion of of uh, ibida to uh, to a little over 50% if we're, you know, you know, a little bit better in the working capital side, you know, closer to 28.27% that free cash flow. Uh, conversion would, uh, would move up higher from there but, you know, good, good outlook on the cash flow for the second half of the

Here. Great. Thanks for the details. Yeah, you bet.

1 moment for our next question.

Our next question comes from Doug Becker with Capital One. Your line is open.

Thank you, Clay. You've taken a lot of cost reduction steps over the last several years. I was just hoping to get some context about what size market you're preparing for. So, is it 1 but slightly higher activity than today, a little bit lower, and maybe it's some mix with...

More at the offshore, no less active, onshore, but just trying to get a sense for what, you're prepared for, and what, what else might be available on the, uh, cost reduction initiatives? Well, we're we're prepared for and hoping for a much larger market in all these categories and they again going back to what I said. Earlier, Doug, we see demand for unconventional technology and tools growing, uh, in international unconventional. We see demand for technology tools growing in deep water. I think that's out there in the future, but, but we're also realistic. Um, I know our customers right now faced some concerns, uh, about about, uh, commodity prices and the like, um, but, uh, you know, in the meantime, as Jose said, we're continuing to focus on becoming more efficient, um, combining facilities where we can closing, uh, locations where, where, hey, we're not making money in this market. Uh, we probably need to exit and so,

A demand requirements for oil. And they're also finding that offshores a nice place to find gas and convert it to LNG. And so that's uh that's another sort of growth driver. And so, uh, noves here to to, uh, um, adjust to the needs of our customers and demand for our products and Technologies, and, and that's our plan. Yeah. And and Doug, and Jose the tag on to that. So, you know, it's, it's Clay touched on. This isn't sort of a, a radical downsizing that we're going through because we think that the, the market has fundamentally changed. I think, you know, look, when we came into 2024, we were pretty optimistic about the outlook for the next several years and how well the company was positioned uh for for where the market was, heading with plateauing North American production, more activity, going, uh, to the international and and offshore um, what has changed is an acceleration of the unwinding of the OPEC plus the trade uncertainty. Um, and um and uh and and the the the the, the Tariff costs that have that, have that have come into that.

That said, I'll create a lot of, you know, geopolitical and macroeconomic uncertainty.

Um, so I mean, the way I look at it is these are transitory type items. The rapid unwind of OPEC+ is painful near-term but probably positive for the overall industry longer term. And so, as it relates to the actions that we're taking, this is really just a continuation and maybe a slightly harder lean into the actions that we have been taking over the last several years to really position ourselves to capitalize on where we see the market going.

Uh, into the future. So the thing is that I talked about, uh, related to, um, you know, the structural cost savings on driving process improvements and efficiencies. Those are things that we've been working on for some time. Also, we've been making a lot of investments in our manufacturing capacities overseas, knowing that that's where the market is heading. So there's really just a shift that's underway and a repositioning of the business. So don't take it as, "Hey, we're downsizing because future activity will be lower." No, we don't think that that's the case. We just think that activity will be positioned in different markets going forward. And frankly, we've been working on that for the last 4 or 5 years.

And that makes a lot of sense. Maybe just sticking with the cost.

Uh, our efforts of the $100 billion—just kind of spread it easily between the fourth quarter of this year and through 2026.

Uh, yeah, the I I think that's a a safe assumption. We're not getting into the specifics on each dollar per quarter. But honestly, as I, as I mentioned, these are there have been efforts underway, uh, for the last couple of quarters. And, you know, you've seen some small, restructuring charges over the last couple of quarters with some of the things that we've been doing. Uh, now we are, as I mentioned, leaning into it harder, also over the last 2, 2 or 3 quarters, we've been, uh, making, uh, plans for these changes. So, I think a ratable, uh, implementation over the coming quarters, uh, is a reasonable assumption. Um, but as as we mentioned the in the prepared commentary,

Um, you know, these are, we also, uh, have uh, some of these cost savings efforts being, uh, offset here near-term over the next couple quarters more than offset by the increase in in tariff expense. Uh, but then as we move through 2026, hopefully we make up, uh, all of that lost ground. Um, and, uh, we end up really well positioned to drive much higher margins.

Yep, start cutting out there. I think I got it. Thank you very much. Thanks, Doug.

1 moment for our next question.

Our next question comes from Grant Hines with J.P. Morgan; your line is open.

Hey, good morning, team.

Morning.

So you provide a pretty encouraging update on on the flexible side and and maybe it was just wondering if you could highlight some of the outperformance there, um, looks like a 1.6 billion of orders the last 5 quarters uh, across process systems and Sub, C flexible pipe. And I think, you know, that would be recently participating in in that patch of us flexible contract over over a billion in total. Uh, and if that's something that we could expect in bookings, kind of a 3,

The bill which came in below kind of our expectations. We didn't expect to hit 1 but we expected it to be closer, um, the 66% that we actually put up, um, was, uh, because we had, uh, pretty low orders for flexible pipe, um, in in the second quarter. Um, and, and while I'm on that, let me just go ahead and provide some additional color, uh, around that. Um, a lot of, a lot of a wide diversity, let's say of book to bills across the products in the in markets that the energy equipment segment serves. Um, uh, so elsewhere within Deep Water Production, you know, we make gas processing equipment, um, cranes, uh, swivel stacks and Turk morning systems for fpso. The the, the swivel stack uh um uh turret morning system business APL did over 200% book to bill in the second quarter. So very strong orders there. Likewise the gas processing business. Uh, well over 100%, uh, in that.

That business. Um, and so, the rest of the offshore production space, we saw pretty good demand in the second quarter. Um, Grant, you might be surprised to hear that demand for intervention and stimulation equipment which mostly goes into North American frat traditionally also put up a 100% booked to build what we're seeing there is you know very very low demand in North America But Rising demand for unconventional overseas in an international markets and so um I think it's it's prospects are rising and then the

Last uh or last 2 pieces of that. Um, offshore drilling pretty low levels of bookings, in the second quarter less than 30%, booked the bill for rig um uh due to the white space uh challenges over the next quarter or 2 and then finally in wind and offshore or construction um you know, north of 150% book to Bill really strong demand there. So the kind of the 4 Main in in markets that we see um, in in energy equipment, all vary pretty widely in the quarter, but they're all going to be a little bit volatile because our our orders, tend to be tend to be lumpy. So when I turn and I Look To The Future, the third quarter. Um, um,

Back to flexible pipe. We're pretty encouraged. We've already landed an order north of a hundred million dollars in that business unit in the first few weeks of Q3. And so I think that business stands a pretty good chance of getting back over 100% booked to bill. Um, in the third quarter, really strong, uh pipeline uh projects out there, likewise gas processing, uh, some large projects out there. Um, the tendering activities is actually up for gas processing year-over-year. Um, nevertheless, I think Q3 they've had strong shipments. I think it's, uh, likely to, to be a little bit below, 100% book to bill. Um, I think shifting to drilling, um, rig is going to continue to be pressured on orders. Probably pretty low in the third quarter. Even though there's some interest in uh uh improving hook load capacities and 20,000 PSI uh pressure

Capabilities, um, possibility of a new jack up in the second half of the year, um, but, uh, we're not counting on that. So, um, less than 100% book to bill in Q3, um, and I think stimulation equipment actually, uh, May surpass 100% book to bill in Q3. So you, you've got all these different. And lastly, too, let me let me cover off wind and, and offshore construction, it continues to be really strong. Um, we do expect a cable, a vessel, and a wind turbine installation. Vessel sometime in the second half of the year, and we've seen really strong demand for sub seed cranes as well. And so, I think that business, um, should should have a pretty decent second half with respect to. So we've got these businesses and in markets with sort of different levels of demand. But but uh, back to your original question, flexible pipe has really been executing super well and seeing really high um, uh, levels of demand.

Appreciate the the in-depth caller there and uh, maybe just as a follow-up, I think you you'd mentioned uh commissioning of some automation platforms and you know the robotic system sort of in the pipeline. Um and as we think about the recovery kind of an offshore could you maybe give us a sense of of what the rate of adoption has looked like on some of this technology? Thanks.

Sorry 134 uh systems that have been uh installed and commissioned and so oboli, we've got a good pipeline of uh systems that that that we're waiting to uh get get implemented um, robotics uh, has been um, extremely, uh, promising something. Uh, that is really getting, um, uh, a lot of attention and a lot of excitement.

Talked about that. We've got 4, uh, systems that are now commercial, uh, combination of both, uh, land and offshore Rigs, and we've got another 11 in the pipeline, and we're getting really positive feedback from our customers on that. In fact, uh, some of our customers are are, are now telling us that they think this is going to be the next top drive for for, for the industry. So that's that, that's super exciting. And see, uh, really good prospects for, for, for that offering. Plus, we have all of our, our Digital Services that support, uh, Drilling and frankly, more and more completion and, and, and now production, uh, related, uh, services. So, um, you know, across our platform, uh, you know, we continue to see really good. Uptake, sequentially revenue from our. Our digital products offering is up 7%. It's up 25%, uh, year-over-year. Um, you know, just a couple of quarters ago, uh, we introduced our uh Max production uh addition to our Max platform for our artificial lift business.

And, uh, we're getting really strong reviews from our from our customers on that front. And we saw basically, uh, installations and adoption for that double uh, over the last quarter. So everything's heading in the direct in the right direction from an Automation and digital standpoint um and see a lot of running room to go in the future.

Appreciate it.

Thanks Grant.

1 moment for our next question.

Our next question comes from John Daniel with Daniel Energy Partners. Your line is open.

Hey, good morning, guys. Thank you for including me. Uh, morning, John Clay, the last...

Couple, uh, you know, this morning Ranger announced that they're going to build out a couple of electric rigs that follow access doing that. I know this might be small for you guys, but in your mobile rig business.

Can you speak to the opportunity you see for sort of retrofitting the U.S. Well Service Fleet?

just the outlook for that.

Yeah, I would say, uh, John. Well, first of all, again, as a sort of a matter of policy, I don't like to comment on any particular customer or project, but, um, I will say, um, a lot of categories across, uh, fit-for-purpose oil and fuel equipment have converted to electrical over the past couple of decades. And so, you know, drilling rigs have moved from mechanical port to DC electric, and then to AC electric, and as you sort of make.

That progression. Um, uh and I would add in, we've done the same in W line units, in Coil, Tubing units and and all categories. There's sort of this interest in continuing continuing to advance the technology, um, uh, towards, uh, AC electric, which enables better controls electronically. And um, and what I would say as a category, Well Service Rigs and you know, this better than anyone, Well Service rigs, uh, across the US tend to be old and, um, you know, fairly basic and uh, I think there is a real potential there to, um, get better, more precise control with newer, more modern assets that are electric. I think it's, um, there's a potential to make those those service rigs safer. Um,

By making them electric and providing more, uh, sort of real-time monitoring, which enables condition-based monitoring and predictive analytics that can enhance maintenance programs and extend the lives of those assets and things like that. So it's sort of one more category of oil field equipment that I think can benefit by, uh, migrating to, uh, electric.

Okay. Um, I won't name the customer, but 1 company has ordered a 2 and 7 AC unit coil.

Uh, and I'm just curious. Do you think that the 2 and 7 H market could see some sort of structural redefinition in terms of size of CT units? It seems to keep getting bigger, just what maybe Jose is being there. Yeah.

Uh, tubing sizes, get bigger strings. Get longer equipment, getting bigger and bigger. Um, and um, the need for frankly, better Technologies to continue that trend of going from 1, mi laterals to 2 miles to to 3 miles and now in times we're seeing 4 miles. So uh, bigger bigger tubing diameter. Along with frankly, 1 of the things that, that, that we're really excited about is our downhole tools. Business is pioneered, um, an agitator system, uh, not just for the BHA of a cool tubing string. Uh, but has a, a really proprietary connection that can be used to join uh, 2 separate, strings of of of pipe and connect them to be able to um enable even longer uh lateral uh usefulness related to uh Coil Tubing drill out. So uh there's a lot of innovative things that continue to go on within nov and we're going to continue to be on the front end of those things.

Okay, well thank you for allowing me to ask a couple of nuanced questions. I'll turn it back over. You bet, John?

No, it's certainly on the callback over at Clay for any further remarks.

Thank you, Kevin, and thanks to all of you for joining us this morning. We look forward to discussing our Q3 2025 results with you in October.

Uh, Kevin, you may wrap up the call now.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect, and have a wonderful day.