National Oilwell Seeks Bargains in Depressed Oilfield Market

National Oilwell Varco Inc is slowing down its share buyback program to preserve cash for acquisitions, driven by the need for consolidation in an industry beset by low crude prices.

 

The largest U.S. oilfield equipment maker is in talks over several potential deals, its chief executive said on Tuesday, which would add to two acquisitions already completed this year.

 

"We are currently slowing our share repurchases in view of the potential acquisition candidates coming into sharper focus," Clay Williams said on a conference call with analysts after the company reported first-quarter results.

 

National Oilwell's $3 billion share buyback program has begun at a blistering pace, with just $900 million remaining under a three-year program announced last September. As of March 31, the company had $3 billion in cash and cash equivalents.

 

But a 44 percent drop in global crude prices since June has prompted oil producers to scale back spending, weighing heavily on demand for oilfield services and equipment.

 

National Oilwell's first-quarter revenue was lower than analysts had expected and the company forecast declining revenue for the next few quarters. Its shares fell as much as 8 percent to $50.18.

 

For an acquisitive company such as National Oilwell, which has spent more than $13 billion on acquisitions in the last 10 years, according to Thomson Reuters data, the downturn could throw up some bargains.

 

"These downturns provide pretty extraordinary opportunities to deploy capital, to kind of reposition ourselves for the next upturn," Williams said. "That's what were looking to do."

 

While declining to identify specific targets, the CEO said he was "really interested" in what might emerge from Halliburton Co's $35 billion takeover of Baker Hughes Inc.

 

To alleviate regulators' antitrust concerns, Halliburton has outlined some of the oilfield services assets it will seek to divest.

 

Evercore ISI analyst James West said National Oilwell's balance sheet was in "very good shape" and that the company might seek assets to fit with its wellbore technologies business and its completion and production solutions division.

 

Wellbore technologies makes equipment used in drilling, while the completion and production solutions unit makes equipment used in hydraulic fracturing.