Why Shares of National Oilwell Varco Dropped 20% in December



Shares of oil equipment manufacturer National Oilwell Varco (NYSE:NOV) fell 20% in December, according to S&P Global Market Intelligence. Much of that plunge can be chalked up to general market declines and dropping oil prices. The long-term concern, though, is that these events may further put off oil and gas capital spending that oil services companies have been anticipating for years.

National Oilwell Varco makes its hay from oil producers' capital expenditure budgets. Any piece of equipment a producer needs for extracting oil and gas -- from drill bits to floating production storage and offloading vessels -- chances are National Oilwell Varco makes it. Even though it has a dominant market share in big-ticket items like offshore drilling rig packages, its prospects will still wax and wane based on how much money producers are putting into new production.

That hasn't been the best business to be in over the past several years because, well, producers haven't been spending money. Either they drastically cut their budgets, or they opted to improve the performance at existing sources rather than develop new reservoirs. 
National Oilwell Varco's management has been saying for some time that it anticipates an uptick in spending over the next few years. The number of new projects slated to produce first oil over that time may not be enough to offset declines from existing sources and meet new demand. It anticipates double-digit revenue growth between now and 2021 with oil around $65 per barrel.
Unfortunately, oil prices have dropped considerably since that forecast, and lower oil prices could further delay expected capital spending. If that is the case, National Oilwell Varco's results could continue to be underwhelming.


GET ONE DAY FREE TRIAL>>>GOLD SILVER TIPS

Comments

Post a Comment

Popular posts from this blog

The positive rally could be testing all the way up to 3400-3500 levels

Image
MCX Crude Oil futures technical chart has taken the formation of “Right angled Ascending broadening wedge” pattern in daily time frame. Previously few sessions ended up in bullish trend along with some corrections inside the channel. As per the technical aspects based on the current price action, the market is expected to continue on bullish trend. The continuation of the trend will be confirmed once the prices breaks above a key resistance holding at 3350. The positive rally could be testing all the way up to 3400-3500 levels in the upcoming sessions.An alternative scenario indicates that if the key resistance zone holds strong then the market might have a chance to retest the same and revise the trend to bearish once again. Such reversal could possibly test up to 3200-3100 levels. Key support holds at 3100. GET ONE DAY FREE TRIAL>>> GOLD SILVER TIPS
Read more

US oil prices rise above $50 on trade talk hopes

Image
US West Texas Intermediate (WTI) crude oil futures were at $50.14 per barrel as at 0021, up 36 cents, or 0.7 percent from their last settlement. US crude oil prices on Wednesday rose above $50 per barrel for the first time in 2019 on hopes that Washington and Beijing can resolve a trade dispute that has triggered a global economic slowdown. US West Texas Intermediate (WTI) crude oil futures were at $50.14 per barrel as at 0021, up 36 cents, or 0.7 percent from their last settlement. International Brent crude futures had yet to trade. "The mood was ... boosted by signs of further progress in trade talks between the US and China," ANZ bank said on Wednesday. The world's two biggest economies will continue trade talks in Beijing for an unscheduled third day on Wednesday, US officials said, amid signs of progress on issues including purchases of US farm and energy commodities and increased US access to China's markets. State newspaper China Daily ...
Read more

Can the Saudi Put, Put a Floor in Crude Oil

Image
Just as the Federal Reserve is thought to use policy to protect equity markets, Saudi Arabia tries to manage crude oil prices by manipulating its production levels writes Phil Flynn of The PRICE Futures Group. You have heard about the so-called Fed put. That is a term that means the Federal Reserve has the markets back. If the markets or economy start to falter, the Fed’s plunge protection team will get into gear and adjust monetary policy to create a floor for the market. That in turn gives investors confidence to take on more risk because, even if the market gets weak, the Fed won’t allow it to crash. With the recent rebound in crude oil, traders are now talking about the Saudi put. That is that Saudi Arabia will not allow oil prices to fall and if it does, they will cut production accordingly. In fact, the Saudi announcement that they want $80 a barrel for crude, and that they will reduce their exports by 800,000 barrels-per-day is sending a signal to the market that the w...
Read more