With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-457-NOV

The oilfield equipment and technology provider is based in Houston and is home to brands such as ASEP, BLM, and Wilco.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-374-national-oilwell-varco

National Oilwell Varco is a Houston-based provider of equipment to the upstream oil and gas industry.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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NOV, founded as National Oilwell Varco in 1862, designs, manufactures, and sells advanced systems, components, and products for oil and gas drilling, production, and the broader industrial and renewable energy sectors in the U.S. and internationally. NOV operates through two main segments: energy equipment and energy products and services. The Houston-based company’s portfolio includes drilling optimization technologies, solids control, waste management, hydraulic fracturing stimulation systems, and offshore production solutions.

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NOV (NOV): Company Profile, Stock Price, News, Rankings

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Good day, and thank you for standing by. Welcome to the third quarter 2026 NOV Inc.'s 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. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising 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 to hand the conference over to your speaker today, Amie D'Ambrosio, Director of Investor Relations. Ma'am, please go ahead.

Welcome everyone to NOV's third quarter 2026 earnings conference call. With me today are Jose Bayardo, our Chairman, President, and CEO, and Rodney Reed, our Senior Vice President and CFO. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities 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. Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

On a US GAAP basis for the third quarter of 2026, NOV reported revenues of $2.23 billion and a net income of $90 million, or $0.25 per fully diluted share. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA, as defined in our earnings release. Later in the call, we will host a question and answer session. Please limit yourself to one question and one follow-up to permit more participation. Now, let me turn the call over to Jose.

Thank you, Amie. Good morning, everyone, and thank you for joining us. NOV delivered another strong quarter. Our teams continued to execute well and build on the operational momentum we established earlier this year with improving performance across much of our portfolio. NOV generated revenue of $2.23 billion during the third quarter, an increase of 4% sequentially and 2% year-over-year. Solid incremental margins on the increase in revenue resulted in $281 million of adjusted EBITDA. Over the past several calls, we've talked about two priorities for NOV. First, improving profitability and returns by operating more efficiently, simplifying how we work, and better leveraging the capabilities and scale of the broader NOV organization. Second, positioning NOV to capitalize on attractive growth opportunities where we have durable competitive advantages and provide products and services that drive higher value for our customers. We're making meaningful progress on both fronts.

This quarter, both reporting segments delivered improved margins, reflecting better execution, continued efficiency gains, and the benefits of the actions we've been taking across the company. At the same time, the industry outlook continues to improve, especially in markets where NOV is particularly well-positioned. While years of limited investment have left relatively little excess capacity across important parts of the service and equipment supply chain. Let me start with the Middle East. As we discussed on our last call, activity in the region had settled into what appeared to be a new operating normal following the disruptions earlier in the year. While takeaway capacity and operating conditions generally improved through most of the third quarter, maritime security continued to deteriorate, creating logistical disruptions and higher costs that affected deliveries of equipment and spare parts and delayed certain tenders.

Despite these challenges, our team in the Middle East delivered sequential and year-over-year growth of over 20% during the quarter. We remain focused first and foremost on the safety of our people and on serving the needs of our customers. I want to thank our employees and our customers in the region who continue doing critical work to maintain the essential flow of energy to the world in an extraordinarily difficult environment. As tensions escalated late in the quarter, we began to see some moderation in regional activity, which we expect will continue through at least year-end. While these challenges will likely persist over the medium term, we remain focused on the importance of the region to the global energy markets over the long term.

The disruption of Middle East supply has required significant draws on global inventories, and experts suggest that replenishing those inventories while also meeting ongoing demand could take up to two years after flows out of the region normalize. Rebuilding global inventories will require increased investment, some of which is beginning to take place in other regions as countries and producers seek to strengthen energy security and diversify sources of supply. But there are limits to how far supply can diversify. The Middle East holds roughly half of the world's proven oil reserves, and as Amin Nasser recently put it, "Markets can diversify suppliers, they cannot diversify geology." That's why we continue to view the Middle East as one of the most important and attractive markets for NOV over the long term.

Maintaining and ultimately increasing production from the region will require significant investment, particularly as unconventional resources become a larger part of the production mix. Economically developing those resources requires many of the same higher specification drilling completion and production technologies that we've perfected to help enable the U.S. shale revolution. We're already seeing increased investment in these technologies as unconventional development expands across the region. A similar pattern is developing across a number of other international land markets. In Argentina, we're capitalizing on attractive growth opportunities as development of the Vaca Muerta continues to scale. Our revenue in the country has now grown double digits year over year for three consecutive quarters as operators move toward increasingly industrialized development programs.

We're seeing greater demand for higher performance motors and other drilling technologies, and we're introducing new completion and drill out solutions to help operators improve efficiency as lateral lengths and completion intensity increase. Importantly, there's still considerable opportunity for us to help operators improve costs and efficiencies with better equipment and technology. We're also benefiting from investment in the infrastructure required to support growing production. During the quarter, we secured orders for production and midstream equipment associated with natural gas infrastructure in the Vaca Muerta, illustrating the breadth of NOV's opportunity as development scales. Argentina is just one example, and we're also capitalizing on opportunities developing in other emerging international unconventional resource markets, including Algeria, Australia, Egypt, and Pakistan. Customers in these countries are increasingly incorporating the technologies we've developed and proven in more mature resource plays.

In Venezuela, we're also seeing activity and customer engagement increase, with growing inquiries across a range of NOV businesses, including production and midstream equipment, artificial lift and pumping technologies, drilling systems, and digital solutions. While still small, our revenue from Venezuela is growing at a high rate, and we see the potential for it to materially increase given the need to reinvest in the country's asset base. More broadly, as international development programs scale and become more technically demanding, they require greater technology content, creating a long runway of opportunity for NOV. North America presents a somewhat different opportunity. Activity continued to improve during the quarter, led by private operators and a normal seasonal increase in Canada. Public operators remain disciplined with capital, and at least for now, they're not making a broad push to materially increase activity. We're seeing a similar dynamic among service companies and drilling contractors.

For the most part, they remain very disciplined and want to see meaningful, sustained improvement in pricing and returns before committing significant capital to their fleets. Importantly, there is little excess high specification equipment capacity available today. As a result, we believe even a modest increase in operator activity could tighten the market fairly quickly, improving utilization, pricing, and ultimately the returns required to support broader fleet reinvestment. Today, we're seeing a few more agile private customers begin investing ahead of what they and we soon believe will be higher utilization and pricing. During the quarter, we booked the sale of two new 2,000 horsepower high spec land rigs, a major upgrade to another rig that included a DC to AC conversion, and an order for our new TDS-1400 top drive, which provides the higher torque and horsepower required to drill increasingly demanding ultra long lateral wells.

At the other end of the spectrum, major operators are helping support selective investments in leading-edge technologies that can structurally improve safety and efficiency, including robotic systems and fully electric well servicing rigs. So while capital equipment investment in North America remains constrained, the customers who are investing are generally focused on higher specification solutions that lower total well costs, improve reliability, and enhance safety. Customers' relentless focus on improving efficiency also continues to drive demand for our shorter cycle technologies, tools, and services. For example, our drill bit business delivered a record quarter with particularly strong growth in the Permian, while our downhole tools business generated record motor revenues and continued to gain traction with several differentiated drilling technologies. The performance and reliability of these products are helping us deepen penetration with customers and gain share. Digital is becoming an increasingly important part of that same efficiency equation.

During the quarter, we were awarded a contract to provide digital services across more than 30 rigs for a large U.S. operator, combining electronic drilling recorders and remote monitoring to standardize data capture, improve operational visibility, and support more consistent decision-making across the fleet. North America remains one of the most important technology markets in the world and an extraordinary proving ground for NOV as customers continue pushing the limits of lateral length, drilling speed, automation, and capital efficiency. That creates opportunities for us to provide more technology and value on each active rig, and many of the solutions proven in North America will ultimately help us drive growth in the international unconventional markets we just discussed. Finally, turning to offshore, where we continue to see some of the strongest industry momentum and some of the most attractive opportunities for NOV.

In offshore drilling, contracting activity has accelerated meaningfully this year. Floater contract days awarded year-to-date have more than doubled compared to the same period last year. Utilization remains high, and leading edge day rates for high specification rigs are approaching $500,000 per day, levels that support greater investment in upgrading the existing fleets. These improving conditions are translating into stronger demand across our drilling equipment and aftermarket businesses. As rigs prepare for new contracts and return to work, customers need spare parts, recertifications, and equipment upgrades, and increasingly, they are investing in automation and robotics. Our offshore aftermarket business strengthened again during the quarter, with spare parts backlog increasing for the fifth consecutive quarter. We also secured additional upgrade opportunities, including an award to increase a drill ship's hook load capacity to over 1,400 tons and add Multi-Machine Control functionality.

We continue to see growing customer adoption of our automation and robotic systems as operators and drilling contractors look to improve safety, consistency, and efficiency. The longer-term outlook is increasingly promising. The offshore fleet is aging at the same time it is being asked to drill more efficiently in deeper water and increasingly challenging operating environments. We believe that combination will continue to create attractive aftermarket and equipment upgrade opportunities, and over time, should increase the need for new high specification rigs. The outlook on the production side of the offshore market is, in many respects, even more compelling. As shown on slide seven of the earnings slide deck we posted on our website this morning, offshore investment is expected to remain at very strong levels through the end of the decade.

South America will remain a significant market led by Brazil, Guyana, and Suriname, while investment is expected to increase meaningfully across Africa, Asia, Australia, and Europe. Much of that incremental activity is also moving into deeper water, harsher operating environments, and more gas-intensive developments, creating a particularly favorable mix of opportunities for NOV. As slide eight illustrates, the median water depth for FPSOs in the development pipeline is approximately 1,400 meters, compared with roughly 420 meters for the active fleet today. They are also increasingly gas-intensive. Average gas handling capacity for the development pipeline is approximately 336 million cu ft per day, compared with 189 million cu ft per day for the existing fleet. Deeper water, greater gas processing requirements, and increasingly harsh operating environments translate into larger and more sophisticated production systems. That plays very well to NOV's capabilities that are illustrated on slide nine.

When we look at both the breadth of the market and the increasingly demanding technical requirements of the projects being developed, we feel very good about the offshore production opportunity over the next several years. If you look at slide 10, you can see that there's an important lag between when an offshore development reaches FID and when NOV ultimately receives orders for much of the equipment we supply. As projects move through engineering, contracting, and procurement, our orders generally follow FIDs by a few quarters, with the exact timing varying by project and equipment package. You can see that higher FPSO FIDs in 2022 and 2023 contributed to elevated NOV offshore bookings in the periods that followed. The moderation in FIDs during 2024 and 2025 is reflected in the slightly muted pace of production equipment bookings we're experiencing in 2026. Importantly, the investment cycle is turning higher.

FPSO project sanctioning is accelerating meaningfully in 2026, and the pipeline for 2027 remains very strong. Consistent with the historical lag shown on slide 10, we expect those projects to increasingly move into equipment procurement as we progress through 2027 and into 2028. We're already seeing that development in our sales pipeline, with a growing number of projects moving through engineering, tendering, and commercial discussions across our businesses. Large offshore awards are inherently lumpy, and their timing can move between quarters. But the more important point is that today's bookings largely reflect yesterday's project sanctioning environment, while the acceleration in FIDs we are seeing today represent a broader opportunity set developing in front of us.

Given the strength of the project pipeline, the increasingly attractive technical requirements of future developments, and NOV's strong positions across many of the critical technologies those projects require, we have growing confidence in a robust offshore production equipment opportunity over the next several years. That brings me back to the earnings potential we discussed last quarter. As a reminder, we looked at the strongest quarterly performance each of our businesses had delivered over the past several years, excluding the seasonally strong fourth quarters, annualized those results, and concluded that NOV's portfolio has demonstrated the capacity to generate $1.5 billion of annual EBITDA. This was not a forecast with a defined timeline. The point was that none of our businesses needed to achieve performance they had not recently demonstrated.

What is needed is a reasonably constructive, broad-based market environment that allows more of them to perform near their potential at the same time. Our confidence in our ability to achieve and exceed this level is increasing, and we see three things moving in our favor. First, we're beginning to see broader improvement across global energy markets. Second, we expect a disproportionate share of supply growth to come from areas where NOV is particularly well-positioned, including deepwater offshore and international unconventionals. Third, we continue to drive operational efficiencies. We're simplifying how we operate, improving manufacturing productivity, better leveraging our global infrastructure and supply chain, and reducing duplication across the company. Importantly, our path to $1.5 billion of EBITDA can be supported by the capacity we already have in place, creating the opportunity to drive attractive incremental earnings, cash flow, and return on capital employed.

The timing will depend on how customer investment develops, and the path will not be perfectly linear. But the improving performance within NOV and the market opportunities we discussed today give us increasing confidence in our ability to demonstrate materially greater earnings power over the coming years. We've been positioning the company for the market conditions we anticipate ahead, and we're committed to delivering stronger margins, greater cash flow, and higher returns. To the NOV employees listening today, thank you for everything you do to serve our customers, keep one another safe, and make NOV better every day. Rodney?

Thank you, Jose. Consolidated revenue for the quarter was $2.23 billion, an increase of 4% sequentially and 2% year-over-year. Net income was $90 million, or $0.25 per fully diluted share. Operating profit was $142 million, which included $28 million in pre-tax other items and an $18 million net write-down of fixed assets, primarily related to facility closures. Adjusted operating profit was $188 million, or 8.4% of sales, and adjusted EBITDA totaled $281 million, or 12.6% of sales. During the quarter, we paid dividends of $32 million and repurchased 800,000 shares for $15 million, bringing our total shares repurchased over the past 10 quarters to 44.5 million shares for $689 million, over 10% of shares outstanding. For the full year, we've returned $242 million to shareholders, excluding the $32 million supplemental dividend in the second quarter.

Free cash flow for the quarter was a use of $47 million as the ongoing conflict in the Middle East delayed certain milestone billings and collections, and our supply chain teams continue to maintain inventory buffers given ongoing disruptions to logistics. We expect a significant improvement in free cash flow with working capital as a percentage of fourth quarter annualized revenue to be around 25%. We also anticipate our conversion of EBITDA to free cash flow in 2027 will return to the 50% range. Full-year capital expenditures should be between $340 million and $360 million, and we forecast our annual effective tax rate to be around 30%. We delivered 35% sequential incremental EBITDA margins in the third quarter after delivering 80% incremental margins in the second quarter due to our improving cost structure and operational efficiencies.

Including our fourth quarter guidance, we expect the team will deliver around 7% revenue growth from the first half to the second half of 2026, with strong incremental EBITDA margins in the mid 40% range, excluding tariff refund benefits. Moving to our segments, starting with energy equipment. Third quarter revenue was $1.22 billion, flat sequentially and down 2% year-over-year. EBITDA increased to $187 million or 15.3% of sales, a year-over-year improvement of around 90 basis points, driven by strong operational execution and improved margins in backlog. Capital equipment sales accounted for 63% of the segment's revenue, with increased demand for drilling and production equipment partially offsetting the higher contribution of certain offshore projects in the prior year that have been completed.

Aftermarket sales and services were 37% of segment revenue, essentially flat compared to the prior year, as improving drilling aftermarket activity offset lower aftermarket revenue from our intervention and stimulation equipment business. Capital equipment orders for the third quarter were $577 million, a 22% increase sequentially, resulting in a book-to-bill ratio of 91%. Orders reflected solid demand for offshore production and marine construction equipment. We continue to expect our order intake in the second half of the year to outpace the first half, but anticipate our book-to-bill ratio will remain below one times. However, as Jose discussed, given the robust outlook for offshore FIDs, we expect 2027 bookings to meaningfully exceed 2026 and 2025. Our subsea flexible pipe business achieved its seventh straight quarter of year-over-year revenue, EBITDA, and margin growth, supported by strong execution on a higher-margin backlog.

Outlook for the business remains bright, and we continue to anticipate industry demand for flexible pipe to exceed supply through the end of the decade. Additionally, the business is expanding solutions for customers, booking the first award of our proprietary subsea automated pig launcher, which enables remote automated pipeline inspection or pigging without a vessel. As subsea tiebacks lengthen and vessel availability tightens, we see future opportunities for these systems. Revenue in our process systems and marine construction business declined year-over-year, reflecting higher prior year contribution from projects that were recently completed. Strong execution on higher-margin backlog resulted in improved EBITDA margins. We continue to see strong demand for our processing technologies, mooring and gas offloading equipment, and offshore construction cranes, which drove the majority of the segment's orders this quarter.

Looking ahead, as Jose mentioned, we see very positive trends in the offshore development pipeline with deeper, higher gas and gas condensate reservoirs and in some cases, harsh metocean conditions. These trends expand the need for advanced and larger gas processing equipment, turret mooring systems, and subsea flexible pipe, all of which are critical technologies where NOV has strong competitive advantages. Our production and midstream business unit achieved double-digit year-over-year growth, reaching its highest quarterly revenue ever. The business also recorded record orders supporting the build-out of pipeline capacity in Argentina and production optimization projects in Oman, Nigeria, and Venezuela. The team also realized over 20% growth in North America from higher sales of production chokes and pumps.

Our drilling capital equipment revenue increased double digits both sequentially and year-over-year, led by strong execution from our Saudi rig manufacturing team and improving demand for our latest drilling equipment and automation technologies. Turning to our aftermarket business, revenue from drilling aftermarket increased in the low single-digit percentage range both sequentially and year-over-year, supported by improved spare parts sales and higher service and repair work. Improving day rates and floater utilization are supporting demand for services, repairs, and upgrades. After two straight quarters of year-over-year double-digit growth in spare parts bookings, backlog for spare parts increased in the high teens percentage range compared to the third quarter of 2025. In summary, energy equipment continues to deliver strong financial results, with margins expanding for four straight years, and given what we anticipate through year-end, we expect that to extend to five years.

Additionally, with offshore FIDs in 2026 and 2027 expected to exceed 2024 and 2025 by around 50%, we anticipate strong bookings in 2027 and 2028, which combined with driller floater utilization that should reach a 12-year high, positions the segment well for growth. For the fourth quarter, we expect revenue in our energy equipment segment to decrease 4%-6% compared to the fourth quarter of 2025, as growth in drilling aftermarket will be more than offset by the completion of certain offshore production-related projects. We expect EBITDA to be in the range of $175 million-$205 million. Moving to the Energy Products and Services segment. Our Energy Products and Services segment generated revenue of $1.06 billion, an increase of 9% both sequentially and year-over-year. Adjusted EBITDA totaled $153 million, or 14.5% of sales.

Excluding tariff refund benefits, third quarter EBITDA incrementals were 39% sequentially, led by strong performance from our drill pipe, drill bits, fiberglass, and artificial lift businesses. For the third quarter, the sales mix within Energy Products and Services was 50% service and rental, 32% capital equipment, and 18% product sales. The segment's service and rental revenue increased mid-single digits both year-over-year and sequentially. NOV Digital achieved record quarterly revenue, increasing by double-digit percentage year-over-year and sequentially from market share gains and growing adoption of our digital completion technologies. Our ReedHycalog drill bit business delivered another strong quarter, with revenue growing over 20% year-over-year. Growth was led by additional market share gains in U.S. land, where revenue grew 30% year-over-year. In addition to greater adoption of higher performance cutters in international unconventionals, with revenue growing in Latin America and the Middle East.

Our downhole tools business followed similar trends, delivering low double-digit percentage growth year-over-year and sequentially. The business unit benefited from strong year-over-year revenue growth in Latin America and the Middle East from increased rentals of drilling motors, supporting our customers' focus on efficiency, developing their unconventional resources. Our well site services business had essentially flat revenues. However, EBITDA margins improved both sequentially and against the prior year. The higher margins were the result of accelerating adoption of our iNOVaTHERM processing technology, which provides more efficient handling of drilling cuttings, and increased utilization of TUNDRA MAX temperature control systems, as well as exiting lower-margin markets. Capital equipment revenue for the segment increased mid to high single-digit percentage range year-over-year and sequentially.

Revenue from our fiberglass systems business increased mid-teens percentage year-over-year and low double digits sequentially, led by strong demand from oil and gas markets and record sales for our fuel handling products. In the Middle East, we realized strong growth and demand for our spoolable pipe for the build-out of production infrastructure, while in the U.S., we significantly increased deliveries for larger diameter composite pipe for produced water systems in West Texas. Strong bookings momentum continued, with the business unit achieving its fourth straight quarter of book-to-bill greater than 100%, with a backlog 30% higher than last year and demand increasing, we expect to see continued growth for this business. Our drill pipe business also had a strong quarter, with revenue up around 20% year-over-year. Trailing 12-month book-to-bill exceeds 120%, with increasing demand for offshore and larger diameter pipe, and backlog improved 50% year-over-year.

Product sales increased 5% year-over-year and low teens percentage sequentially. Growth was led by increased sales of drill bits and drilling tools into the eastern hemisphere and ESPs in the U.S. In summary, increasing adoption of our digital solutions, higher performance technologies that enable efficiencies and longer laterals, and improving manufacturing throughput on a growing backlog of capital equipment led to strong top-line growth with solid incremental margins. For the fourth quarter, we expect Energy Products and Services segment revenue to be up 6%-8% year-over-year, and EBITDA in the range of $140 million-$160 million. With that, I'll turn the call back to Jose.

Thanks, Rodney. Before we open the call for questions, I'll leave you with a few thoughts. We're seeing a broad recovery across many of our key markets, particularly in areas NOV has strong technology positions and significant opportunity to participate. We are pleased with the progress we're making against the two priorities I mentioned at the beginning of the call: improving profitability and positioning NOV to capitalize on attractive growth opportunities. That combination gives us increasing confidence in our ability to deliver materially stronger earnings, cash flow, and return on capital over the coming years. Our focus remains on execution, serving our customers well, and converting the opportunities in front of us into long-term value for our shareholders. With that, we'll open the call for questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In fairness to all, we ask that you please limit yourselves to one question and one follow-up. One moment while we compile our Q&A roster. Our first question will come from the line of Arun Jayaram with JPMorgan Securities. Your line is open. Please go ahead.

Yeah, good morning, Jose and Rodney. I wanted to see if we could kind of zero in on thoughts around energy equipment as we approach 2027. We see two kind of trends, Jose. As Rodney mentioned, book-to-bills have been trending below one for just a few quarters, but you did highlight expectations around strong order momentum in 2027 with flexibles and offshore production equipment. Can you just talk us about how you think those two kind of forces will play out as we think about 2027? I know we ourselves are modeling low single-digit growth in energy equipment next year, but just want to get your thoughts on that.

Yeah. Appreciate the question, Arun. Look, we spent a bit of time in the prepared commentary really talking about the outlook for 2027 and kind of what we see in the pipeline. Short takeaway is, it looks fantastic to us. Really wanted to spend a little bit of extra time this morning highlighting what we see and why we, and quite frankly, I think the rest of the offshore equipment community, is so optimistic about the outlook for 2027. So, really as it relates to the overall performance of this segment and of the business as a whole, offshore production is just one component, but it has been and continues to be a large component of our bookings and our revenue base going forward.

So probably helpful to talk just a little bit more about sort of the bookings cadence, not just 2027, but kind of what we've seen year to date and where we see it going. First of all, as we anticipated and as we've been communicating for really since the end of last year, we saw a nice step-up in bookings from the rate of intake that we saw in the first half of the year. So 91% book-to-bill, in Q3. The question is, and as we kind of touched on, that we really see a lot of excitement around 2027. But let's talk about Q4 a little bit, because I know it's top of mind for a lot of folks.

For us to hit the range that we're talking about previously, the 90%-100% range, we'd need to hit, obviously, it's simple to do the math, around $750 million or so in bookings in Q4. With what we're seeing in terms of timing of certain projects at this point, we think that range is probably a little bit ambitious. So the best estimate right now is that we'll finish the year at the book-to-bill of between, call it 80%-85%. We obviously see that moving considerably higher in 2027. Look, I don't want to downplay the importance of bookings, but one of the things I want to remind folks of is that we currently have $4 billion in backlog. So we're in great shape. Also, keep in mind that only about 28% of our revenue comes from the formally reported capital equipment backlog.

As we've tried to highlight, we obviously have other parts of the business that don't formally report backlog, but those are still capital equipment businesses, and they're doing great right now, right? So rig aftermarket, also within the Energy Products and Services segment, five straight quarters of a building backlog. Our fiberglass systems business, four quarters in a row with a book-to-bill of greater than 100%, backlog up 30% versus last year. Our drill pipe business, 120% book-to-bill over the last 12 months and backlog up over 50% year over year. Put those three components together, and that's effectively more than another billion dollars of backlog. So feel really good about the direction of the business going forward.

I think specifically as it relates to the EE segment in 2027, we have seen really good performance from that segment over the last four years with improving margins over that timeframe, improving backlog, improving revenue, improving throughput through our manufacturing operations. Obviously, as Rodney highlighted, if we meet the midpoint of our guidance for Q4, it'll be five straight years of margin improvement. As we get into 2027, we certainly see order intake picking up significantly with what we see in the pipeline, and we try to cast a light on that. How much the growth and revenue out of backlog improves during the course of 2027 will depend on the timing of when those orders land. Usually, there's a slow start-up on projects. So anticipate momentum to continue to build through the second half of the year.

But really, as we look at EE's upside potential for 2027 versus 2026, the thing that we're most excited about is what we're seeing is in our drilling aftermarket business, where, as we highlighted, backlog has been improving steadily. As you've heard from our customers, including one yesterday, the pace of deep water drilling tenders has accelerated significantly. Day rates have reached $500,000 a day leading edge. That's driving a lot more rigs that will be turning to the right in the second half of 2027. More opportunities for just routine spare parts sales, more opportunities for upgrades, and probably a few large reactivation projects. Really, if we look at our rig project backlog, it's been growing at a pretty healthy clip. Right now, I think it's the highest level of project-related backlog that we have since 2024.

Feel really good about the outlook for the EE segment in 2027, and sorry for providing probably more detail than you wanted.

We always appreciate the color. Jose, we have observed from a number of different OFS conference calls, maybe a different perspective on how the Middle East will move forward, thinking about Q4 and maybe into 2027. Can you maybe just highlight what you are seeing on the ground? You did mention that there are some impacts to drilling activity from the maritime security situation, but love to hear what you are seeing and embedding in terms of your Q4 outlook.

Yeah. I would say, first and foremost, hope and pray for a very quick resolution to all the tensions in the region. Secondly, I wish I had a crystal ball to where I could tell you exactly what is going to happen, Arun, but it is really not possible right now. I was in the Middle East the last week of September visiting with customers. It is an interesting environment and frankly, a very constructive environment from the operators in the region. Look, they understand the importance of what they do for the global community, and they are obviously struggling right now from a logistics standpoint, both in terms of getting what they need into the region, but also very importantly, getting commodity out of the region to provide that energy flow that the rest of the world really needs.

They are intent on making sure that they can quickly and efficiently respond when conditions present themselves to when they can ramp up production activity and the flow of oil and gas out of the region. One of the things I wanted to emphasize in the prepared commentary is just the importance and the long-term value of the region to the world and to NOV's business. Specifically to us, short term, as we touched on, is embedded within the guidance. Due to rigs that have been suspended and customers that have adjusted their drilling programs here near term, what we are currently seeing is that we expect the Middle East to be down in the mid-single-digit range for Q4, and hard to predict what happens beyond that at this point, Arun.

Thank you. Our next question will come from the line of Jim Rollyson with Raymond James. Your line is open. Please go ahead.

Jose, when we were on the road last month, you talked a bit about aftermarket, rig aftermarket, and you just, in answering Arun, talked about it a little bit more. My math is you are probably on track to be down about $400 million or so of revenues this year versus 2024, which is when the offshore rig count last peaked. When you look at what some of your customers are saying, what you guys have said, Rodney talking about getting back to a 12-year high in the floater market, just maybe help us understand a little bit how we should think about the timing of aftermarket ramping back up as the offshore activity ramps back up.

Yeah. Good question, Jim. Yeah, directionally, you are right with where we sit today, and that really presents the opportunity for the upside that we are talking about. As I tried to convey in the response to Arun, we are seeing this gradual improvement, and Rodney gave some specifics in terms of the percentage increase, five straight quarters in a row of effectively continued modest improvements in that backlog that have set us up really well for the coming year. Expect that to continue to move forward as more and more rigs come online. Right? The number of rigs that will be turning to the right in the second half of the year will be a bit higher than certainly where we sit today. So we think we will continue to see a steady progression in terms of demand for spare parts.

Over time, as those day rates continue to tick up, that will create more incentive for people to not only drive more upgrade opportunities to us, but also some of the last remaining and, frankly, somewhat sizable reactivation projects. So there is already more talk of those taking place. Basically, we expect to continue to see a steady ramp with second half of the year being a good improvement over the first half.

Appreciate that color. As a follow-up, I do not know if you have an easy answer to this, but you talked a lot about this kind of unconventional opportunity that is blossoming internationally and kind of following on all the technologies that you have developed in North America from over the past decade plus. How do you put the scale of that international unconventional opportunity, maybe relative to what you have been able to generate over time through the North American side of things?

Yeah. To be determined exactly how large that becomes, Jim, but it is going to become an increasing mix of the energy market going forward. As we look forward, our best view is that there are going to be two primary drivers of incremental production to meet the world's growing demand for oil and gas. You have deep water offshore, which has incredibly compelling economics, but those are huge investment opportunities and longer cycle barrels. Then you have international unconventional resources, which are still, quite frankly, in the very early days, but ramping pretty quickly. Right now, obviously, a lot of the momentum in international unconventionals has been down in Argentina with Vaca Muerta, which is full speed ahead and continuing to accelerate. The other most mature area and rapidly accelerating area was the Middle East.

To be determined how things evolve within that region, given what we just discussed with Arun's questions. But over the long run, that will continue to ramp, I think, in a pretty meaningful way. As we touched on, other areas of the world, North Africa, Australia, there will be more in Asia that will move forward. So over time, I would not be surprised if that sort of supply base started to get in line with what we are seeing in North America over the distant future. Now, we will see exactly how that works.

Obviously, North America came online first and most quickly and efficiently for an important reason that we have to keep in mind, and that is ownership rights entrepreneurship and the amazing efficiencies that the industry in North America brings to the table, and that is hard to replicate in other parts of the world, but a lot of good progress is being made. Ultimately, how much market share unconventionals gain overseas will ultimately depend on the adoption of incredibly efficient, leading-edge, high-spec equipment, which will be in their favor because we are getting better and better every single day at what we do. Then, the cultural element, which I think are wheels in motion to make significant improvements on both of those fronts.

So, we are obviously optimistic about that opportunity for us and for the global community to continue to have more sources of reliable and economic sources of energy.

Thank you. Our next question will come from the line of Marc Bianchi with TD Securities. Your line is open. Please go ahead.

Hey, guys. Good morning. First question on EE and on this guidance here for fourth quarter. If I look at sequentially revenues up a little bit and if I strip out the tariff recovery there in third quarter, it looks like you're not getting a ton of margin leverage. I guess perhaps that's mixed, but I do not know if there is anything else going on there. I would have thought that maybe you get better margin leverage on that revenue increase.

Yeah, Marc, it really is mixed. Obviously, things shift from quarter to quarter and we obviously saw a favorable mix and also, frankly, really good execution here over the last few quarters to drive really healthy incremental margins across the board, not just in EE, but in both segments. As we go into Q4, we anticipate that that will be a little bit less favorable. Also, while we do have a big pickup in our aftermarket business, it tends to be more service and repair, which is a little bit lower margin than what we get from just a large ramp-up in terms of spare parts sales.

Yeah, those are the couple pieces I think, Marc, is one, you typically have a little bit more Eastern Hemisphere product sales into the fourth quarter. However, in this fourth quarter, for some of the reasons that Jose laid out earlier, that's probably a little bit more moderated Q3 to Q4. Also, the other thing that we are seeing still is high freight costs. So freight costs year-over-year are up about 20%. Just with our anticipation on where things are right now, we think that sort of Q3 to Q4 costs are probably a little bit more elevated, too.

Okay, and maybe building on that as we think of it as perhaps a starting point for thinking about 2027. Do you think mix changes a lot? We have got the offshore stuff that you guys have been talking about so much so already on the call. How does that contribute? Then do you get recovery of the freight costs at some point? Is there a lag in pushing price through to recover that? Maybe just try to talk about how much of a good reflection of the normal business this is and how we should think about it building up to 2027.

Yeah. Look, Marc, I think we talked a bit on one of the prior answers related to the expectation in 2027 and the pace of improvement and the general mix. As we mentioned, capital equipment will continue to grow. Some of that growth will be dependent on the timing of when orders come in. What we see as more of a growth opportunity in EE segment into 2027 is the aftermarket business which should drive margins higher. Right? As it relates to inflationary forces. Broadly speaking, outside of the Middle East, we've gotten to a point where the severe headwinds that we saw over the last few years from inflation as well as tariffs hopefully is behind us. We are now at the point where we're starting to outpace that inflation and drive margins higher for the most part. Pricing is the next leg, right?

As we think about the state of the industry today, while things are much improved and the outlook is really fantastic, I think whether it's us in the equipment space or the more traditional service space, there really hasn't been much in the way of pricing yet. While I hate the compressed spring type analogy, I can't think of a market environment that applies to more than it does today. As I've mentioned a couple of times, I think we're nearing a point where excess supply of the type of desirable equipment that's out there is at its limit. That's going to require our service company and contractor customers to invest more in their asset bases, but they're not going to do so without good improvement in pricing, and I think we're very close for the market to see that.

Nobody wants to speculate on the precise timing of that, but I'll be very surprised if we don't see material improvement in 2027. Specifically related to the Middle East, obviously more challenged from an inflationary standpoint via the logistics element that you're asking about. Obviously in an environment in which activity levels are coming down due to those changes in drilling programs that we touched on. All of a sudden, that market has a little bit of excess capacity, so that hurts demand. It also hurts the ability to continue making progress on pricing and makes it difficult to offset some of the inflationary costs associated with logistics. However, we are making progress on it and have been pleased with how constructive the dialogue has been with certain customers, related to them absorbing those additional logistics costs.

But in general, still a headwind right now, but feel pretty good about the direction things are headed.

Great. Thanks for that, Jose. I'll turn it back.

Thank you, and one moment for our next question. Our next question will come from the line of Alexis Freno with Goldman Sachs. Your line is open. Please go ahead.

Hey, good morning, team, and thanks for taking our question.

We just wanted to ask about free cash flow. Can you talk about some of the moving pieces there? As we look into 2027, how should we think about that normalized conversion rate? Is there any opportunity for that to structurally improve?

Yeah. Thanks for that, Alexis Freno. This is Rodney Reed. I'd say free cash flow impact for Q3 and really for the first nine months of the year, has really been affected by two discrete items. Number one is milestone billings. That really relates to some projects that are ongoing in the Middle East. If you look at our free cash flow, that was really a reflection of some working capital build. This sort of contract asset, contract liability piece is about a third of that. I think that starts to turn around and improve in the fourth quarter, quite frankly. Number two, the other discrete item is really related to inventory. We've talked about this one before, just with the ongoing logistical challenges where there's more variability in on-time delivery.

Our teams have built in a little bit more of a buffer into safety stock levels and just into the supply chain overall. That will continue to take a little bit more time to moderate. I think we'll see a little bit of improvement in Q4, but that will continue into the first half of the year. The other part on inventory is, as Jose Bayardo mentioned earlier, if you look at our Grant Prideco Drill Pipe business, backlog is up about 50% year-over-year. Our fiberglass business is up 30% year-over-year. So a little bit more inventory levels there as Q4 and Q1 have higher revenue growth. It's really those two discrete items. I'd call them more transitory than structural. Nothing structurally changed with our business. It's really the milestone billings and inventory.

As we look into 2027, which is the other part of your question, we do think we get back to that 50% range on EBITDA to free cash flow conversion. As I mentioned, I think most of the milestone billings start to make some progress in Q4, a little bit more in Q1. Inventory levels start to normalize. The other thing that helps in 2027 is what Jose Bayardo had laid out earlier in terms of some bookings opportunities. That means that along the way, on some milestones, you're typically pretty cash flow positive throughout those projects, in particular, in the first part. That's where we'd kind of stack up 2027.

Okay. That's very helpful. As a follow-up, understand it's tricky to make a call on Middle East activity from here, but would love to dig deeper on some of the other regional commentary. As we think ex-Middle East, how are you thinking about 2027 shaping up? You've talked about some key regions, including Latin America and elsewhere. Just curious, any other thoughts?

Yeah. Alexis, Jose. Look, obviously, there's been a lot of commentary by our peers related to 2027 outlook. I think our messaging will be somewhat similar, which is that it's really premature to talk about that overall. However, we can talk about things with the framework that others have applied, which feels like consensus for the space seems to be shaking out around mid-single digit growth for next year. Obviously, there's some puts and takes to that. Related to your question, it's hard to provide any sort of real visibility into Middle East. I think that mid-single digit is implying sort of flattish activity within the Middle East region, meaning more healthy activity elsewhere around the globe, which makes sense based on what we're seeing around the world.

We obviously spend a lot of time talking about the deep water environment, which is going to continue experiencing very robust growth, but also anticipate we'll continue to see North America move higher as well as really all other producing regions of the world. In that environment, and again, premature to talk about specifics related to 2027, but with what we see in terms of the tightness of the market on the capital equipment side, ex-Middle East right now, we think we should be able to outpace that sort of general industry rate. It will be, as we touched on within several of our businesses, steady improvement. Second half weighted higher than the first half. We expect to continue to drive more process improvement efficiencies across the organization and drive margins a little bit higher.

I think that's really all we can say at this point. Generally, the industry backdrop is very constructive. Next quarter, you'll obviously receive our Q1 guidance and probably some more detailed commentary related to 2027. However, as you guys know, we don't typically provide full year guidance.

Thank you. One moment for our next question. Our next question will come from the line of Stephen Gengaro with Stifel. Your line is open. Please go ahead.

I think two things for me. The first, this follows up, I think, on Marc's question earlier. You mentioned pricing, I think, Jose, in your response to Marc's question on margins. Can you give us just kind of an overview of kind of where pricing currently sits versus sort of the recent troughs and maybe in some context historically on just some of the bigger product lines?

Gosh, Stephen, it is impossible to answer that with perfect precision given the explosive inflation that we have seen over the last five years or so, right? So obviously today, as we sit here, we are at meaningfully higher pricing than when we were in the past. However, as has been reflected in our margins, particularly within our EPS segment, what you have seen is that things have changed so quickly, not just from an inflationary standpoint, but also the emergence of tariffs that over the last couple of years the inflationary forces combined with deterioration in terms of overall industry activity levels have eroded our margins. Not because we have not moved our pricing up, but just because we have not moved pricing up quickly enough given the market environment.

Here over the last couple of quarters, I think you're starting to see our pricing, and frankly, our internal efficiencies beginning to outpace those inflationary forces. Feel really, really good about where things are headed and really good about our ability to get back to the type of margin levels that we saw in the past. I know your and Marc Bianchi's questions seem to be revolving around the EE segment, which is obviously important. However, EE has been doing fantastic, right? We're about to hit five straight years of improved margin performance and certainly see the potential to drive that higher with higher aftermarket activity into 2027 and beyond. The real opportunity for us though, to drive some more meaningful improvement, is within our EPS segment. We're starting to demonstrate that capability.

But look, you go back to the 2014 type timeframe, and we were at an upper teens margin in that business. The segment's currently at 14.5% margins. If we're able to drive that up 300 basis points back up to 17.5%, which would be a little bit lower than sort of the recent peak, that's another $120 million of EBITDA that we can drive. Two of the reasons why we are so optimistic related to our ability to hit that $1.5 billion in EBITDA, there's really three primary components and buckets to think about there. One is certainly the rig aftermarket opportunity, which is probably roughly $100 million of EBITDA that we can drive if we get back to recent high watermarks.

The $120 million from the EPS segment, which will really come from the form of, yes, some pricing, but also some more volume, better mix as we're seeing more and more growth from the capital equipment components of that segment. Then continued operational efficiencies. We don't really need any one single component to get us there, but they all seem to be moving in the right direction right now, so it gives us a lot of confidence there. Then, there's an additional $180 million on top of today's current run rate that we need to achieve and think we can do that through some modest improvement in volume, driving more efficiencies in other components of the business. Again, more pricing across the portfolio.

We feel really good about our ability to drive earnings margins and return on capital meaningfully higher over the coming years.

Thanks, Jose. You basically answered my second question because one of the things we hear is can you get to $1.5 billion of sort of that, basically target you've laid out, and it sounds like you can get there without kind of anything heroic from an activity level perspective.

That's absolutely right, Stephen. That's the scenario that we tried to build for everybody last quarter and every quarter, every month, every week, every day that goes by, we're getting increasingly confident about our ability to hit it.

NOV (NOV) Q3 2026 Earnings Call Transcript

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