EUR 850.00 For Business Accounts Only

Morningstar | National Oilwell Varco Is the Undisputed Leader in Providing Rig Equipment

National Oilwell Varco is the undisputed leader in providing rig equipment. The company built its empire through an aggressive campaign of acquisitions in the 1990s and 2000s, but it’s maintained that empire with unique scale economies and efficiencies in the business. Conveniently, National Oilwell’s dominance was established just in time for the rig-building boom of 2005-15, and the company feasted on profitable rig-building work during that period.Alas, the rig-building era was decisively ended by the U.S. shale boom. For one, the large incremental volumes from U.S. shale obviate the need for the formerly anticipated large volumes of offshore oil and gas. This offshore downturn has created a glut of offshore drilling rigs, and consequently, we don’t expect any large orders for these rigs for National Oilwell Varco in the next decade or longer. Also, the relentless efficiency gains in U.S. shale means that more shale oil and gas can be developed with fewer rigs. Thus, there will be no boom in rig-building for shale, which will step up to replace the offshore rig-building of the past.Going forward, National Oilwell hopes to create value by focusing on the nonrig parts of its business. But while the company certainly has some high-quality nonrig business lines, we see little likelihood that it will be able to forge a worthy replacement to its rig-building empire of the past.