Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

NOV is a leading independent equipment and technology provider to the global energy industry. NOV and its predecessor companies have spent over 160 years helping transform oil and gas development and improving its cost-effectiveness, efficiency, safety, and environmental impact.

NOV's extensive proprietary technology portfolio supports the industry's drilling, completion, and production needs. With unmatched cross-segment capabilities, scope, and scale, NOV continues to develop and introduce technologies that further enhance the economics and efficiencies of energy production, with a focus on digital, automation, and robotics solutions.

Lower-cost, reliable sources of energy significantly contribute to raising the global standard of living by powering economic development, enabling better infrastructure and facilitating the production of goods and services that improve quality of life. Over the past few decades, the Company has pioneered and refined key technologies to improve the economic viability of frontier resources, including unconventional and deepwater oil and gas. More recently, by applying its deep expertise and technology, NOV has developed solutions to improve the economics of alternative energy sources.

NOV serves major-diversified, national, and independent service companies, contractors, and energy producers in 57 countries. NOV operates under two segments, Energy Equipment and Energy Products and Services.

Results of operations are presented in accordance with GAAP. Certain reclassifications have been made to prior period financial information in order to conform with current period presentation. The Company discloses Adjusted operating profit (defined as operating profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items (as defined below under "Executive Summary")) and Adjusted EBITDA (defined as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items) in its periodic earnings press releases and other public disclosures to provide investors additional information about the results of ongoing operations. See "Non-GAAP Financial Measures and Reconciliations in Results of Operations" for an explanation of our use of non-GAAP financial measures and reconciliations to their corresponding measures calculated in accordance with GAAP.

Energy Equipment

The Company's Energy Equipment segment manufactures and supports the capital equipment and integrated systems needed for oil and gas exploration and production, both onshore and offshore, as well as for other marine-based, industrial and renewable energy markets.

The segment designs, manufactures, and integrates technologies for drilling and producing oil and gas wells. This includes equipment and technologies needed for drilling, including land rigs, offshore drilling equipment packages, drilling rig components, managed pressure drilling, and software control systems that mechanize and automate the drilling process and rig functionality; hydraulic fracture stimulation; well intervention, including coiled tubing units, coiled tubing, and wireline units and tools; cementing products; onshore production, including fluid and gas processing, flow control and pumping solutions; offshore production, including integrated production systems and subsea production technologies; and aftermarket support of these technologies, providing spare parts, service, and repair.

Energy Equipment primarily serves contract drillers, oilfield service companies, and oil and gas companies. Demand for the segment's products primarily depends on capital spending plans by drilling contractors, service companies, and oil and gas companies, and secondarily on the overall level of oilfield drilling, completions, and workover activity which drives demand for equipment, spare parts, service, and repair for the segment's large installed base of equipment.

The segment also serves marine and offshore markets, where it designs and builds equipment for wind turbine installation and cable lay vessels, and offers heavy lift cranes and jacking systems; industrial markets, where the segment provides pumps and mixers for a wide breadth of industrial end markets; and other renewable energy markets, where it provides solutions that support wind power development, and carbon sequestration by applying its gas processing expertise.

Energy Products and Services

The Company's Energy Products and Services segment primarily designs, manufactures, rents, and sells products and equipment used in drilling, intervention, completion, and production activities. Products include drill bits, downhole tools, premium drill pipe, drilling fluids, integral and weld-on connectors for conductor strings and surface casing, completion tools, and artificial lift systems. The segment also designs, manufactures, and delivers high-end composite pipe, tanks, and structures engineered to solve both corrosion and weight challenges in a wide variety of applications, including oil and gas, chemical, industrial, wastewater, fuel handling, marine and offshore, and rare earth mineral extraction.

In addition to product and equipment sales, the segment provides services, software, and digital solutions to improve drilling and completion operational performance. Services include tubular inspection and coating, solids control, waste management. Software and digital solutions offered include drilling and completion optimization and remote monitoring (via downhole and surface instrumentation), wired drill pipe services, software controls and applications, and data management and analytics services at the edge and in the cloud.

Energy Products and Services serves oil and gas companies, drilling contractors, oilfield service companies, oilfield equipment rental companies and developers of geothermal energy. Demand for the segment's products and services primarily depends on the level of oilfield drilling activity by oil and gas companies, drilling contractors, and oilfield service companies. Demand for the segment's composite solutions serving applications outside of oil and gas are driven by industrial activity, infrastructure spend, and population growth.

Critical Accounting Policies and Estimates

In our annual report on Form 10-K for the year ended December 31, 2025, we identified our most critical accounting policies. In preparing the financial statements, we make assumptions, estimates and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments that are most critical in nature which are related to revenue recognition under long-term construction contracts, impairment of goodwill and other indefinite-lived intangible assets, inventory reserves, and income taxes. Our estimates are based on historical experience and on our future expectations that we believe are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates and those differences may be material.

EXECUTIVE SUMMARY

For the second quarter ended June 30, 2026, the Company generated revenues of $2.13 billion, an increase of four percent sequentially and a decrease of two percent compared to the second quarter of 2025. Net income increased $4 million, or $0.02 per diluted share, year-over-year to $112 million. Operating profit was $193 million, or 9.0 percent of sales, an increase of 35 percent versus the second quarter of 2025. Adjusted operating profit was $190 million, an increase of 15 percent versus the second quarter of 2025. Adjusted EBITDA increased $31 million year-over-year to $283 million, or 13.3 percent of sales. Second quarter 2026 Adjusted operating profit and Adjusted EBITDA include a benefit of approximately $40 million related to tariff refunds.

Segment Performance

Energy Equipment

Energy Equipment generated revenues of $1.22 billion in the second quarter of 2026, an increase of one percent from the second quarter of 2025. Operating profit increased $55 million from the prior year to $177 million, or 14.5 percent of sales, and included $2 million in pre-tax Other Items and a $7 million gain on sales of fixed assets. Adjusted EBITDA increased $42 million from the prior year to $200 million, or 16.4 percent of sales, and includes a benefit of approximately $14 million related to tariff refunds. Strong execution on offshore production projects nearing completion and a more favorable sales mix drove the improvement in revenue and profitability.

New orders booked during the quarter totaled $474 million, an increase of $54 million when compared to the $420 million of new orders booked during the second quarter of 2025. Orders shipped from backlog were $638 million, representing a book-to-bill of 74 percent and an increase of $6 million when compared to the $632 million orders shipped and a 66 percent book-to-bill during the second quarter 2025. As of June 30, 2026, backlog for capital equipment orders for Energy Equipment totaled $4.08 billion, a decrease of $220 million from June 30, 2025.

Energy Products and Services

Energy Products and Services generated revenues of $974 million in the second quarter of 2026, a decrease of five percent from the second quarter of 2025. Operating profit increased $2 million from the prior year to $85 million, or 8.7 percent of sales, and included $9 million in pre-tax Other Items and a $13 million gain on sales of fixed assets. Adjusted EBITDA decreased $2 million from the prior year to $144 million, or 14.8 percent of sales, and includes a benefit of approximately $26 million related to tariff refunds. Market share gains by the segment's drill bit and artificial lift operations and continued growth in digital services were more than offset by lower capital equipment sales, despite orders booked in the first half of 2026 that are expected to support higher shipments in the second half of the year.

Oil & Gas Equipment and Services Market and Outlook

Macroeconomic and geopolitical uncertainty remains elevated due to the conflict in the Middle East. Widespread damage to energy infrastructure and the closure of the Strait of Hormuz have materially tightened oil and gas fundamentals, causing volatility in global commodity markets and renewing focus on the need for energy security. Management believes reduced production capacity resulting from years of underinvestment in the oil and gas industry along with the growing need to diversify supply sources will spur renewed investment in upstream capacity and regional infrastructure needed to support more resilient supply. In this environment, management expects increased demand for the Company's equipment and technology.

NOV remains focused on the development and commercialization of innovative products and services that lower the marginal cost and environmental footprint of energy production. The Company also remains focused on improving operational efficiency, simplifying processes, and allocating capital to opportunities where it believes it has competitive advantages, technology differentiation, and the ability to generate attractive returns. Management believes this strategy will further strengthen the Company's competitive position across market cycles and create value for shareholders.

Operating Environment Overview

The Company's results are dependent on, among other things, the level of worldwide oil and gas drilling, well remediation activity, the prices of crude oil and natural gas, capital spending by exploration and production companies and drilling contractors, worldwide oil and gas inventory levels and, to a lesser degree, the level of investment in wind and geothermal energy projects. Key industry indicators for the second quarter of 2026 and 2025, and the first quarter of 2026 include the following:

* Averages for the quarters indicated. See sources below.

The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate Crude Oil prices for the past nine quarters ended June 30, 2026, on a quarterly basis.

Source: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude Oil and Natural Gas Prices: US Department of Energy, Energy Information Administration (www.eia.doe.gov).

The worldwide quarterly average rig count decreased 4 percent (from 1,832 to 1,760) in the second quarter of 2026 when compared to the first quarter of 2026. The average per barrel price of West Texas Intermediate Crude Oil increased 33 percent (from $71.98 per barrel to $95.75 per barrel) and natural gas prices decreased 38 percent (from $4.79 per mmbtu to $2.95 per mmbtu) in the second quarter of 2026 compared to the first quarter of 2026.

On July 24, 2026, there were 791 rigs actively drilling in North America, comprised of U.S. and Canada, which increased 12 percent from the second quarter average of 704 rigs. The price for West Texas Intermediate Crude Oil was $89.31 per barrel at July 24, 2026, a decrease of 7 percent from the second quarter of 2026 average. The price for natural gas was $2.89 per mmbtu at July 24, 2026, a decrease of 2 percent from the second quarter of 2026 average.

Results of Operations

Financial results by operating segment are as follows (in millions):

Energy Equipment

three and six months ended June 30, 2026 and 2025. Revenue from Energy Equipment was $1,218 million for the three months ended June 30, 2026, compared to $1,207 million for the three months ended June 30, 2025, an increase of $11 million or 1 percent. For the six months ended June 30, 2026, revenue was $2,408 million compared to $2,353 million for the six months ended June 30, 2025, an increase of $55 million or 2 percent. Revenue remained relatively flat when compared to the prior year with higher sales of production related capital equipment, mostly offset by lower revenue from aftermarket parts and services.

Operating profit from Energy Equipment was $177 million for the three months ended June 30, 2026, compared to an operating profit of $122 million for the three months ended June 30, 2025, an increase of $55 million. Strong execution on offshore production equipment projects nearing completion, a more favorable sales mix, and a benefit of approximately $14 million related to tariff refunds drove the improvement in profitability for the three months ended June 30, 2026 when compared to the same period of the prior year. For the six months ended June 30, 2026, operating profit was $270 million compared to $256 million for the six months ended June 30, 2025, an increase of $14 million. Strong execution on offshore production related equipment projects, partially offset by disruptions in the Middle East during the first quarter of 2026, led to improved profitability for the six months ended June 30, 2026 when compared to the same period of the prior year.

The Energy Equipment segment monitors its capital equipment backlog to plan its business. New orders are added to backlog only when the Company receives a firm written order for major completion and production components or a contract related to a construction project. The capital equipment backlog was $4.08 billion at June 30, 2026, a decrease of $220 million from backlog of $4.30 billion at June 30, 2025. Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders, supplier accelerations or delays, and the current uncertainty and conflict in the Middle East), the Company reasonably expects approximately 29 percent of backlog to become revenue during the rest of 2026 and the remainder thereafter. At June 30, 2026, approximately 57 percent of the capital equipment backlog was for offshore products and approximately 94 percent of the capital equipment backlog was destined for international markets.

Energy Products and Services

three and six months ended June 30, 2026 and 2025. Revenue from Energy Products and Services was $974 million for the three months ended June 30, 2026, compared to $1,025 million for the three months ended June 30, 2025, a decrease of $51 million or 5 percent. For the six months ended June 30, 2026, revenue was $1,871 million compared to $2,017 million for the six months ended June 30, 2025, a decrease of $146 million or 7 percent. Revenue declines were primarily driven by a decrease in capital equipment sales which were impacted by the conflict in the Middle East, partially offset by market share gains from the segment's drill bit and artificial lift operations, and continued growth in digital services.

Operating profit from Energy Products and Services was $85 million for the three months ended June 30, 2026, compared to an operating profit of $83 million for the three months ended June 30, 2025, an increase of $2 million. For the six months ended June 30, 2026, operating profit was $111 million compared to $166 million for the six months ended June 30, 2025, a decrease of $55 million. Lower net tariff costs, which includes a benefit of approximately $26 million related to tariff refunds in the current quarter, helped profitability remain relatively flat for the three months ended June 30, 2026 when compared to the prior year, while lower capital equipment sales reduced manufacturing plant absorption and impacted profitability for the six months ended June 30, 2026 when compared to the same period of the prior year.

Eliminations and corporate costs

Eliminations and corporate costs were $69 million and $141 million for the three and six months ended June 30, 2026, compared to $62 million and $127 million for the three and six months ended June 30, 2025.

Sales from one segment to another generally are priced at estimated equivalent commercial selling prices; however, segments originating an external sale are credited with the full profit to the Company. Eliminations include intercompany transactions conducted between the two reporting segments that are eliminated in consolidation. Intrasegment transactions are eliminated within each segment. Eliminations increased 21 percent when compared to the second quarter of 2025 due to higher activity, and remained relatively flat on a year-to-date basis.

Corporate costs remained relatively flat compared to the second quarter of 2025, while corporate costs increased 14 percent on a year-to-date basis primarily due to a non-recurring charge related to stock-based compensation during the first quarter of 2026 and other restructuring costs.

Interest and financial costs and Interest income

Interest and financial costs were $21 million and $43 million for the three and six months ended June 30, 2026, compared to $22 million and $44 million for the three and six months ended June 30, 2025, remaining relatively consistent year-over-year.

Interest income was $8 million and $19 million for the three and six months ended June 30, 2026, compared to $10 million and $21 million for the three and six months ended June 30, 2025, remaining relatively consistent year-over-year.

Equity income (loss) in unconsolidated affiliates

Equity income (loss) in unconsolidated affiliates was $(5) million and $(8) million for the three and six months ended June 30, 2026, compared to $1 million for each of the three and six months ended June 30, 2025. Sales for our largest investment in unconsolidated affiliates declined 29 percent for the second quarter of 2026 when compared to the second quarter of 2025. For the six months ended June 30, 2026, sales declined 22 percent year-over-year. The decline in sales is primarily due to pricing pressures for oil country tubular goods which led to lower profitability year-over-year.

Other expense, net

Other expense, net was $18 million and $16 million for the three and six months ended June 30, 2026, compared to $17 million and $37 million for three and six months ended June 30, 2025. The change in expense was primarily due to larger foreign currency fluctuations in the prior year, particularly with the devaluation of the U.S. Dollar.

Provision for income taxes

The effective tax rate for the three and six months ended June 30, 2026 was 26.1% and 29.2%, respectively, compared to 0.9% and 20.3% for the same period of 2025. The U.S. statutory tax rate was 21% for all periods. The effective tax rate for the three months ended June 30, 2026 was negatively impacted by a mix of earnings in higher tax rate jurisdictions, partially offset by the release of previously recorded reserves for unrecognized tax benefits and adjustments to prior year taxes. The effective tax rate for the six months ended June 30, 2026 was negatively impacted by a mix of earnings in higher tax rate jurisdictions and a shortfall related to previously recognized stock compensation deductibility, partially offset by the release of previously recorded reserves for unrecognized tax benefits and adjustments to prior year taxes. The effective tax rate for the six months ended June 30, 2025 was positively impacted by the release of previously recorded reserves for unrecognized tax benefits of $58 million, partially offset by an increase to reserves for unrecognized tax benefits of $23 million, unfavorable adjustments related to the carrying value of deferred tax assets of $14 million, changes in certain foreign currency exchange rates of $4 million, and a mix of earnings in higher tax rate jurisdictions.

Non-GAAP Financial Measures and Reconciliations

This Form 10-Q contains certain non-GAAP financial measures that management believes are useful tools for internal use and the investment community in evaluating NOV's overall financial performance. These non-GAAP financial measures are broadly used to value and compare companies in the oilfield services and equipment industry. Not all companies define these measures in the same way. In addition, these non-GAAP financial measures are not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.

The Company defines Adjusted operating profit as operating profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items. The Company defines Adjusted EBITDA as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items. Adjusted operating profit % is a ratio showing Adjusted operating profit as a percentage of sales and Adjusted EBITDA % is a ratio showing Adjusted EBITDA as a percentage of sales. Management believes this is important information to provide because it is used by management to evaluate the Company's operational performance and trends between periods and manage the business. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company's results of ongoing operations. Adjusted operating profit, Adjusted operating profit %, Adjusted EBITDA, and Adjusted EBITDA % are not intended to replace GAAP financial measures, such as Net Income and operating profit %.

The following tables set forth the reconciliation of Adjusted EBITDA to its most comparable GAAP financial measure (in millions):

Liquidity and Capital Resources

Overview

At June 30, 2026, the Company had cash and cash equivalents of $1,164 million and total debt of $1,706 million. At December 31, 2025, cash and cash equivalents were $1,552 million and total debt was $1,718 million. As of June 30, 2026, approximately $747 million of the $1,164 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash could be subject to foreign withholding taxes and incremental U.S. taxation if transferred among countries or repatriated to the U.S. If opportunities to invest in the U.S. are greater than available cash balances that are not subject to income tax, rather than repatriating cash, the Company may choose to borrow against its revolving credit facility.

The Company has a revolving credit facility with a borrowing capacity of $1.5 billion through September 12, 2030. The Company has the right to increase the aggregate commitments under this agreement to an aggregate amount of up to $2.5 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), Euro Interbank Offered Rate (EURIBOR), Sterling Overnight Index Average (SONIA), Canadian Overnight Repo Rate Average (CORRA), or Norwegian Interbank Offered Rate (NIBOR), plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%. As of June 30, 2026, the Company was in compliance with a debt-to-capitalization ratio of 23.9% and had no borrowings or letters of credit issued under the facility, resulting in $1.5 billion of available funds.

A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit, payable by June 2032, for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of June 30, 2026, the joint venture was in compliance and will not have future borrowings on the line of credit. As of June 30, 2026, the Company had $78 million in borrowings related to this line of credit. The Company has $12 million in payments related to this line of credit due in the next twelve months. The Company can repay the entire outstanding facility balance without penalty at its sole discretion.

Other debt at June 30, 2026 included $38 million of amounts owed to current minority interest partners of NOV consolidated joint ventures, of which $2 million is due in the next twelve months.

The Company's outstanding debt at June 30, 2026 also consisted of $1,092 million in 3.95% Senior Notes, maturing on December 1, 2042, and $497 million in 3.60% Senior Notes, maturing on December 1, 2029. The Company was in compliance with all covenants at June 30, 2026. Long-term lease liabilities totaled $520 million at June 30, 2026.

The Company had $909 million of outstanding letters of credit at June 30, 2026, primarily in Norway and the United States, that are under various bilateral letter of credit facilities. Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.

The following table summarizes our net cash provided by (used in) continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):

Significant uses of cash during the first six months of 2026

Other

The effect of the change in exchange rates on cash flows was a decrease of $2 million for the first six months of 2026, and an increase of $19 million for the first six months of 2025.

We believe that cash on hand, cash generated from operations and amounts available under our credit facilities and from other sources of debt will be sufficient to fund operations, lease payments, working capital needs, capital expenditure requirements, dividends and financing obligations.

During the three and six months ended June 30, 2026, the Company repurchased approximately 3.2 million shares of common stock under the program for an aggregate amount of $63 million and 6.7 million shares of common stock under the program for an aggregate amount of $130 million, respectively. During the three and six months ended June 30, 2025, the Company repurchased approximately 5.5 million shares of common stock under the program for an aggregate amount of $69 million, and 10.9 million shares of common stock under the program for an aggregate amount of $150 million, respectively. The Company expects to return at least 50% of Excess Free Cash Flow (defined as cash flow from operations less capital expenditures and other investments, including acquisitions and divestitures), through a combination of quarterly base dividends, opportunistic stock buybacks, and an annual supplemental dividend to true-up returns to shareholders on an annual basis.

We may pursue acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We continue to expect to fund future cash acquisitions primarily with cash flow from operations and borrowings, including the unborrowed portion of the revolving credit facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that additional financing for acquisitions will be available at terms acceptable to us.

Cautionary Note Regarding Forward-Looking Statements

This document contains, or has incorporated by reference, statements that are not historical facts, including estimates, projections, and statements relating to our business plans, objectives, and expected operating results that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often contain words such as "may," "can," "likely," "believe," "plan," "predict," "potential," "will," "intend," "think," "should," "expect," "anticipate," "estimate," "forecast," "expectation," "goal," "outlook," "projected," "projections," "target," and other similar words, although some such statements are expressed differently. Other oral or written statements we release to the public may also contain forward-looking statements. Forward-looking statements involve risk and uncertainties and reflect our best judgment based on current information. You should be aware that our actual results could differ materially from results anticipated in such forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products, challenges related to NOV's operations in the Middle East, potential catastrophic events related to our operations, protection of intellectual property rights, compliance with laws, and worldwide economic activity, including matters related to recent Russian sanctions and changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs and their related impacts on the economy. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments. You should also consider carefully the statements under "Risk Factors," as disclosed in our most recent Annual Report on Form 10-K, as updated in Part II, Item 1A of our most recent Quarterly Report on Form 10-Q, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our most recent Annual Report on Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in such forward-looking statements, as well as additional disclosures we make in our press releases and other securities filings. We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.