Quarterly Report for Quarter Ending MARCH 31, 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 Products and Services and Energy Equipment.

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 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.

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.

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 first quarter ended March 31, 2026, the Company generated revenues of $2.05 billion, a decrease of two percent compared to the first quarter of 2025. Net income decreased $54 million, or $0.14 per diluted share, year-over-year to $19 million. The Company recorded $37 million within pre-tax Other Items during the first quarter of 2026 primarily related to a non-recurring stock-based compensation charge, severance and facility closures, and costs associated with streamlining our business operations. Operating profit was $47 million and adjusted operating profit was $85 million, compared to operating profit of $152 million and adjusted operating profit of $163 million in the first quarter of 2025. Adjusted EBITDA decreased $75 million year-over-year to $177 million, or 8.6 percent of sales.

Segment Performance

Energy Products and Services

Energy Products and Services generated revenues of $897 million in the first quarter of 2026, a decrease of 10 percent from the first quarter of 2025. Operating profit decreased $57 million from the prior year to $26 million, or 2.9 percent of sales, and included $8 million in pre-tax Other Items. Adjusted EBITDA decreased $49 million from the prior year to $96 million, or 10.7 percent of sales. Disruptions in the Middle East and lower global drilling activity more than offset strong performance from the segment's drill bit and digital services business.

Energy Equipment

Energy Equipment generated revenues of $1.19 billion in the first quarter of 2026, an increase of four percent when compared to the first quarter of 2025. Operating profit decreased $41 million from the prior year to $93 million, or 7.8 percent of sales, and included $9 million in pre-tax Other Items. Adjusted EBITDA decreased $34 million from the prior year to $131 million, or 11.0 percent of sales. Strong execution on the segment's backlog more than offset lower sales of aftermarket parts and services, which were impacted by war related disruptions in the Middle East. A less favorable sales mix and higher costs from the Middle East disruptions contributed to lower profitability.

New orders booked during the quarter totaled $520 million, an increase of $83 million when compared to the $437 million of new orders booked during the first quarter of 2025. Orders shipped from backlog were $650 million, representing a book-to-bill of 80 percent and an increase of $101 million when compared to the $549 million orders shipped and an 80 percent book-to-bill during the first quarter 2025. As of March 31, 2026, backlog for capital equipment orders for Energy Equipment totaled $4.23 billion, a decrease of $184 million from the first quarter of 2025.

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 attractive return potential. Management believes this strategy will further strengthen the Company's competitive position across market cycles.

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 first quarter of 2026 and 2025, and the fourth quarter of 2025 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 March 31, 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 increased 2 percent (from 1,799 to 1,832) in the first quarter of 2026 when compared to the fourth quarter of 2025. The average per barrel price of West Texas Intermediate Crude Oil increased 21 percent (from $59.64 per barrel to $71.98 per barrel) and natural gas prices decreased 19 percent (from $3.75 per mmbtu to $3.04 per mmbtu) in the first quarter of 2026 compared to the fourth quarter of 2025.

On April 24, 2026, there were 674 rigs actively drilling in North America, comprised of U.S. and Canada, which decreased 10 percent from the first quarter average of 749 rigs. The price for West Texas Intermediate Crude Oil was $94.40 per barrel at April 24, 2026, an increase of 31 percent from the first quarter of 2026 average. The price for natural gas was $2.52 per mmbtu at April 24, 2026, a decrease of 17 percent from the first quarter of 2026 average.

Results of Operations

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

Energy Products and Services

three months ended March 31, 2026 and 2025. Revenue from Energy Products and Services was $897 million for the three months ended March 31, 2026, compared to $992 million for the three months ended March 31, 2025, a decrease of $95 million or 10 percent. Revenue was negatively impacted from the Middle East conflict, resulting in delayed deliveries of capital equipment, as well as a 7 percent reduction in North America rig count resulting in lower revenue in the region.

Operating profit from Energy Products and Services was $26 million for the three months ended March 31, 2026, compared to an operating profit of $83 million for the three months ended March 31, 2025, a decrease of $57 million. Profitability was impacted by reduced deliveries of capital equipment due to the conflict in the Middle East and decreased product sales from overall drilling levels, as well as higher tariffs and inflationary pressures for certain raw materials.

Energy Equipment

three months ended March 31, 2026 and 2025. Revenue from Energy Equipment was $1,190 million for the three months ended March 31, 2026, compared to $1,146 million for the three months ended March 31, 2025, an increase of $44 million or 4 percent. Strong execution on backlog for capital equipment more than offset a 12 percent decline in sales of aftermarket parts and services, which were negatively impacted by delivery delays resulting from logistics challenges in the Middle East.

Operating profit from Energy Equipment was $93 million for the three months ended March 31, 2026, compared to an operating profit of $134 million for the three months ended March 31, 2025, a decrease of $41 million. Profitability for the segment was impacted by a less favorable sales mix, rising freight costs, both primarily from the conflict in the Middle East.

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 $4.23 billion at March 31, 2026, a decrease of $184 million from backlog of $4.41 billion at March 31, 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 40 percent of backlog to become revenue during the rest of 2026 and the remainder thereafter. At March 31, 2026, approximately 58 percent of the capital equipment backlog was for offshore products and approximately 94 percent of the capital equipment backlog was destined for international markets.

Eliminations and corporate costs

Eliminations and corporate costs were $72 million for the three months ended March 31, 2026, compared to $65 million for the three months ended March 31, 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 decreased 15 percent when compared to the first quarter of 2025 due to lower activity, while corporate costs increased 22 percent. Corporate costs included $20 million in pre-tax Other Items for the three months ended March 31, 2026, compared to $5 million for the three months ended March 31, 2025. Pre-tax Other Items in the current year primarily related to a non-recurring charge related to stock-based compensation and other restructuring costs.

Interest and financial costs and Interest income

Interest and financial costs were $22 million for each of the three months ended March 31, 2026 and 2025, remaining consistent year-over-year.

Interest income was $11 million for each of the three months ended March 31, 2026 and 2025, remaining consistent year-over-year.

Equity loss in unconsolidated affiliates

Equity loss in unconsolidated affiliates was $3 million and zero for the three months ended March 31, 2026, and 2025, respectively. Sales for our largest investment in unconsolidated affiliates declined 15 percent for the first quarter of 2026 when compared to the first quarter of 2025. The decline in sales is primarily due to pricing pressures for oil country tubular goods which led to lower profitability year-over-year.

Other income (expense), net

Other income (expense), net was $2 million for the three months ended March 31, 2026, compared to $(20) million for three months ended March 31, 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 was 42.9% and 38.8% for the three months ended March 31, 2026, and 2025, respectively, as compared to the U.S. statutory tax rate of 21% for both periods. The effective tax rate for the three months ended March 31, 2026 was negatively impacted by a mix of earnings in higher tax rate jurisdictions and a shortfall related to previously recognized stock compensation deductibility. The effective tax rate for the three months ended March 31, 2025 was negatively impacted by a mix of earnings in higher tax rate jurisdictions, unfavorable adjustments related to changes in certain foreign currency exchange rates, a shortfall related to previously recognized stock compensation deductibility, and adjustments to the carrying value of deferred tax assets, partially offset by a benefit from withholding tax refunds received.

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 March 31, 2026, the Company had cash and cash equivalents of $1,342 million and total debt of $1,715 million. At December 31, 2025, cash and cash equivalents were $1,552 million and total debt was $1,718 million. As of March 31, 2026, approximately $839 million of the $1,342 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.

On March 17, 2026, the Company extended the maturity date of the revolving credit facility by one additional year to September 12, 2030. The revolving credit facility has 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 March 31, 2026, the Company was in compliance with a debt-to-capitalization ratio of 24.0% and had no borrowings or letters of credits 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 March 31, 2026, the joint venture was in compliance and will not have future borrowings on the line of credit. As of March 31, 2026, the Company had $84 million in borrowings related to this line of credit. The Company has $11 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 March 31, 2026 included $42 million of amounts owed to current and former minority interest partners of NOV consolidated joint ventures, of which $16 million is due in the next twelve months.

The Company's outstanding debt at March 31, 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 March 31, 2026. Long-term lease liabilities totaled $524 million at March 31, 2026.

The Company had $1,040 million of outstanding letters of credit at March 31, 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 three months of 2026

Other

The effect of the change in exchange rates on cash flows was a decrease of $5 million for the first three months of 2026, and an increase of $8 million for the first three 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 months ended March 31, 2026, the Company repurchased approximately 3.5 million shares of common stock under its share repurchase program for an aggregate amount of $67 million. During the three months ended March 31, 2025, the Company repurchased 5.4 million shares of common stock under the program for an aggregate amount of $81 million. 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.