National Oilwell May Be Weeks Away From Pair of Acquisitions
February 08, 2012, 7:23 AM ESTBy David Wethe
(Updates share price in seventh paragraph.)
Feb. 2 (Bloomberg) -- National Oilwell Varco Inc., the largest U.S. maker of oilfield equipment, may be weeks away from a pair of acquisitions valued between $250 million and $750 million.
“We probably look at seven deals for every one that we do,” Pete Miller, chairman and chief executive officer of Houston-based National Oilwell, said in a phone interview today. “We’re probably pretty close to a couple right now.”
The company’s interest in expanding its capability to supply equipment comes as U.S. oil and natural-gas production increases. Helped in part by hydraulic fracturing of shale rock, or fracking, U.S. oil production rose 1.7 percent last year and total gas output sold increased 7.4 percent, according to the Energy Information Administration.
National Oilwell decided against buying makers of fracking gear and instead developed its own pumps to help inject water, chemicals and sand underground to free trapped hydrocarbons, Miller said.
The company spent $1.4 billion in cash on nine acquisitions last year, Chief Financial Officer Clay Williams said on an investor conference call today. National Oilwell completed its largest 2011 purchase, the acquisition of Ameron International Corp. for about $777 million, on Oct. 5.
The deals currently being discussed may fall apart at the last minute, Miller said.
National Oilwell climbed 3.2 percent to $77.08 at the close in New York. The shares have 29 buy and 3 hold ratings from analysts.
FPSO Equipment
One area National Oilwell is seeking to increase its supply capability is for facilities that pump oil and gas in deep waters, Miller told analysts today on the conference call. Floating production, storage and offloading vessels, or FPSOs, are a “clever substitute for pipelines,” he said.
The company’s unit that sells fracking gear and drilling fluids, bits and pipes is expected to increase operating profit margin to more than 20 percent in the first quarter, the CFO said. The margin was 19.4 percent in the same period last year.
The global market for fracking will increase 19 percent this year to a record $37 billion, according to Tulsa, Oklahoma- based Spears & Associates.
National Oilwell’s new fracking pumps are lighter, more durable and produce greater power, Miller said. About 24 of them have been bought and are currently in use, he said.
The company reported fourth-quarter earnings today of $574 million, or $1.35 a share, compared with $440 million, or $1.05, a year earlier. Excluding transaction costs, per-share earnings were 7 cents more than the average of 27 analysts’ estimates compiled by Bloomberg.
--Editors: Tina Davis, Steven Frank
To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
