NOV INC. Introduction
National Oilwell Varco, Inc. (the "Company") is a leading independent provider of equipment and technology to the upstream oil and gas industry. The Company designs, manufactures, sells and services a comprehensive line of drilling and well servicing equipment; sells and rents drilling motors, specialized downhole tools, and rig instrumentation; performs inspection and internal coating of oilfield tubular products; provides drill cuttings separation, management and disposal systems and services; and provides expendables and spare parts used in conjunction with the Company's large installed base of equipment. The Company also manufactures coiled tubing and high-pressure fiberglass and composite tubing, and sells and rents advanced in-line inspection equipment to makers of oil country tubular goods. The Company has a long tradition of pioneering innovations which improve the cost-effectiveness, efficiency, safety, and environmental impact of oil and gas operations. Unless indicated otherwise, results of operations are presented in accordance with accounting principles generally accepted inthe United States ("GAAP"). Certain reclassifications have been made to prior period financial information in order to conform with current period presentation. The Company discloses Adjusted EBITDA (defined as Operating Profit excluding Depreciation, Amortization and, when applicable, 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.
Wellbore Technologies
The Company's Wellbore Technologies segment designs, manufactures, rents, and sells a variety of equipment and technologies used to perform drilling operations, and offers services that optimize their performance, including: solids control and waste management equipment and services; drilling fluids; portable power generation; premium drill pipe; wired pipe; drilling optimization and automation services; tubular inspection, repair and coating services; rope access inspection; instrumentation; measuring and monitoring; downhole and fishing tools; steerable technologies; hole openers; and drill bits. Wellbore Technologies focuses on oil and gas companies and supports drilling contractors, oilfield service companies, and oilfield equipment rental companies. Demand for the segment's products and services depends on the level of oilfield drilling activity by oil and gas companies, drilling contractors, and oilfield service companies.
Completion & Production Solutions
The Company's Completion & Production Solutions segment integrates technologies
for well completions and oil and gas production. The segment designs,
manufactures, and services equipment and technologies needed for hydraulic
fracture stimulation, including downhole multistage fracturing tools, pressure
pumping trucks, blenders, sanders, hydration units, injection units, flowline,
and manifolds; well intervention, including coiled tubing units, coiled tubing,
and wireline units and tools; well construction, including premium connections
and liner hangers; onshore production, including composite pipe, surface
transfer and progressive cavity pumps, and artificial lift systems, wellstream
processing and sand control systems; and, offshore production, including fluid
processing and sand control systems, mooring and fluid transfer systems, and
subsea production technologies.
Completion & Production Solutions supports service companies and oil and gas
companies. Demand for the segment's products depends on the level of oilfield
completions and workover activity by oilfield service companies and drilling
contractors, and capital spending plans by oil and gas companies and oilfield
service companies.
Rig Technologies
The Company's Rig Technologies segment makes and supports the capital equipment
and integrated systems needed to drill oil and gas wells on land and offshore as
well as other marine-based markets, including offshore wind vessels. The segment
designs, manufactures and sells land rigs, offshore drilling equipment packages,
including installation and commissioning services, and drilling rig components
that mechanize and automate the drilling process and rig functionality.
Equipment and technologies the segment brings to customers include:
substructures, derricks, and masts; cranes; jacking systems; pipe lifting,
racking, rotating, and assembly systems; fluid transfer technologies, such as
mud pumps; pressure control equipment, including blowout preventers; power
transmission systems, including drives and generators; rig instrumentation and
control systems; mooring, anchor, and deck handling machinery; and pipelay and
construction systems. The segment also provides spare parts, repair, and rentals
as well as comprehensive remote equipment monitoring, technical support, field
service, and customer training through an extensive network of aftermarket
service and repair facilities strategically located in major areas of drilling
operations around the world.
Rig Technologies supports land and offshore drillers. Demand for the segment's
products depends on drilling contractors' and oil and gas companies' capital
spending plans, specifically capital expenditures on rig construction and
refurbishment; and secondarily on the overall level of oilfield drilling
activity, which drives demand for spare parts, service, and repair for the
segment's large installed base of equipment.
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--------------------------------------------------------------------------------Critical Accounting Policies and Estimates
In our annual report on Form 10-K for the year endedDecember 31, 2019 , 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; allowance for doubtful accounts; inventory reserves; impairment of long-lived assets (excluding goodwill and other indefinite-lived intangible assets); goodwill and other indefinite-lived intangible assets; purchase price allocation of acquisitions; warranties; 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 endedJune 30, 2020 , the Company generated revenues of$1.50 billion , compared to$1.88 billion for the first quarter of 2020 and$2.13 billion for the second quarter of 2019. Operating loss for the second quarter of 2020 was$100 million , and net loss was$93 million . Operating loss and net loss include non-cash, pre-tax charges ("other items", see Other Corporate Items for additional detail) of$102 million . Adjusted EBITDA (operating profit excluding depreciation, amortization, and other items) decreased$94 million sequentially to$84 million , or 5.6 percent of sales. Other items included inventory charges, impairment charges, severance accruals, and restructuring costs. Segment Performance Wellbore Technologies Wellbore Technologies generated revenues of$442 million in the second quarter of 2020, a decrease of 36 percent from the first quarter of 2020 and a decrease of 48 percent from the second quarter of 2019. The sequential decline in revenue was driven primarily by the severe fall in global drilling activity, particularly inNorth America andLatin America . Operating loss was$67 million , or -15.2 percent of sales, and included$62 million of other items. Adjusted EBITDA decreased 59 percent sequentially to$42 million , or 9.5 percent of sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of$611 million in the second quarter of 2020, a decrease of nine percent from the first quarter of 2020 and a decrease of eight percent from the second quarter of 2019. Operating profit was$42 million , or 6.9 percent of sales, and included$12 million in other items. Deteriorating conditions in the global completions market and logistical disruptions from COVID-19-related restrictions were partially offset by strong execution on existing backlog. Adjusted EBITDA decreased four percent sequentially to$68 million , or 11.1 percent of sales.
New orders booked during the quarter totaled
Rig Technologies
Rig Technologies generated revenues of$476 million in the second quarter of 2020, a decrease of 15 percent from the first quarter of 2020 and a decrease of 29 percent from the second quarter of 2019. Operating loss was$25 million , or -5.3 percent of sales, and included$20 million of other items. Adjusted EBITDA decreased 75 percent sequentially to$14 million , or 2.9 percent of sales. Declining global rig activity combined with COVID-19-related logistics issues, which were particularly acute in the aftermarket business, drove the sequential decline in revenue and profitability. New orders booked during the quarter totaled$74 million , representing a book-to-bill of 34 percent when compared to the$219 million of orders shipped from backlog. AtJune 30, 2020 , backlog for capital equipment orders for Rig Technologies was$2.79 billion .
Following approximately two and a half years of steady improvements in oil prices and global drilling activity levels, prices declined sharply during the fourth quarter of 2018 due to stronger than expected growth inU.S. production and concerns regarding the global economy. As a result of reduced budgets, and despite a modest recovery in commodity prices, drilling activity levels in theU.S. declined throughout 2019 resulting in the first double digit percentage decrease in the average annual rig count since 2016. While the North American market deteriorated, the new-found capital austerity and fiscal discipline exhibited byU.S. operators along with declining production from underinvestment in overseas markets and rapidly growing demand for LNG inspired greater levels of confidence from international oil and gas companies. The industry entered 2020 anticipating higher international and offshore activity levels would mostly offset the ongoing effects of capital austerity in the North American land marketplace, where a meaningful recovery was not expected before 2021. 21 -------------------------------------------------------------------------------- During the first quarter of 2020, the coronavirus (COVID-19) outbreak rapidly spread across the world, driving sharp demand destruction for crude oil as whole economies ordered curtailed activity. In response to declining demand for crude oil, members of theOrganization of the Petroleum Exporting Countries and other producing countries (OPEC+), includingRussia , increased production into the already oversupplied market, decimating oil prices and rapidly filling worldwide storage facilities. InApril 2020 , OPEC+ began to reduce production, which had a muted positive effect on oil prices due to market concerns that the cuts were significantly less than the demand destructions caused by COVID-19. As a result, companies across the industry responded with severe capital spending budget cuts, cost cuts, personnel layoffs, facility closures and bankruptcy filings. The COVID-19 virus continued to spread during the second quarter of 2020, extending depressed demand, uncertainty and spending constraint by the entire oil and gas industry even as oil prices recovered and appeared to stabilize near$40 bbl. In response to the economic destruction caused by the COVID-19 pandemic, many governments implemented stimulus programs to aid individuals and businesses. The size, method and effectiveness of these programs varies greatly and, although generally helpful to the target economies, they have not fully restored prior levels of demand for oil and gas. Management expects industry activity levels and spending by customers to remain depressed throughout the remainder of 2020 as demand destruction from COVID-19 continues. NOV remains committed to streamlining operations and improving organizational efficiencies while focusing on investing in innovative products and services, including environmentally friendly technologies, that are responsive to the longer-term needs of our customers. We believe this strategy will further advance the Company's competitive position, regardless of the market environment.
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 other oilfield service companies and
drilling contractors, and worldwide oil and gas inventory levels. Key industry
indicators for the second quarter of 2020 and 2019, and the first quarter of
2020 include the following:
% %
2Q20 2Q20
2Q20* 2Q19* 1Q20* 2Q19 1Q20
Active Drilling Rigs:
U.S. 396 989 784 (60.0 %) (49.5 %)
Canada 25 83 196 (69.9 %) (87.2 %)
International 834 1,138 1,073 (26.7 %) (22.3 %)
Worldwide 1,255 2,210 2,053 (43.2 %) (38.9 %)
West Texas Intermediate
Crude Prices (per barrel) $ 27.81 $ 59.78 $ 45.99 (53.5 %) (39.5 %)
Natural Gas Prices ($/mmbtu) $ 1.67 $ 2.51 $ 1.88 (33.5 %) (11.2 %)
* Averages for the quarters indicated. See sources below.
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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, 2020 , on a quarterly basis:
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Industry Trends Rig Counts and Oil Prices Total Number of Rigs 4,000 3,500 3,000
2,500 2,000 1,500 1,000 500 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00
$ West Texas Int. (Price per Barrel) 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20
2Q20 Total Rings 2,110 2,262 2,260 2,260 2,210 2,197 2,071 2,053 1,255 Canada
105 208 177 185 83 132 139 196 25 US 1,037 1,051 1,072 1,046 989 920 821 784 396
International 968 1,003 1,011 1,029 1,138 1,145 1,111 1,073 834 W.TX Int. ($)
$68.03 $69.76 $59.08 $54.83 $59.78 $56.37 $56.92 $45.99 $27.81 Source: Rig count:
The worldwide quarterly average rig count decreased 39 percent (from 2,053 to 1,255), and theU.S. decreased 49 percent (from 784 to 396), in the second quarter of 2020 compared to the first quarter of 2020. The average per barrel price of West Texas Intermediate Crude Oil decreased 40 percent (from$45.99 per barrel to$27.81 per barrel) and natural gas prices decreased 11 percent (from$1.88 per mmbtu to$1.67 per mmbtu) in the second quarter of 2020 compared to the first quarter of 2020. AtJuly 17, 2020 , there were 285 rigs actively drilling inNorth America , which decreased 32 percent from the second quarter average of 421 rigs. The price for West Texas Intermediate Crude Oil was$40.59 per barrel atJuly 17, 2020 , an increase of 46 percent from the second quarter of 2020 average. The price for natural gas was$1.72 per mmbtu atJuly 17, 2020 , an increase of three percent from the second quarter of 2020 average. 23 --------------------------------------------------------------------------------
Results of Operations
Financial results by operating segment are as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenue:
Wellbore Technologies $ 442 $ 850 $ 1,133 $ 1,657
Completion & Production Solutions 611 663 1,286 1,244
Rig Technologies 476 671 1,033 1,274
Eliminations (33 ) (52 ) (73 ) (103 )
Total revenue $ 1,496 $ 2,132 $ 3,379 $ 4,072
Operating profit (loss):
Wellbore Technologies $ (67 ) (3,295 ) $ (730 ) $ (3,276 )
Completion & Production Solutions 42 (1,932 ) (971 ) (1,967 )
Rig Technologies (25 ) (422 ) (227 ) (391 )
Eliminations and corporate costs (50 ) (79 ) (122 ) (142 )
Total operating profit (loss) $ (100 ) $ (5,728 ) $ (2,050 ) $ (5,776 )
Wellbore Technologies
Three and six months ended June 30, 2020 and 2019. Revenue from Wellbore
Technologies was $442 million for the three months ended June 30, 2020 , compared
to $850 million for the three months ended June 30, 2019 , a decrease of $408
million or 48 percent. For the six months ended June 30, 2020 , revenue from
Wellbore Technologies was $1,133 million compared to $1,657 million for the six
months ending June 30, 2019 , a decrease of $524 million or 32 percent.
Operating loss from Wellbore Technologies was $67 million for the three months
ended June 30, 2020 compared to $3,295 million for the three months ended June
30, 2019 , an increase of $3,228 million . For the six months ended June 30, 2020 ,
operating loss from Wellbore Technologies was $730 million compared to $3,276
million for the six months ending June 30, 2019 , an increase of $2,546 million
primarily due to the impairment of certain assets.
Completion & Production Solutions
Three and six months endedJune 30, 2020 and 2019. Revenue from Completion & Production Solutions was$611 million for the three months endedJune 30, 2020 , compared to$663 million for the three months endedJune 30, 2019 , a decrease of$52 million dollars or eight percent. For the six months endedJune 30, 2020 , revenue from Completion & Production Solutions was$1,286 million compared to$1,244 million for the six months endingJune 30, 2019 , an increase of$42 million or three percent. Operating profit from Completion & Production Solutions was$42 million for the three months endedJune 30, 2020 compared to an operating loss of$1,932 million for the three months endedJune 30, 2019 , an increase of$1,974 million . For the six months endedJune 30, 2020 , operating loss from Completion & Production Solutions was$971 million compared to$1,967 million for the six months endingJune 30, 2019 , an increase of$996 million primarily due to the impairment of certain assets. The Completion & Productions Solutions 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$1.0 billion atJune 30, 2020 , a decrease of$215 million , or 18 percent from backlog of$1.22 million atJune 30, 2019 . Numerous factors may affect the timing of revenue out of backlog. Considering these factors, the Company reasonably expects approximately 67 percent of backlog to become revenue during the rest of 2020 and the remainder thereafter. AtJune 30, 2020 , approximately 63 percent of the capital equipment backlog was for offshore products and approximately 90 percent of the capital equipment backlog was destined for international markets. 24 --------------------------------------------------------------------------------
Rig Technologies
Three and six months endedJune 30, 2020 and 2019. Revenue from Rig Technologies was$476 million for the three months endedJune 30, 2020 , compared to$671 million for the three months endedJune 30, 2019 , a decrease of$195 million or 29 percent. For the six months endedJune 30, 2020 , revenue from Rig Technologies was$1,033 million compared to$1,274 million for the six months endingJune 30, 2019 , a decrease of$241 million or 19 percent. Operating loss from Rig Technologies was$25 million for the three months endedJune 30, 2020 compared to$422 million for the three months endedJune 30, 2019 , an increase of$397 million . For the six months endedJune 30, 2020 , operating loss from Rig Technologies was$227 million compared to$391 million for the six months endingJune 30, 2019 , an increase of$164 million , primarily due to asset impairments. The Rig Technologies 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 drilling rig components or a signed contract related to a construction project. The capital equipment backlog was$2.79 billion atJune 30, 2020 , a decrease of$381 million , or 12 percent, from backlog of$3.17 billion atJune 30, 2019 . Numerous factors may affect the timing of revenue out of backlog. Considering these factors, the Company reasonably expects approximately 12 percent of backlog to become revenue during the rest of 2020 and the remainder thereafter. AtJune 30, 2020 , approximately 26 percent of the capital equipment backlog was for offshore products and approximately 93 percent of the capital equipment backlog was destined for international markets.
Eliminations and corporate costs
Eliminations and corporate costs were$50 million and$122 million for the three and six months endedJune 30, 2020 , respectively, compared to$79 million and$142 million for the three and six months endedJune 30, 2019 . 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 three reporting segments that are eliminated in consolidation. Intrasegment transactions are eliminated within each segment.
Other income (expense), net
Other income (expense), net were expenses of$8 million and$11 million for the three and six months endedJune 30, 2020 , respectively, compared to expenses of$8 million and$26 million for the three and six months endedJune 30, 2019 , respectively. The change in expense was primarily due to the fluctuations in foreign currencies. Provision for income taxes The effective tax rate for the three and six months endedJune 30, 2020 was 35.1% and 8.7%, respectively, compared to 6.5% and 6.6% for the same periods in 2019. The company's 2019 and 2020 effective tax rates are negatively impacted by incremental valuation allowances primarily on net operating loss and tax attributes available in those years and the impairment of nondeductible goodwill. Furthermore, the Company revised its estimated income tax benefit related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was enacted onMarch 27, 2020 allowing net operating losses originating in 2018, 2019 or 2020 to be carried back five years. The Company recorded an income tax benefit of$123 million in the three months endedMarch 31, 2020 in anticipation of filing a refund claim to carryback its 2019 United States net operating loss to its 2014 tax year. The Company refined its estimated income tax benefit during the three months endedJune 30, 2020 , resulting in a reduction to the income tax benefit from$123 million to$100 million . The Company received a cash refund of$94 million inJune 2020 and anticipates receiving an additional refund upon the filing of the final 2019 United States income tax return and final net operating loss carryback claim to 2014. The Company will finalize these computations during the three months endedSeptember 30, 2020 . In addition, the effective tax rate in the three months and six months endedJune 30, 2020 was favorably impacted by an income tax benefit of$90 million related to the Company's decision to amend its 2016 United States income tax return in order to deduct foreign taxes paid rather than to claim foreign tax credits which would carryforward and be expected to expire unused in 2026. The resulting net operating loss in 2016 will be carried back to the Company's 2014 tax return and will result in a net income tax refund of$90 million . The income tax receivable of$90 million is recorded in Other Assets on the balance sheet as the Company believes the refund will not be received within twelve months. 25
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Non-GAAP Financial Measures and Reconciliations
The Company discloses Adjusted EBITDA (defined as Operating Profit excluding Depreciation, Amortization and, when applicable, Other Items) in its periodic earnings press releases and other public disclosures to provide investors additional information about the results of ongoing operations. The Company uses Adjusted EBITDA internally to evaluate and manage the business. Adjusted EBITDA is not intended to replace GAAP financial measures, such as Net Income. Other items include impairment charges forGoodwill , indefinite and finite-lived intangible assets, long-lived tangible assets, restructure costs for facility closures, inventory write downs, severance payments and adjustments of certain reserves.
The following tables set forth the reconciliation of Adjusted EBITDA to its most comparable GAAP financial measure (in millions):
Three Months Ended Six Months Ended
June 30, March 31, June 30,
2020 2019 2020 2020 2019
Operating profit (loss):
Wellbore Technologies $ (67 ) $ (3,295 ) $ (663 ) $ (730 ) $ (3,276 )
Completion & Production Solutions 42 (1,932 ) (1,013 ) (971 ) (1,967 )
Rig Technologies (25 ) (422 ) (202 ) (227 ) (391 )
Eliminations and corporate costs (50 ) (79 ) (72 ) (122 ) (142 )
Total operating loss $ (100 ) $ (5,728 ) $
(1,950 )
Other items: Wellbore Technologies$ 62 $ 3,345 $ 715 $ 777 $ 3,343 Completion & Production Solutions 12 1,939 1,054 1,066 1,950 Rig Technologies 20 474 238 258 476 Corporate 8 11 16 24 11 Total other items$ 102 $ 5,769 $ 2,023 $ 2,125 $ 5,780 Depreciation & amortization: Wellbore Technologies$ 47 $ 84 $ 51 $ 98 $ 184 Completion & Production Solutions 14 45 30 44 97 Rig Technologies 19 22 20 39 45 Corporate 2 3 4 6 5 Total depreciation & amortization$ 82 $ 154 $ 105 $ 187 $ 331 Adjusted EBITDA: Wellbore Technologies$ 42 $ 134 $ 103 $ 145 $ 251 Completion & Production Solutions 68 52 71 139 80 Rig Technologies 14 74 56 70 130 Eliminations and corporate costs (40 ) (65 ) (52 ) (92 ) (126 ) Total Adjusted EBITDA$ 84 $ 195 $
178
Reconciliation of Adjusted EBITDA: GAAP net loss attributable to Company$ (93 ) $ (5,389 ) $ (2,047 ) $ (2,140 ) $ (5,466 ) Noncontrolling interests 6 5 (2 ) 4 7 Benefit for income taxes (47 ) (373 ) (156 ) (203 ) (383 ) Interest expense 22 25 22 44 50 Interest income (2 ) (6 ) (3 ) (5 ) (12 ) Equity loss in unconsolidated affiliate 6 2 233 239 2 Other (income) expense, net 8 8 3 11 26 Depreciation and amortization 82 154 105 187 331 Other items 102 5,769 2,023 2,125 5,780 Total Adjusted EBITDA$ 84 $ 195 $ 178 $ 262 $ 335 26
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Liquidity and Capital Resources
Overview
AtJune 30, 2020 , the Company had cash and cash equivalents of$1,447 million and total debt of$2,029 million . AtDecember 31, 2019 , cash and cash equivalents were$1,171 million and total debt was$1,989 million . As ofJune 30, 2020 , approximately$849 million of the$1,447 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 incrementalU.S. taxation. If opportunities to invest in theU.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$2.0 billion , five-year unsecured revolving credit facility, which expires onOctober 30, 2024 . The Company has the right to increase the commitments under this agreement to an aggregate amount of up to$3.0 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon LIBOR, NIBOR or CDOR plus 1.125% subject to a ratings-based grid or theU.S. prime rate. The credit facility contains a financial covenant regarding maximum debt-to-capitalization ratio of 60%. As ofJune 30, 2020 , the Company was in compliance with a debt-to-capitalization ratio of 29.4% and had no outstanding letters of credit issued under the facility, resulting in$2.0 billion of available funds. The Company also has a$150 million bank line of credit for the construction of a facility inSaudi Arabia . Interest under the bank line of credit is based upon LIBOR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As ofJune 30, 2020 , the Company was in compliance. From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions. Our factoring transactions are recognized as sales, and the proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows. Our outstanding debt atJune 30, 2020 was$2,029 million and consisted primarily of$399 million in 2.60% Senior Notes,$1,089 million in 3.95% Senior Notes,$493 million in 3.60% Senior Notes, and other debt of$48 million . The Company was in compliance with all covenants atJune 30, 2020 . Lease liabilities totaled$752 million atJune 30, 2020 . We had$524 million of outstanding letters of credit atJune 30, 2020 , primarily in theU.S. andNorway , 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 continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions): Six Months EndedJune 30, 2020 2019
Net cash provided by (used in) operating activities
(111 ) (156 )
Net cash used in financing activities (27 ) (39 )
Significant sources and uses of cash during the first six months of 2020
• Cash flows provided by operating activities was
changes in the primary components of our working capital (receivables,
inventories and accounts payable), primarily related to strong collections
on accounts receivable.
• We did not sell any accounts receivable in the second quarter.
• Capital expenditures were $124 million .
• We paid $19 million in dividends to our shareholders.
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Oil and Gas Market Downturn and COVID-19 Pandemic
Since the oil and gas market downturn began in late 2014, the Company has maintained a continuous process of actively managing its strategy, structure and resources to the changing market conditions and new realities. The Company has closed or realigned hundreds of facilities, reduced headcount, sharply lowered costs and reviewed all product lines for acceptable returns in the evolved market. Additionally, the Company has proactively reduced the balances and extended the maturity profile of its debt. In the fall of 2019, the Company retired$1 billion of notes due 2022 for cash, issued$500 million of notes due 2029 and extended the maturity of its undrawn credit facility to 2024. While aggressively matching size and spend to the market, and protecting its balance sheet, the Company has continued investing in new products and technologies that enable its customers to improve their operational efficiencies. When the COVID-19 global pandemic and OPEC+ actions further depressed oil prices and industry activity beginning in March of 2020, the Company's prior prudent actions helped ensure adequate available resources. Management intends to continue managing the business to the market realities to ensure the Company's access to capital remains sufficient. - See Item 1A Risk Factors.
Other
The effect of the change in exchange rates on cash flows was a decrease of
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. We intend to pursue additional 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.
New Accounting Pronouncements
See Note 16 for recently adopted and recently issued accounting standards.
Forward-Looking Statements
Some of the information in this document contains, or has incorporated by reference, forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by use of terms such as "may," "expect," "anticipate," "estimate," and similar words, although some forward-looking statements are expressed differently. All statements herein regarding expected merger synergies are forward-looking statements. You should be aware that our actual results could differ materially from results anticipated in the 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, difficulties encountered in integrating mergers and acquisitions, and worldwide economic activity. You should also consider carefully the statements under "Risk Factors," as disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements. 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. 28
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