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; 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 (including 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 third quarter endedSeptember 30, 2020 , the Company generated revenues of$1.38 billion , compared to$1.50 billion for the second quarter of 2020 and$2.13 billion for the third quarter of 2019. Operating loss for the third quarter of 2020 was$74 million , or -5.3% of sales, and net loss improved$38 million sequentially to$55 million , or -4 percent of sales. Operating loss and net loss include non-cash, pre-tax charges ("other items", see Other Corporate Items for additional detail) of$62 million . Adjusted EBITDA (operating profit excluding depreciation, amortization, and other items) decreased$13 million sequentially to$71 million , or 5.1 percent of sales. Other items included severance, facility closures, inventory charges and other restructuring costs. Segment Performance Wellbore Technologies Wellbore Technologies generated revenues of$361 million in the third quarter of 2020, a decrease of 18 percent from the second quarter of 2020 and a decrease of 54 percent from the third quarter of 2019. The sequential decline in revenue was a result of a full quarter impact of sharp reductions in North American drilling activity that occurred during the second quarter and continued declines in international drilling activity. Operating loss was$50 million , or -13.9 percent of sales, and included$26 million of other items. Adjusted EBITDA was$21 million , or 5.8 percent of sales, as cost-savings initiatives limited decremental leverage (the change in Adjusted EBITDA divided by the change in revenue) to 26 percent.
Completion & Production Solutions
Completion & Production Solutions generated revenues of$601 million in the third quarter of 2020, a decrease of two percent from the second quarter of 2020 and a decrease of 17 percent from the third quarter of 2019. Operating profit was$25 million , or 4.2 percent of sales, and included$23 million in other items. Strong execution on international and offshore project backlog partially offset declines in shorter-cycle businesses. Adjusted EBITDA decreased seven percent sequentially to$63 million , or 10.5 percent of sales. New orders booked during the quarter totaled$169 million , representing a book-to-bill of 43 percent when compared to the$394 million of orders shipped from backlog. AtSeptember 30, 2020 , backlog for capital equipment orders for Completion & Production Solutions was$789 million .
Rig Technologies
Rig Technologies generated revenues of$449 million in the third quarter of 2020, a decrease of six percent from the second quarter of 2020 and a decrease of 31 percent from the third quarter of 2019. Lower sales of rig capital equipment and aftermarket parts and services were partially offset by higher project revenues in the segment'sMarine Construction business, which continues to benefit from a growing number of offshore wind construction opportunities. Operating loss was$3 million , or -0.7 percent of sales, and included$12 million of other items. Adjusted EBITDA increased$14 million sequentially to$28 million , or 6.2 percent of sales. New orders booked during the quarter totaled$57 million , representing a book-to-bill of 29 percent when compared to the$199 million of orders shipped from backlog. AtSeptember 30, 2020 , backlog for capital equipment orders for Rig Technologies was$2.66 billion . 21 --------------------------------------------------------------------------------
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. 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 and third quarters of 2020, extending depressed demand, uncertainty and additional spending reductions by the entire oil and gas industry asU.S. rig count fell to its lowest level since 1940 in August despite oil prices beginning 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 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 and into the beginning of 2021 as demand destruction from COVID-19 persists. 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:
% increase (decrease)
3Q20 v 3Q20 v
3Q20* 3Q19* 2Q20* 3Q19 2Q20
Active Drilling Rigs:
U.S. 254 920 396 (72.4 %) (35.9 %)
Canada 49 132 25 (62.9 %) 96.0 %
International 730 1,145 834 (36.2 %) (12.5 %)
Worldwide 1,033 2,197 1,255 (53.0 %) (17.7 %)
West Texas Intermediate
Crude Prices (per barrel) $ 41.05 $ 56.37 $ 27.81 (27.2 %) 47.6 %
Natural Gas Prices ($/mmbtu) $ 1.97 $ 2.34 $ 1.67 (15.8 %) 18.0 %
* 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
September 30, 2020 , on a quarterly basis:
[[Image Removed]]
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 18 percent (from 1,255 to 1,033), and theU.S. decreased 36 percent (from 396 to 254), in the third quarter of 2020 compared to the second quarter of 2020. The average per barrel price of West Texas Intermediate Crude Oil increased 48 percent (from$27.81 per barrel to$41.05 per barrel) and natural gas prices increased 18 percent (from$1.67 per mmbtu to$1.97 per mmbtu) in the third quarter of 2020 compared to the second quarter of 2020. AtOctober 16, 2020 , there were 362 rigs actively drilling inNorth America , which increased 19 percent from the third quarter average of 303 rigs. The price for West Texas Intermediate Crude Oil was$40.88 per barrel atOctober 16, 2020 , a slight decrease from the third quarter average of$41.05 . The price for natural gas was$2.77 per mmbtu atOctober 16, 2020 , an increase of 41 percent from the third quarter average of$1.97 . 23 --------------------------------------------------------------------------------
Results of Operations
Financial results by operating segment are as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenue:
Wellbore Technologies $ 361 $ 793 $ 1,494 $ 2,450
Completion & Production Solutions 601 728 1,887 1,972
Rig Technologies 449 649 1,482 1,923
Eliminations (27 ) (44 ) (100 ) (147 )
Total revenue $ 1,384 $ 2,126 $ 4,763 $ 6,198
Operating profit (loss):
Wellbore Technologies $ (50 ) 42 $ (780 ) $ (3,234 )
Completion & Production Solutions 25 (24 ) (946 ) (1,991 )
Rig Technologies (3 ) (110 ) (230 ) (501 )
Eliminations and corporate costs (46 ) (62 ) (168 ) (204 )
Total operating profit (loss) $ (74 ) $ (154 ) $ (2,124 ) $ (5,930 )
Wellbore Technologies
Three and nine months ended September 30, 2020 and 2019. Revenue from Wellbore
Technologies was $361 million for the three months ended September 30, 2020 ,
compared to $793 million for the three months ended September 30, 2019 , a
decrease of $432 million or 54 percent. For the nine months ended September 30,
2020 , revenue from Wellbore Technologies was $1,494 million compared to $2,450
million for the nine months ended September 30, 2019 , a decrease of $956 million
or 39 percent.
Operating loss from Wellbore Technologies was $50 million for the three months
ended September 30, 2020 compared to operating profit of $42 million for the
three months ended September 30, 2019 , a decrease of $92 million . For the nine
months ended September 30, 2020 , operating loss from Wellbore Technologies was
$780 million compared to $3,234 million for the nine months ended September 30,
2019 , an increase of $2,454 million primarily due a larger impairment of certain
assets in 2019.
Completion & Production Solutions
Three and nine months endedSeptember 30, 2020 and 2019. Revenue from Completion & Production Solutions was$601 million for the three months endedSeptember 30, 2020 , compared to$728 million for the three months endedSeptember 30, 2019 , a decrease of$127 million dollars or 17 percent. For the nine months endedSeptember 30, 2020 , revenue from Completion & Production Solutions was$1,887 million compared to$1,972 million for the nine months endedSeptember 30, 2019 , a decrease of$85 million or four percent. Operating profit from Completion & Production Solutions was$25 million for the three months endedSeptember 30, 2020 compared to an operating loss of$24 million for the three months endedSeptember 30, 2019 , an increase of$49 million . For the nine months endedSeptember 30, 2020 , operating loss from Completion & Production Solutions was$946 million compared to$1,991 million for the nine months endedSeptember 30, 2019 , an increase of$1,045 million primarily due to a larger impairment of certain assets in 2019. 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$789 million atSeptember 30, 2020 , a decrease of$509 million , or 39 percent from backlog of$1.30 billion atSeptember 30, 2019 . Numerous factors may affect the timing of revenue out of backlog. Considering these factors, the Company reasonably expects approximately 44 percent of backlog to become revenue during the rest of 2020 and the remainder thereafter. AtSeptember 30, 2020 , approximately 63 percent of the capital equipment backlog was for offshore products and approximately 91 percent of the capital equipment backlog was destined for international markets. 24 --------------------------------------------------------------------------------
Rig Technologies
Three and nine months endedSeptember 30, 2020 and 2019. Revenue from Rig Technologies was$449 million for the three months endedSeptember 30, 2020 , compared to$649 million for the three months endedSeptember 30, 2019 , a decrease of$200 million or 31 percent. For the nine months endedSeptember 30, 2020 , revenue from Rig Technologies was$1,482 million compared to$1,923 million for the nine months endedSeptember 30, 2019 , a decrease of$441 million or 23 percent. Operating loss from Rig Technologies was$3 million for the three months endedSeptember 30, 2020 compared to$110 million for the three months endedSeptember 30, 2019 , an increase of$107 million . For the nine months endedSeptember 30, 2020 , operating loss from Rig Technologies was$230 million compared to$501 million for the nine months endedSeptember 30, 2019 , an increase of$271 million , primarily due to larger asset impairments in 2019. 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$2.66 billion atSeptember 30, 2020 , a decrease of$483 million , or 15 percent, from backlog of$3.14 billion atSeptember 30, 2019 . Numerous factors may affect the timing of revenue out of backlog. Considering these factors, the Company reasonably expects approximately seven percent of backlog to become revenue during the rest of 2020 and the remainder thereafter. AtSeptember 30, 2020 , approximately 23 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$46 million and$168 million for the three and nine months endedSeptember 30, 2020 , respectively, compared to$62 million and$204 million for the three and nine months endedSeptember 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$19 million for the three and nine months endedSeptember 30, 2020 , respectively, compared to expenses of$10 million and$36 million for the three and nine months endedSeptember 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 nine months endedSeptember 30, 2020 was 53.5% and 10.8%, respectively, compared to (31.7%) and 5.4% 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 recorded income tax benefits of$106M in the three months endedSeptember 30, 2020 and$206M in the nine months endedSeptember 30, 2020 related to the carryback of its 2019 United States net operating loss pursuant 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. In addition, the Company recorded an income tax benefit of$90.3M in the nine months endedSeptember 30, 2020 to reflect the Company's decision to amend its 2016 United States income tax return and resulting net operating loss carryback to 2014. The Company has recorded an income tax receivable of$112 million in Current Assets related to the 2019 net operating loss carryback and an income tax receivable in Other Assets of$90.3 million related to the 2016 net operating loss carryback. 25 --------------------------------------------------------------------------------
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 charges, 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 Nine Months Ended
September 30, June 30, September 30,
2020 2019 2020 2020 2019
Operating profit (loss):
Wellbore Technologies $ (50 ) $ 42 $ (67 ) $ (780 ) $ (3,234 )
Completion & Production Solutions 25 (24 ) 42 (946 ) (1,991 )
Rig Technologies (3 ) (110 ) (25 ) (230 ) (501 )
Eliminations and corporate costs (46 ) (62 ) (50 ) (168 ) (204 )
Total operating loss $ (74 ) $ (154 ) $
(100 )
Other items: Wellbore Technologies$ 26 $ 41 $ 62 $ 803 $ 3,384 Completion & Production Solutions 23 79 12 1,089 2,029 Rig Technologies 12 194 20 270 670 Corporate 1 - 8 25 11 Total other items$ 62 $ 314 $ 102 $ 2,187 $ 6,094 Depreciation & amortization: Wellbore Technologies$ 45 $ 50 $ 47 $ 143 $ 234 Completion & Production Solutions 15 27 14 59 124 Rig Technologies 19 21 19 58 66 Corporate 4 4 2 10 9
Total depreciation & amortization
82$ 270 $ 433 Adjusted EBITDA: Wellbore Technologies$ 21 $ 133 $ 42 $ 166 $ 384 Completion & Production Solutions 63 82 68 202 162 Rig Technologies 28 105 14 98 235 Eliminations and corporate costs (41 ) (58 ) (40 ) (133 ) (184 ) Total Adjusted EBITDA$ 71 $ 262 $
84
Reconciliation of Adjusted EBITDA: GAAP net loss attributable to Company$ (55 ) $ (244 ) $ (93 ) $ (2,195 ) $ (5,710 ) Noncontrolling interests 2 (5 ) 6 6 2 Benefit for income taxes (61 ) 60 (47 ) (264 ) (323 ) Interest expense 21 25 22 65 75 Interest income - (4 ) (2 ) (5 ) (16 ) Equity loss in unconsolidated affiliate 11 4 6 250 6 Other (income) expense, net 8 10 8 19 36 Depreciation and amortization 83 102 82 270 433 Other items 62 314 102 2,187 6,094 Total Adjusted EBITDA$ 71 $ 262 $ 84 $ 333 $ 597 26
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Liquidity and Capital Resources
Overview
AtSeptember 30, 2020 , the Company had cash and cash equivalents of$1,485 million and total debt of$1,824 million . AtDecember 31, 2019 , cash and cash equivalents were$1,171 million and total debt was$1,989 million . As ofSeptember 30, 2020 , approximately$911 million of the$1,485 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 ofSeptember 30, 2020 , the Company was in compliance with a debt-to-capitalization ratio of 27.4% 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 ofSeptember 30, 2020 , the Company was in compliance. OnAugust 25, 2020 , the Company completed a cash tender offer for$217.3 million of its 2.60% unsecured Senior Notes using available cash balances. The Company paid$226 million , which included a redemption premium of$7.6 million as well as accrued and unpaid interest of$1.3 million . As a result of the redemption, the Company recorded a loss on extinguishment of debt of$8.2 million , which included the redemption premium of$7.6 million and non-cash charges of$0.6 million attributable to the write-off of unamortized discount and debt issuance costs. 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 atSeptember 30, 2020 was$1,824 million and consisted primarily of$182 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$60 million . The Company was in compliance with all covenants atSeptember 30, 2020 . Lease liabilities totaled$619 million atSeptember 30, 2020 . We had$490 million of outstanding letters of credit atSeptember 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): Nine Months EndedSeptember 30, 2020 2019
Net cash provided by operating activities
(160 ) (268 )
Net cash used in financing activities (256 ) (73 )
Significant sources and uses of cash during the first nine 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.
• Capital expenditures were $173 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. InAugust 2020 , the company completed a tender on$217 million of the remaining 2022 notes, further reducing its amount of debt outstanding. 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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