NOV INC. Introduction
NOV Inc. ("NOV" or the "Company") is a leading independent equipment and technology provider to the global energy industry. Originally founded in 1862, NOV and its predecessor companies have spent 159 years helping transform oil and gas field development and improving its cost-effectiveness, efficiency, safety, and environmental impact. 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, the company has helped advance the transition toward sustainable energy.
NOV's extensive proprietary technology portfolio supports the industry's full-field 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 automation, predictive analytics, and condition-based maintenance.
NOV serves major-diversified, national, and independent service companies, contractors, and energy producers in 61 countries, operating under three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies.
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; and, offshore production, including floating production systems and subsea production technologies. The segment also manufacturers industrial pumps and mixers. 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. The segment also designs and manufactures equipment for industrial markets. This includes specialized, technology-driven progressive cavity pumps and mixers for a wide breadth of industrial end markets with high failure costs. Premium pole products to support connectivity, lighting, and power for municipal and residential applications including 5G, smart-city infrastructure, roads and highways, and energy-grid modernization. Demand for these products is driven by general industrial activity and infrastructure spend.
Rig Technologies
The Company's Rig Technologies segment manufactures 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 provides 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
18
--------------------------------------------------------------------------------
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. The segment also designs and builds
equipment for wind turbine installation companies, where demand is dependent on
global investment into offshore wind energy developments.
Critical Accounting Policies and Estimates
In our annual report on Form 10-K for the year endedDecember 31, 2020 , we identified our most critical accounting policies. In preparing the financial statements, we make assumptions, estimates and judgements that affect the amounts reported. We periodically evaluate our estimates and judgements that are most critical in nature which are related to revenue recognition under long-term construction contracts; inventory reserves; impairments of long-lived assets (excluding goodwill and other indefinite-lived intangible assets); impairment of goodwill and other indefinite-lived intangible assets 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 judgements 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, 2021 the Company generated revenues of$1.34 billion , a decrease of 5 percent compared to the second quarter of 2021 and a decrease of 3 percent compared to the third quarter of 2020. Net loss for the third quarter of 2021 was$69 million , or 5.1 percent of sales, which included$12 million in pre-tax charges related to COVID-19 operational disruptions on a project in an Southeast Asian shipyard and$24 million in Other Items. Adjusted EBITDA (operating profit excluding depreciation, amortization, and Other Items) decreased sequentially to$56 million , or 4.2 percent of sales. Segment Performance Wellbore Technologies Wellbore Technologies generated revenues of$507 million in the third quarter of 2021, an increase of 10 percent from the second quarter of 2021 and an increase of 40 percent from the third quarter of 2020. The increase in revenues was driven by oil and gas drilling activity levels that improved in every major region of the world, market share gains in certain markets, and higher prices. Operating profit was$32 million , or 6.3 percent of sales, and included$7 million of Other Items. Adjusted EBITDA increased$14 million sequentially to$77 million , or 15.2 percent of sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of$478 million in the third quarter of 2021, a decrease of 4 percent from the second quarter of 2021 and a decrease of 20 percent from the third quarter of 2020. COVID-19 operational disruptions and supply chain issues negatively impacted the conversion of revenue from backlog during the quarter. Operating loss was$26 million , or 5.4 percent of sales, and included$6 million in Other Items. Adjusted EBITDA decreased$9 million sequentially to-$5 million , or -1.0 percent of sales. Third quarter results included$12 million in charges related to COVID-19 operational disruptions on a project in an Southeast Asian shipyard. New orders booked during the quarter totaled$384 million , representing a book-to-bill of 144 percent when compared to the$266 million of orders shipped from backlog. AtSeptember 30, 2021 , backlog for capital equipment orders for Completion & Production Solutions was$1.11 billion . Rig Technologies Rig Technologies generated revenues of$390 million in the third quarter of 2021, a decrease of 20 percent from the second quarter of 2021 and a decrease of 13 percent from the third quarter of 2020. The sequential decline in revenue was driven primarily by a$74 million project settlement in the second quarter that did not repeat. Operating profit was$1 million , or less than one percent of sales, and included$6 million of other items. Adjusted EBITDA decreased$50 million sequentially to$25 million , or 6.4 percent of sales. New orders booked during the quarter totaled$300 million , representing a book-to-bill of 190 percent when compared to the$158 million of orders shipped from backlog. AtSeptember 30, 2021 , backlog for capital equipment orders for Rig Technologies was$2.78 billion . 19
--------------------------------------------------------------------------------
During 2020, the coronavirus (COVID-19) outbreak rapidly spread across the world, driving sharp demand destruction for crude oil as countries took measures that curtailed economic activity to slow the spread of the outbreak. Companies across the industry responded with severe capital spending budget cuts, curtailed production, cost reductions, personnel layoffs, facility closures and bankruptcy filings. Towards the end of 2020 and into 2021, commodity prices stabilized and began to recover resulting in improving industry activity levels inNorth America . Throughout 2021, greater availability of COVID-19 vaccines resulted in the gradual reopening of certain economies around the world. Pent-up consumer and industrial demand combined with government economic stimulus programs are serving to amplify the global recovery, improve economic activity, and drive higher demand for oil and gas, which management believes is setting the stage for a global recovery in drilling activity. During the third quarter of 2021 oil and gas drilling activity levels increased in every major region of the world, reflecting this growing demand. Despite near-term disruptions from ongoing COVID-19 outbreaks, pandemic related supply chain disruptions, and inflationary forces, management is optimistic that improving market fundamentals and the actions NOV has taken to position its business for the future will drive growth and improve profitability for the Company. NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including environmentally friendly technologies, that are responsive to the longer-term needs of NOV's customers. We believe this strategy will further advance the Company's competitive position, regardless of the market.
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 third quarter of 2021 and 2020, and the second quarter of
2021 include the following:
% %
3Q21 3Q21
3Q21* 3Q20* 2Q21* 3Q20 2Q21
Active Drilling Rigs:
U.S. 497 254 451 95.7 % 10.2 %
Canada 151 49 73 208.2 % 106.8 %
International 772 730 734 5.8 % 5.2 %
Worldwide 1,420 1,033 1,258 37.5 % 12.9 %
West Texas Intermediate
Crude Prices (per barrel) $ 70.62 $ 41.05 $ 66.09 72.0 % 6.9 %
Natural Gas Prices ($/mmbtu) $ 4.32 $ 1.97 $ 2.91 119.3 % 48.5 %
* Averages for the quarters indicated. See sources below.
The Company is also becoming increasingly engaged with energy transition related
opportunities and is currently involved in projects related to wind energy,
geothermal power, rare earth metal extraction, biogas production, and carbon
sequestration. Additionally, the Company is investing in developing
technologies and solutions that will support other energy transition related
industry verticals. Management expects to see continued growth in these areas
as low carbon power becomes a larger portion of the global energy supply.
20
--------------------------------------------------------------------------------
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, 2021 , 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 $4
.99 $2 Source: Rig count:
The worldwide quarterly average rig count increased 13 percent (from 1,258 to 1,420), and theU.S. increased 10 percent (from 451 to 497), in the third quarter of 2021 compared to the second quarter of 2021. The average per barrel price of West Texas Intermediate Crude Oil increased seven percent (from$66.09 per barrel to$70.62 per barrel) and natural gas prices increased 48 percent (from$2.91 per mmbtu to$4.32 per mmbtu) in the third quarter of 2021 compared to the second quarter of 2021. AtOctober 15, 2021 , there were 711 rigs actively drilling inNorth America , which increased 10 percent from the third quarter average of 648 rigs. The price for West Texas Intermediate Crude Oil was$83.53 per barrel atOctober 15, 2021 , an increase of 18 percent from the third quarter of 2021 average. The price for natural gas was$5.64 per mmbtu atOctober 15, 2021 , an increase of 31 percent from the third quarter of 2021 average. 21
--------------------------------------------------------------------------------
Results of Operations
Financial results by operating segment are as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue:
Wellbore Technologies $ 507 $ 361 $ 1,383 $ 1,494
Completion & Production Solutions 478 601 1,414 1,887
Rig Technologies 390 449 1,308 1,482
Eliminations (34 ) (27 ) (98 ) (100 )
Total revenue $ 1,341 $ 1,384 $ 4,007 $ 4,763
Operating profit (loss):
Wellbore Technologies $ 32 (50 ) $ 24 $ (780 )
Completion & Production Solutions (26 ) 25 (49 ) (946 )
Rig Technologies 1 (3 ) 42 (230 )
Eliminations and corporate costs (50 ) (46 ) (136 ) (168 )
Total operating profit (loss) $ (43 ) $ (74 ) $ (119 ) $ (2,124 )
Wellbore Technologies
Three and nine months ended September 30, 2021 and 2020. Revenue from Wellbore
Technologies was $507 million for the three months ended September 30, 2021 ,
compared to $361 million for the three months ended September 30, 2020 , an
increase of $146 million or 40 percent. For the nine months ended September 30,
2021 , revenue from Wellbore Technologies was $1,383 million compared to $1,494
million for the nine months ending September 30, 2020 , a decrease of $111
million or 8 percent.
Operating profit from Wellbore Technologies was $32 million for the three months
ended September 30, 2021 compared to a loss of $50 million for the three months
ended September 30, 2020 , an increase of $82 million . For the nine months ended
September 30, 2021 , operating profit from Wellbore Technologies was $24 million
compared to a loss of $780 million for the nine months ending September 30,
2020 , an increase of $804 million primarily due to the impairment of certain
assets in 2020 that did not repeat in 2021.
Completion & Production Solutions
Three and nine months endedSeptember 30, 2021 and 2020. Revenue from Completion & Production Solutions was$478 million for the three months endedSeptember 30, 2021 , compared to$601 million for the three months endedSeptember 30, 2020 , a decrease of$123 million dollars or 20 percent. For the nine months endedSeptember 30, 2021 , revenue from Completion & Production Solutions was$1,414 million compared to$1,887 million for the nine months endingSeptember 30, 2020 , a decrease of$473 million or 25 percent. Operating loss from Completion & Production Solutions was$26 million for the three months endedSeptember 30, 2021 compared to an operating profit of$25 million for the three months endedSeptember 30, 2020 , a decrease of$51 million . For the nine months endedSeptember 30, 2021 , operating loss from Completion & Production Solutions was$49 million compared to$946 million for the nine months endingSeptember 30, 2020 . Operating loss decreased$897 million primarily due to the impairment of certain assets in 2020 that did not repeat in 2021. 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$1.1 billion atSeptember 30, 2021 , an increase of$318 million from backlog of$789 million atSeptember 30, 2020 . Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 32 percent of backlog to become revenue during the rest of 2021 and the remainder thereafter. AtSeptember 30, 2021 , approximately 65 percent of the capital equipment backlog was for offshore products and approximately 77 percent of the capital equipment backlog was destined for international markets. 22 --------------------------------------------------------------------------------
Rig Technologies
Three and nine months endedSeptember 30, 2021 and 2020. Revenue from Rig Technologies was$390 million for the three months endedSeptember 30, 2021 , compared to$449 million for the three months endedSeptember 30, 2020 , a decrease of$59 million or 13 percent. For the nine months endedSeptember 30, 2021 , revenue from Rig Technologies was$1,308 million compared to$1,482 million for the nine months endingSeptember 30, 2020 , a decrease of$174 million or 12 percent. Operating profit from Rig Technologies was$1 million for the three months endedSeptember 30, 2021 compared to an operating loss of$3 million for the three months endedSeptember 30, 2020 , an increase of$4 million . For the nine months endingSeptember 30, 2021 , operating profit from Rig Technologies was$42 million compared to an operating loss of$230 million for the nine months endingSeptember 30, 2020 an increase of$272 million , primarily due to asset impairments in 2020 that did not repeat in 2021. 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$2.78 billion atSeptember 30, 2021 , an increase of$124 million from backlog of$2.66 billion atSeptember 30, 2020 . Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 6 percent of backlog to become revenue during the rest of 2021 and the remainder thereafter. AtSeptember 30, 2021 , approximately 30 percent of the capital equipment backlog was for offshore products and approximately 92 percent of the capital equipment backlog was destined for international markets.
Eliminations and corporate costs
Eliminations and corporate costs were$50 million and$136 million for the three and nine months endedSeptember 30, 2021 , respectively, compared to$46 million and$168 million for the three and nine months endedSeptember 30, 2020 , respectively. 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 income of$1 million and expense of$25 million for the three and nine months endedSeptember 30, 2021 , respectively, compared to expenses of$8 million and$19 million for the three and nine months endedSeptember 30, 2020 , respectively. The change in expense was primarily due to fluctuations in foreign currencies.
Provision for income taxes
The effective tax rate for the three and nine months endedSeptember 30, 2021 was (8.3)% and (0.5)%, respectively, compared to 53.5% and 10.8% for the same periods in 2020. The Company has established valuation allowances on deferred tax assets for losses and tax credits generated in 2021 and 2020. The effective tax rate for 2021 was negatively impacted by current year losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to utilization of losses and tax credits for prior year tax returns. The effective tax rate for 2020 was negatively impacted by losses in certain jurisdictions with no tax benefit as well as the impairment of nondeductible goodwill, partially offset by an income tax benefit from 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 million 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 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 the next twelve months. 23 --------------------------------------------------------------------------------
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. Net Other items of$48 million in 2021 include$67 million of restructure, severance and facility closure, costs and an$8 million post-warranty product modification partially offset by related credits of$27 million . Other items in 2020 include impairment charges forGoodwill , indefinite and finite-lived intangible assets, long-lived tangible assets, and restructure costs for facility closures, inventory write downs, and severance payments, net of related credits.
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,
2021 2020 2021 2021 2020
Operating profit (loss):
Wellbore Technologies $ 32 $ (50 ) $ 6 $ 24 $ (780 )
Completion & Production Solutions (26 ) 25 (6 ) (49 ) (946 )
Rig Technologies 1 (3 ) 49 42 (230 )
Eliminations and corporate costs (50 ) (46 ) (37 ) (136 ) (168 )
Total operating loss $ (43 ) $ (74 ) $ 12 $ (119 ) $ (2,124 )
Other items, net:
Wellbore Technologies $ 7 $ 26 $ 18 $ 31 $ 803
Completion & Production Solutions 6 23 (6 ) (2 ) 1,089
Rig Technologies 6 12 8 17 270
Corporate 5 1 (5 ) 2 25
Total other items $ 24 $ 62 $ 15 $ 48 $ 2,187
Depreciation & amortization:
Wellbore Technologies $ 38 $ 45 $ 39 $ 119 $ 143
Completion & Production Solutions 15 15 16 46 59
Rig Technologies 18 19 18 54 58
Corporate 4 4 4 12 10
Total depreciation & amortization
77$ 231 $ 270 Adjusted EBITDA: Wellbore Technologies$ 77 $ 21 $ 63 $ 174 $ 166 Completion & Production Solutions (5 ) 63 4 (5 ) 202 Rig Technologies 25 28 75 113 98 Eliminations and corporate costs (41 ) (41 ) (38 ) (122 ) (133 ) Total Adjusted EBITDA$ 56 $ 71 $
104
Reconciliation of Adjusted EBITDA: GAAP net loss attributable to Company$ (69 ) $ (55 ) $ (26 ) $ (210 ) $ (2,195 ) Noncontrolling interests 4 2 3 8 6 Benefit for income taxes 5 (61 ) 2 1 (264 ) Interest expense 19 21 19 58 65 Interest income (3 ) - (2 ) (7 ) (5 ) Equity loss in unconsolidated affiliate 2 11 - 6 250 Other (income) expense, net (1 ) 8 16 25 19 Depreciation and amortization 75 83 77 231 270 Other items, net 24 62 15 48 2,187 Total Adjusted EBITDA$ 56 $ 71 $ 104 $ 160 $ 333 24
--------------------------------------------------------------------------------
Liquidity and Capital Resources
Overview
AtSeptember 30, 2021 , the Company had cash and cash equivalents of$1,668 million and total debt of$1,704 million . AtDecember 31, 2020 , cash and cash equivalents were$1,692 million and total debt was$1,834 million . As ofSeptember 30, 2021 , approximately$867 million of the$1,668 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 transferred among countries or repatriated to theU.S. 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. OnApril 8, 2021 , the Company extended the maturity date of the revolving credit facility by one additional year toOctober 30, 2025 . The revolving credit facility has a borrowing capacity of$2.0 billion throughOctober 30, 2024 , and a borrowing capacity of$1.665 billion fromOctober 31, 2024 , toOctober 30, 2025 . 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, 2021 , the Company was in compliance with a debt-to-capitalization ratio of 27.7% 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, 2021 , the Company was in compliance. The Company's outstanding debt atSeptember 30, 2021 consisted primarily of$1,089 million in 3.95% Senior Notes,$494 million in 3.60% Senior Notes, and other debt of$121 million . The Company was in compliance with all covenants atSeptember 30, 2021 . Lease liabilities totaled$695 million atSeptember 30, 2021 . OnApril 9, 2021 , the Company repaid the entire outstanding balance of$182 million of its 2.60% unsecured Senior Notes dueDecember 1, 2022 using available cash balances. Upon redemption, the Company paid$191 million , which included a redemption premium of$6.8 million as well as accrued and unpaid interest of$1.7 million . As a result of the redemption, the Company recorded a loss on extinguishment of debt of$7.1 million , which included the redemption premium of$6.8 million and non-cash charges of$0.3 million to write-off of unamortized discount and debt issuance costs. Following the repayment, the Company's earliest bond maturity is in 2029. The Company had$441 million of outstanding letters of credit atSeptember 30, 2021 , 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, 2021 2020
Net cash provided by operating activities
(102 ) (160 )
Net cash used in financing activities (172 ) (256 )
Significant sources and uses of cash during the first nine months of 2021
• Cash flows provided by operating activities was
changes in the primary components of our working capital (receivables,
inventories and accounts payable).
• Capital expenditures were $137 million .
• The Company repaid $182 million of Senior Notes.
Other
The effect of the change in exchange rates on cash flows was a decrease of
25
--------------------------------------------------------------------------------
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 may 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 15 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, 2020 , 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. 26
--------------------------------------------------------------------------------
© Edgar Online, source
