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Edited Transcript of NOV earnings conference call or presentation 26-Oct-18 3:00pm GMT

Q3 2018 National Oilwell Varco Inc Earnings Call

HOUSTON Oct 30, 2018 (Thomson StreetEvents) -- Edited Transcript of National Oilwell Varco Inc earnings conference call or presentation Friday, October 26, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Clay C. Williams

National Oilwell Varco, Inc. - Chairman, President & CEO

* Jose A. Bayardo

National Oilwell Varco, Inc. - Senior VP & CFO

* Loren B. Singletary

National Oilwell Varco, Inc. - Chief Investor & Industry Relations Officer

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Conference Call Participants

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* Byron Keith Pope

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research

* James Carlyle West

Evercore ISI Institutional Equities, Research Division - Senior MD

* James Knowlton Wicklund

Crédit Suisse AG, Research Division - MD

* James Marshall Adkins

Raymond James & Associates, Inc., Research Division - MD of Equity Research and Director of Energy Research

* Madhav Sanwal

UBS Investment Bank, Research Division - Director and Equity Research Analyst

* William Andrew Herbert

Simmons & Company International, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the National Oilwell Varco Third Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Loren Singletary, Chief Investor and Industry Relations Officer. Sir, you may begin.

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Loren B. Singletary, National Oilwell Varco, Inc. - Chief Investor & Industry Relations Officer [2]

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Welcome, everyone to National Oilwell Varco's Third Quarter 2018 Earnings Conference Call.

With me today are Clay Williams, our Chairman, President and Chief Executive Officer; and Jose Bayardo, our Senior Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities laws. They involve risk and uncertainty, and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year.

For a more detailed discussion of the major risk factors affecting our business, please refer to our latest Forms 10-K and 10-Q filed with the Securities and Exchange Commission.

Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

On a U.S. GAAP basis, for the third quarter of 2018, NOV reported revenues of $2.15 billion and net income of $1 million. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA, as defined in our earnings release. Later in the call, we will host a question-and-answer session. (Operator Instructions)

Now let me turn the call over to Clay.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [3]

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Thank you, Loren. National Oilwell Varco's revenue in the third quarter of 2018 increased 2% and EBITDA increased $19 million to $245 million or 11.4% of revenue.

While the company posted consolidated sequential improvement, our third quarter performance fell short of our expectations. This was due to a combination of market headwinds, which arose late in the quarter in North America, a sharper-than-anticipated falloff of product sales into offshore markets and a couple of self-inflicted execution challenges, which we are focused on fixing.

Jose will go into these in more detail in just a few minutes, but generally, our Completion & Production Solutions segment saw completion services' customer slow deliveries of pressure pumping units, spares and coiled tubing strings in September in North America. Some of this revenue will push out into fourth quarter as deferred units are delivered. But nevertheless, we recognize that our North American customers for this equipment are facing lower day rates in pricing. They began slowing acceptance of equipment on order and cutting expenditures to manage their cash flows over the past few weeks. The Completion & Production Solutions segment's offshore products also showed significantly lower sequential sales, which were partly offset by much higher sales of fiberglass pipe and completion tools at good incrementals throughout the third quarter.

The Wellbore Technologies group achieved its expectations for revenue, but with a different mix, owing to some tool shipments that didn't make it out by the end of the quarter, which was roughly offset by higher drill pipe and drilling fluid sales.

Margins for the group were below expectations due to mix and inflationary forces around labor and steel. We have been less successful than we anticipated at passing on higher cost, as our customers are pushing back hard on price increases. Rig Technologies posted better-than-expected margins compared to guidance, despite lower revenues, owing to a higher mix of aftermarket revenue associated with land rig demand and offshore rig reactivation activities as well as better execution on offshore projects. These revenue gains were offset by lower-than-expected revenues on lower -- on a lower margin land rig, which was expected to ship in the third quarter but did not, which shifted revenues to later periods.

Overall, NOV's EBITDA improved 8% sequentially. While EBITDA is going in the right direction, we are focused on delivering better results as we continue to position the company for future growth, which we expect to unfold in 2019. Before Jose goes into our detailed financial results for the third quarter, I'd like to spend a few minutes offering color into some of our major geographic markets, beginning with North America. 46% of NOV's consolidated revenues came from North America during the third quarter, reflecting sequential growth of 7% or $66 million.

U.S. revenues increased 6% sequentially and Canada seasonal improvement produced 17% sequential growth. Within the North America directional drilling market, downhole tools saw increased sales with share gains in both bits and downhole drilling motors. Our high torque, high flow rate ERT motors continue to win share, and we are seeing more operators rent motors directly from us as opposed to relying on directional drilling service providers to supply them. The strong performance of our motors has led to a 30% increase in power section sales year-to-date, and our first half price increases appear to be holding, at least for these products.

On the other hand, MWD spares sales into North America slowed in the third quarter, after strong performance through the first half. Drill pipes saw double-digit sequential revenue growth, and 58% of our global drill pipe bookings were for the U.S. markets in the third quarter, as we achieved our highest level of Delta premium connection sales to date at $44 million. Drill pipe demands still remains materially below its long-term averages, despite customer-owned inventory being at the lowest levels that we've seen since 2010. But customers are focused on Delta's lower cost of ownership as they resume buying.

U.S. solids control rental jobs increased 6% in the quarter, and we've been able to get selected price increases in North America for rig instrumentation services. Nevertheless, steel and labor costs are continuing to rise, eroding margin gains from price increases across many of our businesses.

Tuboscope posted North American revenue gains from both coating and inspection services. Higher steel prices are driving demand for our tubing and sucker rod reclamation services, which provide lower cost used pipe and sucker rods as compared to new. As I mentioned, our well intervention equipment businesses within our Completion & Production Solutions segment saw generally lower sales for everything except coiled tubing units for North America. Pumping units deliveries fell from 40 units in the second quarter to only 24 this quarter, but processing equipment like mixers and blenders still see comparatively strong demand. We secured new orders for about 27,000 horsepower in the third quarter for replacement units, and we are seeing high interest in our new high-capacity coiled tubing units as well as our new 2.4 million-pound SandBank proppant silo system, which we are introducing this quarter.

Coiled tubing string sales declined in the third quarter at high decrementals, hurt by higher steel cost. Within workover rigs, our customers are interested in taller mass and 1,000 horsepower pumps to reach down the longer laterals characterizing North American unconventional wells. We sold another super spec land drilling rig to a repeat customer from North America, and we saw improvements in demand for spares for land contractors. 57% of our overall Rig Technology's capital orders in the third quarter were for land markets, partly in support of DC to AC land rig conversions as well as to add high torque top drives. We continue to promote super spec rigs to North American drillers, complete with NOVOS operating systems.

Higher drilling day rates in North America, around $25,000 a day, mean that they are very interested, but smaller operators tell us that securing financing remains very challenging. Overall, our drilling contractor customers from North America seem to be willing to increase their spend, while pressure pumpers are retrenching hard as we enter the fourth quarter.

On the production side, North America revenues for fiberglass flowlines are very strong, particularly in West Texas. Higher steel costs are helping shift more demand to composite fiberglass flowlines, where NOV is the global leader. Our Completion Tools business sold its first new liner hanger product into the North American market in the third quarter. Midstream pipeline valves and closures are also seeing brisk demand within our PFT group, offset by lower demand for artificial lift products, as many producers in Canada and elsewhere appear to be moving a little more towards gas lift. The PFT group won a nice order for 93 reciprocating pump packages for a major U.S. pipeline operator during the quarter, and we are seeing high interest in separators and sand traps for the North American market for the group as well.

Turning to international markets. Overall, National Oilwell Varco's revenues declined 2% sequentially, mostly due to lower offshore production equipment sales. Middle East activity has been steady. NOV's consolidated revenues for the Middle East and North Africa totaled 14% of our third quarter mix, and we're roughly flat sequentially, with lower rig sales offset by higher Wellbore Technologies revenues. During the third quarter, we saw strong demand for drilling motors, roller reamers and fishing toll packages, including our Wide Catch Overshot, grew to support new drilling programs across the Middle East, North Africa region. Bit sales declined following large sales into Algeria and Kuwait in the second quarter, but we did win a large 3-year tender in North America during the third quarter and MWD sales improved there as well.

27% of our third quarter total global drill pipe orders were from the Middle East, North Africa region. However, we saw the sale of one string of Wired Drill Pipe into the Middle East actually slip into the fourth quarter, as the operator pushed its spud date for this pipe back a quarter.

Pressure pumping aftermarket sales improved sequentially in the region, offset somewhat by lower coiled tubing sales, but demand generally for stimulation equipment across the region appears to be rising. Demand for fiberglass tubulars is also high. Again, helped by higher steel cost shifting demand to composites. We are currently commissioning our new fiberglass tubular production plant in Saudi Arabia. Our Completion Tools business sold its first i-Frac system in Burst Port Subs to a national oil company in the Middle East during the first quarter, but planned shipments of a large pump skid order into Kuwait by PFT were delayed.

Nearby in Central Asia, we had successful test runs for our new rotary steerable offerings and MWD tools. Unfortunately though, these were completed after the end of the quarter. So again, revenue was deferred into Q4. We expect Q4 sales of rotary steerables and MWD into Russia and China to be strong, while bit sales will slow seasonally. Our Completion & Production Solutions segment benefited from higher sequential shipments of fiberglass pipe into China and Russia, and our Completion Tools business in Russia remains strong, as operators are adopting our Burst Port Subs and liner hangers, even though the oilfield market has been under pressure related to FX and budget constraints.

Within Rig Technologies, we are also pursuing large opportunities around the Caspian region. Turning to Latin America. NOV's revenues declined 2% sequentially and made up about 10% of our consolidated revenue mix. Gains in Mexico were offset by declines in Brazil. In Mexico, we are benefiting from leasing rotary steerable tools and MWD equipment and drilling motors to an independent directional drilling services firm.

In Argentina, we saw significant pressure on Tuboscope and WellSite Services related to the devaluation of the peso. But we are, nevertheless, able to post sequential gains owing to fiberglass pipe shipments and rig sales into the region. And Completion Tools sold its first i-Frac order for 3 wells there during the third quarter. Despite the FX challenges in Argentina, that Jose will address in a moment, the country remains a key focus area for us, as operators there seek to replicate North American unconventional successes in the Vaca Muerta formation.

Finally, turning to offshore. NOV saw revenues decline 1% sequentially, driving our offshore mix down to 33% of consolidated revenues or about $720 million. As we noted last quarter, we continue to see positive signs of offshore recovery. XL Systems, for instance, which makes conductor pipe connections, posted its fifth quarter in a row of book-to-bills north of 100%. Orders to date for these products speak to offshore drilling plants for like 2019, early 2020, given lead times for specialized heavy wall, large diameter pipe from international mills.

This business, like many other businesses, is having only mixed success on recouping higher steel cost through higher pricing, but the growing volumes of demand are a clear indicator of expected future growth in offshore drilling. Rig Technologies is seeing rising inquiries in spares bookings on rig reactivations for the offshore, including larger, more complex reactivations.

Overall, spares bookings increased 7% for rig, our fourth quarter in a row of rising bookings. And SPS work improved $7 million sequentially, as contractors are seeing rising levels of rig tenders, particularly for jackups. This fits with what we're hearing from operators, who tell us that they are moving towards more FIDs and higher levels of activity, given higher stable oil prices. After a few years of low activity, offshore market needs to get back to work. We are not seeing a lot of urgency here yet, but inquiries and tenders and studies appear to be accelerating. So in the meantime, we continue to pursue field development projects in our subsea flexible pipe unit in the face of tough competition and price pressure.

Likewise, our wellstream processing group within PFT is bidding fluids processing skids into several offshore projects, and our turret mooring systems group, which won a nice order this quarter for the Jubilee field in West Africa, is doing the same.

While we are still probably a couple of quarters away from significant activity level increases in the offshore, our customers' actions point to the early stages of an offshore recovery in the works, underpinned by higher oil prices and growing global energy demand. All while we continue to invest in new drilling and production automation technologies, subsea water treatment technologies and fluids processing technologies to position ourselves for the coming recovery.

Although the near-term outlook is clouded by North American activity challenges, we think the coming year will see this reverse, and 2019 more likely to bring broad-based offshore and international recovery. It is clear that North American producers have embraced capital discipline and are returning more cash to their shareholders, while also facing short-term logistical constraints in certain unconventional basins. IOCs are continuing to reduce their per barrel development cost offshore, after cutting CapEx by half since 2014, and are also exhibiting restraint and returning more capital to their shareholders. And many NOCs are struggling with outdated rig fleets and methods while facing inadequate cash flows to fund both drilling needs and government takes. Globally, oil companies in all regions have been cautious and measured in their drilling and development budgets through a difficult downturn as they navigated extraordinarily challenging commodity price declines.

Meanwhile, global crude inventory overhangs have now evaporated and oil prices have doubled, in fact, nearly tripled. While I think the next couple of quarters will be challenging, we also see more signs of recovery and improving macro tailwinds bolstered by stronger price tags.

To our employees, who are listening, I want to tell you how much we appreciate all that you've been doing to take care of our customers around the globe that depend on you. You are part of a great NOV team, and you make me, Jose and Loren very, very proud. Thank you.

Now I'll turn it over to Jose.

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Jose A. Bayardo, National Oilwell Varco, Inc. - Senior VP & CFO [4]

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Thank you, Clay. To recap the quarter, NOV's EBITDA improved $19 million to $245 million, and operating profit increased by $21 million to $73 million. However, net income declined sequentially to $1 million due to higher other expense and a higher tax rate.

Other expense increased $17 million, primarily due to FX losses from the continuing devaluation of the Argentine peso against the U.S. dollar. Argentina was designated as a highly inflationary economy, requiring us to change our peso currency functional ledgers to U.S. dollar functional during the third quarter, a change that has the unintended effect of amplifying the impact of movements between the Argentine peso and the U.S. dollar on our income statement.

Other expense also reflect small loss associated with the divestiture of a small noncore operation. Pretax income totaled $33 million, and we reported an income tax provision of $29 million. The outsized income tax expense is primarily the result of valuation allowances, which prevent us from fully recognizing tax credits and other increases in nondeductible expenses. As we previously mentioned, we will continue to have significant volatility in our effective tax rate until we begin reporting higher levels of pretax income.

One other item on the consolidated P&L we're pointing out is SG&A, which increased $17 million sequentially due to higher employee benefit and workers' compensation cost and an increase in property tax assessments. We expect to report a slight sequential increase in SG&A in the fourth quarter.

Looking at our operating segment detail. Lower intercompany sales led to an $11 million sequential decrease in revenue eliminations. This decrease, along with lower compensation cost and a reduction in third-party service expense, resulted in an $18 million EBITDA improvement at the eliminations and corporate cost line.

Most of our business units sell products or services to at least one other business within NOV, and the need for our intercompany sales are fairly obvious. For example, if a customer orders a new drilling rig and wants it equipped with a full string of drill pipe, our drill pipe business unit will sell the string to a rig operation, that will send one invoice to the customer. Some intercompany sales may be less obvious, such as Rig Technologies, providing certain engineering, procurement and manufacturing for large components associated with our Seabox subsea water treatment system that is sold by our Completion & Production Solutions segment.

We regularly leverage the scale and diversity of our operations around the globe to manufacture, fabricate or assemble products in plants where we can be the most efficient. Frequently, this results in sales across segment lines. The amount of intercompany revenue can fluctuate quite a bit from quarter-to-quarter as it did in Q3, due to a decrease in transactions between Rig Technologies and caps. As all of you know, total third-party revenue and profit is reflected in our consolidated results.

For the fourth quarter, we expect revenue eliminations will remain in line with Q3 and corporate costs to increase approximately $5 million. Cash flow from operations was $190 million and capital expenditures totaled $71 million. We did not complete any acquisitions during the third quarter, but see the potential for several attractive transaction opportunities in the fourth quarter and the early part of 2019.

Turning to results of our operations. Our Wellbore Technologies segment generated $847 million in revenue in the third quarter of 2018, an increase of $54 million or 7%, in line with our expectations.

Segment revenue continued to meaningfully outpace the rig count in the U.S., but this growth was partially offset by a 12% decline in Latin America, mostly due to the devaluation of the Argentine peso, resulting in 2% growth in the Western Hemisphere.

More signs of life are emerging in other international markets allowing the segment to post second quarter in a row of double-digit growth in the Eastern Hemisphere at 17% for Q3. EBITDA increased $2 million sequentially to $135 million or 15.9% of sales. While we noted in our last call that rising inflationary forces were impacting our business, we had lower-than-expected success in passing cost through to customers in North America.

We also had mix changes resulting in poor EBITDA flow-through. Even though drilling activity has not been materially impacted by the takeaway constraints in West Texas, and the resulting slowdown in completions activity, it is difficult for an E&P drilling department to tell their executive management team that they are accepting price increases, while their fellow completion department is boasting of price concessions from completion service providers.

Clay mentioned that our downhole tools business unit realized solid growth from all major regions of the world outside of Latin America, driving a 5% sequential increase overall. The business unit is also seeing more demand from the offshore markets and received orders for 2 8045 TorqueMaster units, used to make and break threaded connections on offshore rigs. The first such orders received since mid-2015. The downhole tools business also continues to advance new technologies. Our SelectShift Downhole Adjustable Motor, which offers the ability to adjust the motor bend setting while downhole has been undergoing field trials in the Permian and the Bakken.

The tool completed 13 runs, drilled over 45,000 feet and completed over 100 motor bend changes while downhole. Use of the tool is delivering substantial increases in rate of penetration and reductions in vibration, which should meaningfully improve economics for our customers.

The business unit also recently began field trials for its next-generation 2.0875 inch coiled tubing agitator. The new tool is designed to generate significantly higher pressure pulses than earlier generations of the product. This is important because it can significantly increase the distance for which coiled tubing can effectively mill plugs in extended reach laterals.

Our ReedHycalog business saw a 5% sequential improvement in revenue during the third quarter. Share gains for fixed cutter bits and increased Canadian activity after the seasonal Q2 breakup were partially offset by hurricane-related slowdowns to the Gulf of Mexico. Unlike other businesses in this segment, revenue decreased slightly in the Eastern Hemisphere after realizing strong growth in the prior quarter. Improved sales into the UAE, Qatar and Turkey were offset by sequential decrease in sales into other countries.

This group is achieving success with its directional drilling and downhole measurement tools. We recently commenced rotary steerable field trials in 3 countries. Two of the trials are ongoing, but one successfully completed, resulting in the sale of 2 VectorEXAKT rotary steerable kits to the directional driller. Additionally, we received our first orders for our symmetric propagation resistivity LWD tool. With the successful commercialization of these products, we have filled 2 critical holes in our directional drilling tool portfolio, and we are now positioned to capitalize on the compelling directional drilling tool market opportunity. We're also advancing our closed-loop drilling automation systems, selectively executing on North American land projects and preparing for a major ramp-up in North Sea activity, with several jobs expected to begin by year-end. As Clay noted, our drill pipe business recorded its second straight double-digit percent sequential increase in revenue, but integration costs associated with our acquisition of Vallourec's drill pipe business, limited EBITDA flow through during Q3.

Bookings decreased slightly from the second quarter but remained over $100 million for the third quarter in a row. We expect a traditional seasonal Q4 slowdown in drill pipe bookings, as many customers have exhausted drill pipe capital budgets for 2018. Notwithstanding the anticipated 1-quarter pullback in orders, we believe customers will expand budgets in 2019, as their inventory levels continue to decline.

Our Tuboscope business realized a 5% sequential revenue increase in coating services, driven by increasing sales of drill pipe, partially offset by a record Thru-Kote sleeve sales in Q2 that did not repeat.

Tuboscope's global inspection service revenues decreased slightly. Strong demand for tubular inspection services in North America was offset by decreasing revenue in Latin America due to currency devaluations. Lastly, our WellSite Services business posted a 9% sequential increase in revenue, led by strong sales of drilling fluids in the U.S., our well cellar containment systems and solids control services in North America and Europe.

Improved sales were partially offset by lower revenues on higher volumes in Latin America as a result of currency devaluations against the U.S. dollar. Demand for solids control services for offshore markets remains challenged. However, we saw our backlog for our prime inspection services increase to 12 jobs from 2 during the third quarter. Prime inspection services are detailed assessments of the condition and performance of solids control, fluid processing and waste management systems on offshore rigs.

The service informs drilling contractors of what equipment needs to be repaired, replaced or upgraded in order to ensure solids control and waste management packages operate reliably and efficiently. This is another clear indication that offshore drilling contractors are preparing to get back to work, as Clay mentioned a few minutes ago.

For the fourth quarter, we expect a strong momentum in most of our Wellbore Technologies businesses to more than offset any softness in fourth quarter activity levels, resulting in a 2% to 3% sequential increase in revenue.

We anticipate a better mix of business and slightly improved success in passing on increased inflationary cost to our customers, resulting in incremental EBITDA margins between 30% and 35% during the fourth quarter. Our Completion & Production Solutions segment generated $735 million in revenue in the third quarter, a decrease of $3 million sequentially. Slowing demand for pressure pumping equipment and sharper-than-anticipated declines in our offshore-focused businesses more than offset strong growth in our fiberglass and Completion Tools businesses. An improved mix of products sales led to a $5 million increase in EBITDA to $99 million or 13.5% of sales. Shipments of $439 million exceeded our bookings of $372 million, providing us with an 85% book to bill.

Total segment backlog at quarter end was $880 million. Sales in our Intervention & Stimulation Equipment business fell sharply late in the third quarter. As anticipated, revenue from sales from coiled tubing equipment increased sequentially, but not to the full extent we expected, as deliveries of several large coiled tubing spreads slipped into the fourth quarter. The modest growth in coiled tubing equipment sales was more than offset by significantly reduced demand for pressure pumping units and associated aftermarket sales. Wireline equipment deliveries also fell short of expectations due to combination of customer change orders on several wireline skids and manufacturing challenges.

The decrease in revenue also resulted in high decremental margins as inflationary pressures on steel, aluminum, hydraulic components and labor compounded the business unit's challenges. Q3 bookings declined 24% sequentially, resulting in a 69% book to bill for the quarter. Demand for coiled tubing equipment remained strong. And as Clay mentioned, we are still seeing limited opportunities for additional pressure pump unit sales, primarily for replacements or backup units.

Demand remains steady for other pressure pumping support equipment, and wireline equipment bookings remain strong globally. However, U.S. customers are becoming noticeably more cautious as a result of the slowdown in completion activity in West Texas. So while we expect to ship the Q3 unit deferrals in the fourth quarter, we may see additional pushback in the fourth quarter.

Our fiberglass systems business unit posted a 23% sequential increase in revenue, with strong incremental margins despite inflationary pressures of raw materials and wages. The business unit shipped major projects of jointed pipe into China, Russia and West Texas and delivered large orders of our Fiberspar spoolable composite pipe into Argentina, Oman and the U.S.

As expected, bookings for the quarter returned above the $100 million threshold, an increase of 44% over an uncharacteristically low Q2. While global demand for our corrosion-proof composite pipe remains strong and our backlog is solid, we were recently notified by our supplier of a critical resin, used to make our flexible pipe, that it had experienced a major plant failure, which will persist into December.

Consequently, there is a significant global shortage of this resin, which we expect will result in total business unit revenues falling back to the levels we saw in the second quarter. We anticipate high decremental margins associated with the revenue decline due to the additional absorption challenges we expect to face in our Fiberspar manufacturing plants.

Our Completion Tools business posted its second quarter in a row of double-digit percentage growth. It is garnering market share gains in a number of markets around the world as a result of our innovative product offering and our ability to leverage NOV's global infrastructure and customer relationships.

Our Process and Flow Technologies business unit saw revenues decline 6% sequentially. Strong demand for reciprocating pumps and chokes for midstream applications in North America, spherical separation equipment in the U.S. and pump packages in Africa and Southeast Asia were offset by weakness in Canada, delayed equipment deliveries into Nigeria and Russia and challenging market conditions for the business units offshore-oriented wellstream processing operation.

Our Subsea Production Systems business unit saw a significant sequential decrease in revenue, which was greater than expected due to a customer delayed delivery and new project orders coming in much later in the quarter than planned. Bookings also remained soft with the business unit posting an 81% book to bill during the quarter. Notwithstanding the ongoing challenges, there are encouraging data points for the offshore businesses in our Completion & Production Solutions segment.

Our Floating Production Systems business unit realized a slight sequential increase in revenue during the third quarter. And more importantly, had a book-to-bill in excess of 200%.

Our XL Systems conductor pipe connector unit achieved the highest backlog ever recorded for this business. Lastly, tendering activity in each of our offshore businesses within this segment is materially higher today than it was at this time last year. While we do not yet see much urgency from our offshore customer base, as Clay mentioned, we believe market dynamics are improving and our operations are well positioned for the inevitable recovery in the offshore.

Looking at the fourth quarter, we expect to see more demand for midstream production equipment, modest improvements in our offshore operations, a pickup in Q3 deferred deliveries of coil tubing and wireline equipment, and higher conductor pipe sales, which should roughly offset the impacts from the slowdown of completion-related activity in West Texas and raw material supply challenges in our fiberglass operations.

Our Rig Technology segment generated $637 million in revenue, a decrease of $14 million or 2%. Revenue out of backlog decreased $20 million to $256 million and EBITDA decreased $6 million to $78 million or 12.2% of sales.

Margins came in better than guidance as a result of revenue mix. After achieving 3 quarters in a row of improved bookings, new orders decreased $151 million, a sequential decline of 32%, excluding the $1.8 billion in Saudi rig orders received in the second quarter. We exited the quarter with $3.4 billion in backlog for the segment.

While bookings for capital equipment were softer in Q3, we see growing opportunities to support our North American land customers by providing upgrades to existing rigs and through occasional sales of super-spec rigs into the market, where utilization of these rigs remains near 100%.

In the international markets, operators continue to advance tenders for land rigs in the Middle East, Asia and North Africa. We are realizing rapidly growing demand for our NOVOS operating system. To date, we have sold 103 NOVOS packages to a customer base that includes 11 land and 5 offshore drilling contractors. We also recently commissioned our first NOVOS installation on an offshore floater for one of these contractors, and it is performing well.

We, along with certain customers, have written over 30 applications for the control system, and are seeing more pull-through sales from EMP operators who recognize the value of this unique process automation system.

While offshore contracting is slowly improving, the market remains oversupplied, and we anticipate few near-term newbuilds apart from potential opportunities for niche applications. But we see growing opportunities to help our customers reactivate and upgrade rig fleets.

As Clay mentioned, our offshore customers are seeing a significant amount of tendering activity and are working to make sure rigs are well positioned to go back to work. This work is driving demand for such items as our Crown Motion Compensation systems for which we booked an additional 3 orders in the third quarter. For the fourth quarter, we expect continued progress on offshore projects and land rig upgrades for the U.S. market. Land rigs, which slipped from Q3 to ship, and a seasonal pickup in service and repair work in our aftermarket operations to drive a revenue increase of 4% to 6% with incremental EBITDA margins in the mid-teens.

While there will be near-term difficulties associated with the year-end capital budget exhaustion and takeaway constraints in certain U.S. basins, we currently expect to realize a slight sequential improvement in our fourth quarter consolidated operating results. And as Clay mentioned, we believe significantly improved macro fundamentals are setting the stage for a broader recovery in 2019.

We'll now open the call to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Mr. James West with Evercore ISI.

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James Carlyle West, Evercore ISI Institutional Equities, Research Division - Senior MD [2]

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Clay or Jose, I was wondering if you could kind of bracket for us what the -- we share the bullishness around the offshore markets and the rig reactivations that's you're starting to see. And what does it cost for? I mean, I think these offshore drillers really went to the bottom of the barrel on spares and things like that during the downturn because they had to. So to reactivate a cold-stacked rig today, whether it's a jack-up or a floater, can you give us some idea what that would be in terms of revenue for NOV?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [3]

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It's a question we get frequently, James. But it's kind of like asking how long is a piece of rope. It depends on a lot of things. First, what condition was that rig in when it was stacked? How hard was it run prior? Secondly, what conditions was it stacked under? And so were doors welded shut? Were dehumidifiers put on board? Do you have a crew going around, sort of, bumping the electronics and cycling through the equipment periodically? And then thirdly, how long has it been stacked? We believe that after 2, 3 years, the cost of reactivating that rig starts to go up exponentially. So there are a lot of variables here. And what I would tell you is what we've seen is -- or , sort of, across all the map. Generally though, given how difficult it is to store this complex equipment in salt, air there. And this is equipment that we've been building through the last 10, 15 years, it really wasn't designed to be stacked, none of us really know.

So I -- we'll generally take the over. We do have one data point of an offshore rig that we're working on now that's basically a $40 million ticket to us. So I think the industry is going to find out as it goes back to work. But generally there's a lot of work for NOV and our competitors to do that put these rigs back to work.

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James Carlyle West, Evercore ISI Institutional Equities, Research Division - Senior MD [4]

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Okay. But you would say that some of the estimates that have been out there from some of your customer base. Generally speaking, you think the over is probably more likely now. It's not going to matter to really investors because rigs are going back to work. But there's probably going to be a series of overruns, cost overruns...

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [5]

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Yes, I'm not referring to any specific estimate or any specific comment by a customer. But just generally, taking equipment off the beach and putting it into a shipyard and really opening the hood and seeing what's under there. Until you do that, none of us really know. And I think even the drilling contractors would acknowledge this. There's still some uncertainty in that. But nevertheless, I think we're -- we continue to move towards a world where more and more rigs are going to get reactivated and get several data points in our prepared remarks a few minutes ago around this. And so this is kind of where it starts. We alluded to it last quarter, we kind of saw it build through the third quarter. And so again, we're not -- we're still a long way from a robust recovery. But it begins with drilling contractors looking at reactivating rigs. And we're seeing clear signs that many of them are really thinking hard about it.

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James Carlyle West, Evercore ISI Institutional Equities, Research Division - Senior MD [6]

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And how -- what's the timeline on a reactivation? When did they talk to you about the equipment versus when the rig is supposed to -- should be back on contract and working?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [7]

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The sooner, the better. We're pretty responsive. We certainly have some slack capacity. However, it does take a lot of time, a lot of engineering effort that goes into these rigs. And actually, in terms of tangibly, what we're hearing from our customers, it's more along the lines of that. We're doing more engineering upfront work around these rigs to see what's needed, and that's starting to go. But it's not a trivial undertaking. And if history is a guide, and I'm going way back now, but usually, when these stacked rigs go into shipyards and actually do get reactivated out of warm stacking or cold stacking, usually it tends to run -- projects tend to run over budget and over time.

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Jose A. Bayardo, National Oilwell Varco, Inc. - Senior VP & CFO [8]

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I'll also add that, yes, we -- as Clay alluded to, we do have some slack in the capabilities right now. But like virtually anything in our portfolio when things inflect, they tend to inflect pretty sharply. And people come to the door at the same time. So one of the things that we are already talking about and worrying about a little bit is a good problem to have when it arises, is how do we expand that capacity, because we're certain that will happen at some point. And things will get tight in a hurry, but we're looking forward to addressing that challenge.

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Operator [9]

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Our next question comes from James Wicklund with Credit Suisse.

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James Knowlton Wicklund, Crédit Suisse AG, Research Division - MD [10]

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International expectations out there seemed to be for either high single-digit or low double-digit growth. The U.S. is expected to recover, you guys know that. Which one do you think in 2019 wins the race, in terms of who grows the fastest? And which one is best for NOV? Is it better if international grows by 11%? Or the U.S. grows by 11%? Which benefits you guys the most?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [11]

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That's a hard question, Jim.

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James Knowlton Wicklund, Crédit Suisse AG, Research Division - MD [12]

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Well, we don't ask the easy ones, Clay. You know that.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [13]

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No. The good news is, NOV is certainly exposed to both. We're introducing new technologies to both. We have a lot of optionality with respect to both. And so I think that's all good. We're happy -- I'm happy with growth anywhere. And I think with our portfolio, like I said, we've continued to position ourselves around unconventional technologies that, in the past 3 or 4 years, have clearly been outpacing activity gains in other areas. I think 2019, you're going to continue to see more international customers look at employing these in their respective areas of operation. We're already seeing that in Argentina. We're seeing growing interest in the Middle East. And so I think that train is going to steadily kind of move ahead. The other big opportunity for NOV overseas is the fact that the unconventional share revolution in North America started by replacing all of the old rigs with new modern AC rig technology. And the Eastern Hemisphere still has a long, long way to go in that respect. And so I think we're kind of in a very early innings of seeing that happen as well. So I can't -- I don't know which one wins, I hope they both win.

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James Knowlton Wicklund, Crédit Suisse AG, Research Division - MD [14]

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Tied by numbers.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [15]

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But NOV really, again, we're positioning for that sort of recovery. And rolling into 2019 with materially higher oil prices than we've had over the past couple of years, and a recognition of underinvestment across kind of the global oil and gas infrastructure is setting up a good backdrop for 2019.

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James Knowlton Wicklund, Crédit Suisse AG, Research Division - MD [16]

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Okay. That's very helpful, I appreciate it. And when we talk about offshore. The improvement has been somewhat limited to really so far to jack-ups in more shallow rigs. There have been more tenders for deepwater. But going into the IOC budget season, some of that has to be just updating [AOP for] budget submission. Can you talk about the scale differences between the work you do on jack-ups versus floaters? I know floaters are whole lot more expensive. But just in terms of the workflow we see out there, you sell a lot of equipment to the deepwater floaters. But in terms of reactivations and the work you're doing, can you talk about the difference as we transition from jack-up in shallow water into floaters over the next couple of years?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [17]

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Yes. Clearly, the floaters are bigger opportunity around reactivations. There's a lot more sophisticated equipment on board. But nevertheless, we've got good opportunities with jack-ups as well, in fact, we just introduced a new crane design that is kind of special fit for purpose for jack-ups, they can be retrofitted, and kind of, improve their capabilities. The opportunities in both arenas, but the floaters typically are a little bigger ticket item for us.

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Operator [18]

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Our next question comes from Byron Pope with Tudor, Pickering, Holt.

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Byron Keith Pope, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [19]

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The continued top line growth for international and Wellbore Technologies suggested you guys are having good success in terms of being enablers to some of the independent service companies there. But Clay, I was struck by something you touched on, with regards -- it seems like some of your U.S. customers are purchasing some downhole tools directly as opposed to using 3-dimensional drilling? So is that a sustainable trend when in its early stages? Could you just provide some color on your thought process there?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [20]

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Yes. I think, I found it interesting too. We're seeing more components of the bottom hole assembly being accessed directly by the oil and gas companies that were probably previously lumped into kind of a directional drilling tool package, and by the way, we're happy to sell to either. But what it speaks to is that in certain North American markets, customers are disaggregating this a little bit and buying on -- we -- I think we provide the best drilling motors out there in terms of quality and longevity and value. And I think that's been recognized by some of the E&P companies that are sort of breaking that out of packages. And so just kind of an interesting trend around disaggregation of the tools away from the service.

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Byron Keith Pope, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [21]

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Okay. And then just one additional question as it relates to thinking about the steel cost and the impacts there. From the way you guys described it in your prepared remarks, it seems as though it's most acute in Wellbore Technologies? Or is it more broad-based than that? And at some point, it seems as though the ability to get through some surcharges would be easier. So how do you think about that in terms of...

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [22]

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Yes. I think we're dealing with the first full quarter of higher steel costs arising out of the Section 232 tariffs. There are 3 business units here that are most affected by it drill pipe, which is in Wellbore Technologies. But also XL Systems conductor pipe connections, and our coil tubing string business Quality Tubing, which are both in Completion & Production Solutions. All 3 are kind of having mixed results with regards to passing on steel cost to their customers in terms of higher pricing. But I think we're going to -- we're going to achieve a little higher level of success as we work a little deeper into this and sort of adjust along the way. One of the outcomes of all of this is that irrespective of where the steel actually comes from, we're seeing much higher steel prices across the board. And so it does show up really in all 3 segments to some degree, but I would say, those 3 product lines that I mentioned are most acute. On the positive side, higher steel costs are actually helping our Tuboscope business that provides reclamation services around used tubulars and used sucker rods because customers are saying, "gosh, new sucker rods and new tubulars are so much more expensive." And so they're -- we can inspect and reclaim tubulars and sucker rods coming out of existing wells for reuse, and that's become incrementally more attractive. And then likewise, our fiberglass and composite pipe business typically benefits when steel -- when the cost of steel pipe rises, incrementally demand tends to shift more towards fiberglass and composite tubulars, which offer -- they're still more expensive, but the benefit is as if they're not as susceptible to corrosion, so they're longer -- they tend to last much, much longer.

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Operator [23]

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Our next question comes from Bill Herbert with Simmons.

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William Andrew Herbert, Simmons & Company International, Research Division - MD & Senior Research Analyst [24]

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Notwithstanding the slowdown in Q3, or relative to expectations, cash flow still strong. So you're on your way to becoming overcapitalized, and you've mentioned that you're giving a lot of thought with regard to return of cash options. Clay and Jose, can you just give us your latest thinking on that front, please?

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Jose A. Bayardo, National Oilwell Varco, Inc. - Senior VP & CFO [25]

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Sure, Bill. It's Jose. I'm just saying that nothing has really changed on that front except for we're inching our way closer, as you described, with a continued healthy cash flow generation from the business. So as we've talked about before, by far, the #1 priority is making sure that the balance sheet is where it needs to be. It's certainly heading in the right direction, and in great condition. This quarter on, on annualized basis, net debt-to-EBITDA, 1.45x, very comfortable with that. Gross debt-to-EBITDA is about 2.77. So probably a little tiny bit higher than we wanted it to be. But again, everything heading in the right direction. Outside of the balance sheet, it's about investing in compelling organic growth opportunities, which we have obviously ample cash flow to do that. Then we look at, as we sort of exhaust those opportunities, that puts us into the realm of M&A. We were very active on the M&A front over the last several years with over 30 transactions, about $700 million will be spent on that. As we talked about last quarter, we sort of knew that the M&A environment was going to be a little soft in Q4, but we don't think that that's something that's going to be long-lived. We're pretty optimistic that more and more interesting opportunities are emerging here in Q4 and into the early part of '19. But if they don't emerge, and even if they do emerge, and we spend at the same pace we have been spending over the last several years. We see ourselves having an excess of capital, which will then look to return to shareholders.

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William Andrew Herbert, Simmons & Company International, Research Division - MD & Senior Research Analyst [26]

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Okay. And 2 final quick ones for me. First, Clay, you mentioned execution challenges, which should ameliorate in Q4. What were those? And then, secondly, Jose, expected revenues out of backlog for rig tech for the foreseeable future?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [27]

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Yes. First, Bill, we had a number of things that we didn't quite get done building, frankly, by the end of the quarter, and they didn't go out. We had some units, particularly in the North American intervention and stimulation world, that our customers really didn't want to accept delivery of. So that's really not on us, but we had few that we didn't quite get done. And so a little disappointed in that. But good news is they're done and should go in Q4. So we're working through those issues.

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Jose A. Bayardo, National Oilwell Varco, Inc. - Senior VP & CFO [28]

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And Bill, as it relates to revenue out of backlog for the fourth quarter just for rig. We're looking at just a tiny bit over $280 million.

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Operator [29]

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Our next question comes from Sasha Sanwal with UBS.

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Madhav Sanwal, UBS Investment Bank, Research Division - Director and Equity Research Analyst [30]

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So just on Wellbore. May be without getting too much into specifics. Would it be fair to say that margins for Grant Prideco are still significantly dilutive to overall margins, while maybe bits and downhole are above the average?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [31]

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Yes. We had some challenges in drill pipe. We had an acquisition earlier this year that was quite large. And so one of the drags on Q3 in drill pipe was the fact that we had some more integration cost flow through in the third quarter. Not big enough really to break out on a consolidated basis, but that was one challenge. The second is that we inherited a lot of backlog there that's at very low margin, and so we got to kind of work through that and ship that out in -- for a drill pipe that came in at -- that was dilutive to our own drill pipe business. And the third is, is that a part of the reason was the steel cost up for that business, and in particular, the raw materials, the green tubes and the tool joints that go into manufacturing that pipe are more expensive kind of than what we have in our base business. So the flow through for drill pipe was up, as we mentioned, but the flow through was not nearly what it could have been had we sort of had a more typical mix of our traditional Grant Prideco business.

With respect to the downhole tools business and the bits business, we referenced several different technologies and new products that we've been introducing across that business. And really pretty strong growth in the third quarter. And that's -- those businesses have continued to grow now for several quarters, more or less, outpacing the rig count. And so really good base of new technologies that are really designed towards delivering wellbores that have lower tortuosity that are more precisely geo-steered into the sweet spots formations and getting some real traction with those. So a lot of things going in the right direction for our downhole tools business.

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Madhav Sanwal, UBS Investment Bank, Research Division - Director and Equity Research Analyst [32]

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And just a follow-up. Just may be touch on pricing briefly as well. So you made the point that it's difficult to kind of push through pricing kind of in this environment. So as we think about what the catalyst might be, that might just make those conversations easier, does the -- just the Jan, Feb kind of reset in E&P budget, does that help? Or we're going to have to kind of maybe wait til the back half of the year before we see a more meaningful turnaround activity to kind of drive those pricing discussions?

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Jose A. Bayardo, National Oilwell Varco, Inc. - Senior VP & CFO [33]

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Sacha, I'll start and maybe Clay can chime in on this one as well. But one thing that referred to in my prepared comments, it's an unusual environment right now, right? We're considering -- we're continuing to see outpaced growth in demand for drilling-related products in our Wellbore Technology segment. So that would typically be an environment which we could be very successful in passing on, at least passing on inflationary core -- costs to our customers. But as I mentioned, it's just very unusual with the decline in pricing that's taking place on the completion side for our E&P contractors. So we think this is a very sort of temporary and transitory thing as, first of all, pressure pumping and other completion service prices are probably approaching stabilization. And once that takes place, we can be a lot more optimistic and confident in terms of our ability to get those pricing concessions that we think we're deserving of.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [34]

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Yes. I mean, ultimately, it's all about scarcity at the risk of oversimplifying most products, most markets in oilfield services. We're highly cyclical, and as you're sort of tracing a path to the bottom of the cycle, everyone's focused on price and cost. And as you emerge from that, like a switch flips and everyone begins to become much more focused on time because so much that we provide into development and exploration activities is critical, and you kind of have to have it all to spud your well and to develop your wells. And so it feels like we're kind of knocking on the door of transitioning from that first world where everyone's very keenly focused on price into the world where everybody's focused on time. But we're -- and we had some setbacks in North American well completion world this quarter. But generally, I think the industry is moving towards that world of more scarcity. Our customers are burning through their stocks of spare parts and inventory that we provide, they're burning through their drill pipe, they're burning through downhole components through rigs. And so I think, generally, we've got a fairly steady tailwind of moving back into a place where we have more pricing leverage and can do a better job overcoming higher steel cost.

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Operator [35]

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Sasha, does that answer your question?

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Madhav Sanwal, UBS Investment Bank, Research Division - Director and Equity Research Analyst [36]

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Yes.

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Operator [37]

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Our next question comes from Marshall Adkins with Raymond James.

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James Marshall Adkins, Raymond James & Associates, Inc., Research Division - MD of Equity Research and Director of Energy Research [38]

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What's -- Clay, I'm going to ask you to speculate a little bit here. I know how much you like doing that. Let's assume oil prices stay roughly in these levels, $70-ish TI (sic) [WTI], $80-ish Brent for the next few years. How do you see '19 playing out generically? I'm not asking for specifics on each subgroup in your businesses, but just generically, how would you see it playing out in '19? And then wouldn't 2020 be meaningfully better than '19? Again, assuming oil stays in roughly where it is right now.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [39]

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Yes. First, I'm a little more bullish on oil prices, generally than the premise of the question. After 4 years of underspending and all the capital restraint and capital discipline that's in the space, I think that that's going to have to turn around to more activity in the oilfield to continue to provide growing demand. But given the premise of your question, I think oil companies are going to have to figure out how to replace reserves. I think they're going to have to get after developing more reserves in the offshore, in particular. I think takeaway constraints in a couple of the unconventional basins across North America are going to work themselves through in 2019. And I think that sets up -- I agree with you, I think 2020 is even better.

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James Marshall Adkins, Raymond James & Associates, Inc., Research Division - MD of Equity Research and Director of Energy Research [40]

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But '19, is it early '19 or late '19?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [41]

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In terms of improvements?

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James Marshall Adkins, Raymond James & Associates, Inc., Research Division - MD of Equity Research and Director of Energy Research [42]

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Yes.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [43]

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I think early '19. I mean, here in the near term, and you've heard this from others. I think a lot of people are kind of running out of 2018 budgets. I think E&P companies don't want to tell Wall Street that they want to up CapEx until they get into '19 with their '19 budgets. And so there's kind of a general -- we're facing a little bit of near-term pressure here in the fourth quarter around that. But I think once we get into '19, I do think you're going to see people reload budgets, get back to buying. We've heard this from several different customers for different products that we sell. And so I think once we get into '19, we're going to get kind of back on the path to more growth.

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James Marshall Adkins, Raymond James & Associates, Inc., Research Division - MD of Equity Research and Director of Energy Research [44]

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Okay. My second one, I want to kind of shift gears here. We all kind of know that the U.S. business, I think, we're all pretty bullish on where the oil prices are. But I guess the surprise here is you're starting to see a lot of neat things going on in rig tech. So help paint a picture here on the relative importance between rig reactivations, managed pressure drilling to me seems to be a bigger deal that a lot of people aren't paying attention to and you're in the heart of that. And then, obviously, restocking of aftermarket. So of those 3, or maybe some that I forgot or hadn't put in there, how relevant are those in terms of '19 and '20 and going forward?

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [45]

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Yes. It's really, I think, setting up for a better outlook for rig. Although orders were down in the third quarter, after 3 quarters of growth. We did see our mix continue to move upwards with respect to aftermarket, which is a higher margin opportunity for us. In fact, it was a little more than 50% of the rig mix in the third quarter. And we've had our fourth quarter of higher spares bookings with a little more offshore flavor to it in the third quarter, which reflects the fact, I think, a lot of the offshore drillers have depleted a lot of their spare parts and are looking at -- when they look at putting these rigs back to work. So they kind of sum up the outlook for rig. You've got day rates around $25,000 in North America, which is right at the cusp of justifying newbuild super spec rigs. You've got some of the larger drillers now upgrading rigs, converting from DC to AC, moving towards this super spec rig category, which is at a very high level utilization. So you get a lot of financial health across North American drillers.

Internationally, we've talked a lot about more modern rigs going into Argentina. Opportunities in the Middle East, there's 3 or 4 major tenders going on across North Africa, the Middle East and India currently, and so that's picking up. So on the whole, the rig business is, I think, is on much firmer footing, both land and offshore. And within the offshore too, I don't know if this will happen in Q4, but we've got a couple of large opportunities in the Eastern Hemisphere, which if they don't show up in Q4, I think they're going to show up early in 2019 that we're feeling better and better about.

So on the whole, I feel pretty good about where we are with rig. Good acceptance of our NOVOS operating system, good acceptance of our condition-based monitoring, aftermarket equipment maintenance that reduces total cost of ownership, interest in upgrading certain aspects of rigs. So on the whole, I think we're in as good a position as we've been in for a couple of years here.

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Operator [46]

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Thank you. And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call back to management for any final remarks.

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Clay C. Williams, National Oilwell Varco, Inc. - Chairman, President & CEO [47]

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Thank you, Carmen. And thanks to all of you for joining us. Goodbye.

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Operator [48]

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And ladies and gentlemen, with that, we thank you for participating in today's conference. This concludes the program, and you may all disconnect, have a wonderful weekend.