National Oilwell Varco 2015 Annual Report Download - page 42

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Table of Contents
prices and overall activity levels. We also expect them to minimize parts purchases and postpone maintenance using existing stocks of spares and
cannibalizing idle equipment whenever possible.
In the current environment, contractors are hesitant to invest in older equipment which can be far less productive and competitive. As a result, we anticipate
that the industry will retire a significant portion of the current base of capital equipment during this cyclical downturn, which could result in newbuild orders
when commodity prices recover and activity increases. However, a meaningful increase in drilling activity is not expected in early 2016 as commodity prices
remain at decade lows. As a result, our near-term outlook remains cautious and visibility beyond the early part of 2016 remains limited as the duration of the
current market downturn is uncertain.
We expect the slope and timing of revenue decline, stabilization and recovery will be different across our four business segments. Likewise, our global
customer base includes national oil companies, international oil companies, onshore and offshore drilling contractors and others whose strategies and
reactions to low commodity prices vary. Our Completion & Production Solutions segment is expected to see an increase in activity when decisions are made
to complete and produce the inventory of already drilled wells. Our Wellbore Technologies and Rig Aftermarket segments are expected to see stronger
recovery as drilling of new wells increases, while orders for newbuild rigs in our Rig Systems segment may come later in the cycle.
Throughout 2016 we will continue to focus on what we can control, in the form of sizing our operations with anticipated levels of activity while continuing
to advance our longer term strategic goals. The Company has a history of implementing cost-controls measures and downsizing in response to depressed
market conditions and has a track record of executing strategic acquisitions and developing new products and technologies. The Company remains
optimistic regarding longer-term market fundamentals as existing oil and gas fields continue to deplete and numerous major projects to replenish supply are
deferred or canceled while global demand continues to grow.
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