National Oilwell Varco 2012 Annual Report Download - page 41

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Index to Financial Statements
Results of Operations
Years Ended December 31, 2011 and December 31, 2010
The following table summarizes the Companys revenue and operating profit by operating segment in 2011 and 2010 (in millions):
$00,0000 $00,0000 $00,0000 $00,0000
Years Ended December 31, Variance
2011 2010 $ %
Revenue:
Rig Technology $ 7,788 $ 6,965 $ 823 11.8%
Petroleum Services & Supplies 5,654 4,182 1,472 35.2%
Distribution & Transmission 1,873 1,546 327 21.2%
Eliminations (657) (537) (120) 22.3%
Total Revenue $ 14,658 $ 12,156 $ 2,502 20.6%
Operating Profit:
Rig Technology $ 2,053 $ 2,064 $ (11) (0.5%)
Petroleum Services & Supplies 1,072 585 487 83.2%
Distribution & Transmission 135 78 57 73.1%
Unallocated expenses and eliminations (323) (280) (43) 15.4%
Total Operating Profit $ 2,937 $ 2,447 $ 490 20.0%
Operating Profit %:
Rig Technology 26.4% 29.6%
Petroleum Services & Supplies 19.0% 14.0%
Distribution & Transmission 7.2% 5.0%
Total Operating Profit % 20.0% 20.1%
Rig Technology
Rig Technology revenue for the year ended December 31, 2011 was $7,788 million, an increase of $823 million (11.8%) compared to 2010. Deepwater offshore drilling
world-wide and active shale plays in the U.S. continue to be the driving force for the increase in revenue for this segment resulting in both increased rig construction as well as
demand for aftermarket spare parts and services. In addition, strategic acquisitions in the U.S. and Singapore contributed to the increase in revenue for this segment.
Operating profit from Rig Technology was $2,053 million for the year ended December 31, 2011, a decrease of $11 million (0.5%) over the same period of 2010. Operating
profit percentage decreased to 26.4%, from 29.6% in 2010 primarily due to decrease in the average margin of revenue out of backlog as contracts signed during 2009 and 2010
contain less favorable margins compared to contracts won during the order ramp-up from 2005 to 2008. This decrease in margins was partially offset by the increase in
demand for aftermarket spare parts and services.
The Rig Technology 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 $10.2 billion at December 31, 2011, an
increase of $5.2 billion (104.0%) from backlog of $5.0 billion at December 31, 2010. The $5.2 billion increase in backlog included the largest order in the Companys history
in the amount of approximately $1.5 billion won during the third quarter of 2011. $6.6 billion of the current backlog is expected to be delivered in 2012.
Petroleum Services & Supplies
Revenue from Petroleum Services & Supplies was $5,654 million for 2011 compared to $4,182 million for 2010, an increase of $1,472 million (35.2%). The increase was
primarily attributable to shale plays leading to a strong North American market with a 21.7% increase in U.S. rig activity and a 20.5% increase in Canada rig activity
compared to 2010. North American shale plays continue to be a driving force in the increase in revenues across most business units within this segment. In addition, strategic
acquisitions in the U.S., the U.K., the Netherlands, Singapore, Malaysia and Brazil contributed to the increase in revenue for this segment.
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