NOV Inc
For the period ended Dec 31, 2024. Filed Feb 14, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 14, 2025
NOV$17.56+1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-14.
0000950170-24-015145
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-14.
0000950170-25-021042
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 96 previous paragraphs and 102 current paragraphs.
38 unchanged; 38 reworded; 25 added; 18 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
NOV generated revenue of $8.87 billion in 2024, due to improving quality of our capital equipment backlog, market share gains from new, higher margin technologies and services, and operational efficiencies that more than offset the effect of lower drilling activity.
Current report
For the fourth quarter ended December 31, 2024, revenue was $2.31 billion, a decrease of 1 percent compared to the fourth quarter of 2023. Net income decreased $438 million, or $1.10 per diluted share, year-over-year from $598 million, which included the release of valuation allowances on deferred tax assets of $485 million. Operating profit increased 29 percent to $207 million, or 9.0 percent of sales. The Company recorded $7 million in pre-tax charges within Other Items, primarily related to severance and facility closure costs. Adjusted EBITDA increased 3 percent year-over-year to $302 million, or 13.1 percent of sales.
Current report
Energy Products and Services generated revenues of $1.06 billion in the fourth quarter of 2024, a decrease of 1 percent from the fourth quarter of 2023. Operating profit increased $18 million from the prior year to $112 million, or 10.6 percent of sales, and included $3 million in Other Items. Adjusted EBITDA decreased $20 million from the prior year to $173 million, or 16.3 percent of sales. The decrease in revenue and Adjusted EBITDA was primarily due to lower levels of global drilling activity, but this was partially offset by growing adoption of the Company’s new technologically advanced product offerings.
Current report
Energy Equipment generated revenues of $1.29 billion in the fourth quarter of 2024, a decrease of 1 percent from the fourth quarter of 2023. The decline in revenue was due primarily to the divestiture of the Company’s Pole Products business in early 2024 and lower revenue from aftermarket support; however, this was mostly offset by higher revenue from the segment’s growing backlog. Operating profit increased $31 million from the prior year to $152 million, or 11.8 percent of sales, and included $4 million in Other Items. Adjusted EBITDA increased $38 million from the prior year to $185 million, or 14.4 percent of sales. Profitability improved due to strong execution on higher margin projects from the segment’s backlog.
Current report
The macro environment and geopolitical uncertainties continue to drive volatility and pressure commodity prices, with oil prices reflecting growing concerns regarding diminishing demand from weakening global economies, excess OPEC capacity, and rising non-OPEC production. These concerns along with ample supplies of natural gas in North America are increasing cautiousness among oil and gas producers, resulting in lower drilling activity in the U.S. land market and are beginning to affect shorter-cycle activity in international markets.
Current report
Despite growing concerns that global oil and U.S. natural gas markets may be oversupplied in 2025, management believes commodity prices and activity levels should remain relatively rangebound, with any pullback in activity short-lived, and that the industry remains in an extended recovery due to: (1) current inventory levels in relation to OECD demand that are lower than historical averages; (2) natural oil production decline rates that average almost 15 percent; (3) anticipated increases in LNG exports from the U.S.; (4) increasing focus on energy security; and (5) capital discipline across the industry, which has diminished the global oil and gas industry’s ability to easily ramp production.
Current report
Revenue from Energy Products and Services for the year ended December 31, 2024 was $4.13 billion, an increase of $53 million, or 1 percent, compared to the year ended December 31, 2023. North American revenue increased 4 percent despite the decline in drilling activity primarily due to the acquisition of our artificial lift business and market share gains, while international revenue declined 1 percent primarily due to lower sales of drill pipe and conductor pipe connections.
Current report
Operating profit from Energy Products and Services was $475 million for the year ended December 31, 2024, a decrease of $32 million compared to the year ended December 31, 2023. Operating profit percentage for 2024 was 11.5 percent compared to an operating profit percentage of 12.4 percent in 2023. The decrease in profitability was due to a less favorable sales mix and a 21 percent decline in sales of drill pipe for the year ended December 31, 2024, when compared to the prior year.
Current report
Revenue from Energy Equipment for the year ended December 31, 2024 was $4.89 billion, an increase of $219 million, or 5 percent, compared to the year ended December 31, 2023. The increase in revenue is attributable to higher sales in international offshore markets. Revenue improved from international sales by 8 percent and offshore sales increased by 10 percent for the year ended December 31, 2024, when compared to the prior year. The increase in sales to these markets is a result of strong demand for aftermarket products and services and execution on the segment’s improving capital equipment backlog. Revenues in North America declined 3 percent year-to-date when compared to the prior year, primarily due to the divestiture of the segment’s Pole Products business during the second quarter of 2024.
Current report
Operating profit from Energy Equipment was $608 million for the year ended December 31, 2024, an increase of $237 million compared to the year ended December 31, 2023. Operating profit percentage for 2024 was 12.4 percent compared to operating profit percentage of 7.9 percent in 2023. Higher profitability for the year ended December 31, 2024 was the result of higher margin sales primarily driven by improved demand for aftermarket products and services and strong execution on the segment’s improving capital equipment backlog. A $130 million gain from the divestiture of the segment’s Pole Products business in the second quarter of 2024 also contributed to the increase in profitability for the current year.
Current report
Eliminations and corporate costs were $207 million for the year ended December 31, 2024 compared to $227 million for the year ended December 31, 2023.
Current report
Interest and financial costs and Interest Income
Current report
Interest and financial costs were $91 million for the year ended December 31, 2024 compared to $88 million for the year ended December 31, 2023. The increase in interest and financial costs were primarily due to debt borrowings on the revolving credit facility in the first quarter of 2024.
Current report
Interest income was $38 million for the year ended December 31, 2024 compared to $28 million for the year ended December 31, 2023. The increase was primarily related to interest earned on larger cash balances in the current year compared to prior year.
Current report
Equity income in unconsolidated affiliates
Current report
Equity income in unconsolidated affiliates was $36 million for the year ended December 31, 2024 compared to $119 million for the year ended December 31, 2023. A less favorable product sales mix and lower volume in sales led to lower profitability year-over-year for our largest investment in unconsolidated affiliates.
Current report
Additionally, Excess Free Cash Flow is defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures. Excess Free Cash Flow does not represent the Company’s residual cash flow available for discretionary expenditures, as the calculation of these measures does not account for certain debt service requirements or other non-discretionary expenditures.
Current report
Overview
Current report
Capital expenditures were $351 million.
Current report
Business divestitures, net of cash disposed, were $176 million.
Current report
Share repurchases were $229 million.
Current report
During the three months ended December 31, 2024, the Company repurchased 7.5 million shares of common stock under its share repurchase program for an aggregate amount of $112 million. During the year ended December 31, 2024, the Company repurchased 14.2 million shares of common stock under its share repurchase program for an aggregate amount of $229 million. The Company expects to return at least 50% of Excess Free Cash Flow (defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures), through a combination of steady, quarterly base dividends, opportunistic stock buybacks, and an annual supplemental dividend to true-up returns to shareholders on an annual basis.
Current report
The Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is greater than its carrying amount. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting is greater than its carrying amount, no further testing is required. However, if the Company concludes otherwise, then it is required to perform a quantitative assessment.
Current report
The Company elected to first perform the qualitative assessment described above for the purposes of its annual goodwill impairment test in 2024. Based on the results of the assessment, the Company concluded it was more likely than not that the fair value of each of its reporting units was greater than its carrying amount and no further testing was performed.
Current report
See Note 2 to the Consolidated Financial Statements for further discussion on recently issued and recently adopted accounting standards.
Removed paragraphs (18)
Previous report
NOV generated revenue of $8.58 billion in 2023, which was higher than the prior year due to higher industry activity. The average 2023 worldwide rig count (as measured by Baker Hughes) increased when compared to 2022.
Previous report
For the fourth quarter ended December 31, 2023, revenue was $2.34 billion, a $158 million or seven percent increase compared to the third quarter of 2023. The Company reported net income of $598 million, which included the release of valuation allowances, or $1.51 per fully diluted share, an improvement of $484 million, or $1.22 per fully diluted share, from the third quarter of 2023. Compared to the fourth quarter of 2022, revenue increased $270 million or 13 percent, and net income improved $494 million.
Previous report
During the fourth quarter of 2023, third quarter of 2023, and fourth quarter of 2022, pre-tax other items: inventory charges, severance accruals, and other charges and credits (collectively “Other Items”), were $55 million, $7 million, and $(8) million, respectively. Excluding the Other Items from all periods, fourth quarter 2023 Adjusted EBITDA was $294 million, compared to $267 million in the third quarter of 2023 and $231 million in the fourth quarter of 2022.
Previous report
Wellbore Technologies generated revenues of $824 million in the fourth quarter of 2023, an increase of three percent from the third quarter of 2023 and an increase of eight percent from the fourth quarter of 2022. Operating profit was $76 million, or 9.2 percent of sales, and included $42 million in Other Items. Adjusted EBITDA decreased $6 million sequentially and increased $14 million from the prior year to $160 million, or 19.4 percent of sales. Growing demand from international markets more than offset declining activity in North America. Profitability was affected by a less favorable sales mix, an increase in employee benefit expense, the devaluation of the Argentine peso, and other costs.
Previous report
Completion & Production Solutions generated revenues of $803 million in the fourth quarter of 2023, an increase of six percent from the third quarter of 2023 and an increase of nine percent from the fourth quarter of 2022. Operating profit was $44 million, or 5.5 percent of sales, and included $25 million in Other Items. Adjusted EBITDA increased $19 million sequentially and increased $20 million from the prior year to $86 million, or 10.7 percent of sales. Improved revenue and profitability were primarily the result of strong year-end capital equipment sales and continued margin improvement in the segment’s project backlog.
Previous report
New orders booked during the quarter increased 28 percent sequentially and totaled $676 million, representing a book-to-bill of 132 percent when compared to the $513 million of orders shipped from backlog. As of December 31, 2023, backlog for capital equipment orders for Completion & Production Solutions was $1.82 billion, an increase of $196 million from the third quarter of 2023 and an increase of $220 million from the fourth quarter of 2022.
Previous report
Rig Technologies generated revenues of $766 million in the fourth quarter of 2023, an increase of 12 percent from the third quarter of 2023 and an increase of 24 percent from the fourth quarter of 2022. Operating profit was $111 million, or 14.5 percent of sales, and included a credit of $18 million from Other Items. Adjusted EBITDA increased $9 million sequentially and increased $21 million from the prior year to $109 million, or 14.2 percent of sales. Results reflect seasonal increases in aftermarket activities supplemented by continued improvements in deliveries of spare parts and strong year-end capital equipment sales.
Previous report
Despite the recent volatility in commodity prices, management believes the industry is in the early stages of an extended recovery that began in 2021 with the gradual reopening of global economies following the COVID-19 pandemic. Improving economic activity, driven by pent-up consumer and industrial demand and government economic stimulus, drove higher consumption of commodities, pulled significant volumes of oil and gas out of global inventories, and exposed diminished productive capacity resulting from years of underinvestment in the oil and gas industry.
Previous report
Geopolitical risks and concerns regarding a slowing global economy, among other macro environment uncertainties, may drive volatility and could pressure commodity prices near-term; however, management believes diminished global oil and gas production capacity and rising energy security risks will continue to spur increased oilfield activity and demand for the Company’s equipment and technology.
Previous report
Revenue from Wellbore Technologies for the year ended December 31, 2023 was $3,172 million, an increase of $395 million, or 14%, compared to the year ended December 31, 2022.
Previous report
Operating profit from Wellbore Technologies was $423 million for the year ended December 31, 2023, an increase of $119 million compared to the year ended December 31, 2022. Operating profit percentage for 2023 was 13.3 percent compared to an operating profit percentage of 10.9 percent in 2022. Growing demand from international and offshore markets, improved manufacturing throughput, and market share gains more than offset the effect of declining activity in North America to drive improved results.
Previous report
Revenue from Completion & Production Solutions for the year ended December 31, 2023 was $3,034 million, an increase of $446 million, or 17%, compared to the year ended December 31, 2022.
Previous report
Operating profit from Completion & Production Solutions was $188 million for the year ended December 31, 2023 compared to an operating profit of $69 million for 2022, an improvement of $119 million. Operating profit percentage for 2023 was 6.2 percent compared to operating profit percentage of 2.7 percent in 2022. Results reflect growing demand and a higher rate of progress on higher margin international and offshore projects, partially offset by softening demand for completion equipment and aftermarket services in North America.
Previous report
Revenue from Rig Technologies for the year ended December 31, 2023 was $2,608 million, an increase of $574 million, or 28%, compared to the year ended December 31, 2022.
Previous report
Operating profit from Rig Technologies was $314 million for the year ended December 31, 2023, an improvement of $170 million compared to 2022. Operating profit percentage for 2023 was 12.0 percent compared to 7.1 percent in 2022. Improved demand for drilling equipment and aftermarket parts and services from international and offshore markets along with a greater rate of progress on offshore wind related backlog led to year over year growth in revenue and profitability.
Previous report
Included in operating profit are gains on sales of previously reserved inventory, release of an earnout accrual, charges related to a VERP, and other charges. Other items included in operating profit for Rig Technologies was a credit of $31 million for the year ended December 31, 2023 and none recorded for the year ended December 31, 2022.
Previous report
Capital expenditures were $283 million.
Previous report
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848).” Topic 848, as amended, applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024. During the first quarter of 2023, the Company adopted the optional relief guidance provided under Topic 848 after modifying certain debt and derivative instruments to update the reference rate from LIBOR to SOFR. The adoption of this optional relief did not have a material impact on the consolidated financial statements.
Reworded paragraphs (38)
Previous wording
The Company is a leading independent provider of equipment and technology to the upstream oil and gas industry. With operations in approximately 548 locations across six continents, NOV designs, manufactures and services a comprehensive line of drilling, well servicing and offshore construction equipment; sells and rents drilling motors, specialized downhole tools, and rig instrumentation; performs inspection and internal coating of oilfield tubular products; provides drill cuttings separation, management and disposal systems and services; and provides expendables and spare parts used in conjunction with the Company’s large installed base of equipment. NOV also manufactures coiled tubing and high-pressure fiberglass and composite tubing and sells and rents advanced in-line inspection equipment to makers of oil country tubular goods. More recently, by applying its deep knowledge in technology, the Company has helped advance the transition toward sustainable energy. The Company has a long tradition of pioneering innovations which improve the cost-effectiveness, efficiency, safety, and environmental impact of oil and gas operations.
Current wording
The Company is a leading independent provider of equipment and technology to the upstream oil and gas industry. With operations in approximately 551 locations across six continents, NOV designs, manufactures and services a comprehensive line of drilling, well servicing and offshore construction equipment; sells and rents drilling motors, specialized downhole tools, and rig instrumentation; performs inspection and internal coating of oilfield tubular products; provides drill cuttings separation, management and disposal systems and services; and provides expendables and spare parts used in conjunction with the Company’s large installed base of equipment. NOV also manufactures coiled tubing and high-pressure fiberglass and composite tubing and sells and rents advanced in-line inspection equipment to makers of oil country tubular goods. More recently, by applying its deep knowledge in technology, the Company has helped advance the transition toward sustainable energy. The Company has a long tradition of pioneering innovations which improve the cost-effectiveness, efficiency, safety, and environmental impact of oil and gas operations.
Previous wording
In an effort to drive further operational and financial efficiencies, the Company consolidated NOV’s operational structure into two segments, Energy Equipment and Energy Products and Services, effective January 1, 2024. The Company plans to begin reporting the new segment information beginning in the first quarter of 2024. Prior to January 1, 2024, the Company conducted its operations through three business segments: Wellbore Technologies, Completion & Production Solutions and Rig Technologies. See Item 1. “Business”, for a discussion of each of these business segments.
Current wording
In an effort to drive further operational and financial efficiencies, the Company consolidated NOV’s operational structure into two segments, Energy Equipment and Energy Products and Services, effective January 1, 2024. Prior to January 1, 2024, the Company conducted its operations through three business segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies. Segment disclosures pertaining to prior periods have been restated to reflect the change in reportable segments. See Item 1. “Business”, for a discussion of each of these business segments.
Previous wording
The average price per barrel of West Texas Intermediate Crude was $77.64 in 2023, a decrease of 18% over the average price for 2022 of $94.81 per barrel. The average natural gas price in 2023 was $2.54 per mmbtu, a decrease of 60% compared to the 2022 average of $6.38 per mmbtu. Average rig activity worldwide increased 4% for the full year in 2023 compared to 2022. The average crude oil price for the fourth quarter of 2023 was $78.41 per barrel, and natural gas was $2.74 per mmbtu.
Current wording
The average price per barrel of West Texas Intermediate Crude was $76.55 in 2024, a decrease of 1% over the average price for 2023 of $77.64 per barrel. The average natural gas price in 2024 was $2.19 per mmbtu, a decrease of 14% compared to the 2023 average of $2.54 per mmbtu. Average rig activity worldwide decreased 5% for the full-year in 2024 compared to 2023. The average crude oil price for the fourth quarter of 2024 was $70.69 per barrel, and natural gas was $2.44 per mmbtu.
Previous wording
At February 2, 2024, there were 851 rigs actively drilling in North America, comprised of U.S. and Canada, compared to the fourth quarter average of 804 rigs, an increase of 6 percent. The price for West Texas Intermediate Crude Oil was $72.28 per barrel at February 2, 2024, a decrease of 8 percent from the fourth quarter of 2023 average. The price for natural gas was $2.08 per mmbtu at February 2, 2024, a decrease of 24 percent from the fourth quarter of 2023 average.
Current wording
At January 31, 2025, there were 840 rigs actively drilling in North America, comprised of U.S. and Canada, compared to the fourth quarter average of 781 rigs, an increase of 8 percent. The price for West Texas Intermediate Crude Oil was $72.53 per barrel at January 31, 2025, an increase of 3 percent from the fourth quarter of 2024 average. The price for natural gas was $3.04 per mmbtu at January 31, 2025, an increase of 25 percent from the fourth quarter of 2024 average.
Previous wording
For the year ended December 31, 2023, the Company reported an operating profit of $651 million compared to an operating profit of $264 million in 2022, and net income attributable to the Company of $993 million, which included the release of valuation allowances on deferred tax assets of $485 million, or $2.50 per fully diluted share compared to a net income of $155 million or $0.39 per fully diluted share during 2022.
Current wording
For the year ended December 31, 2024, the Company reported net income attributable to the Company of $635 million, a decrease of $358 million from $993 million in 2023, which included the release of valuation allowances on deferred tax assets of $485 million. Operating profit increased 35 percent to $876 million, or 9.9 percent of sales for the full-year 2024. Adjusted EBITDA increased 11 percent to $1.11 billion or 12.5 percent of sales for 2024.
Previous wording
New capital equipment orders booked during the quarter totaled $214 million, representing a book-to-bill of 68 percent when compared to the $314 million of orders shipped from backlog. At December 31, 2023, backlog for capital equipment orders for Rig Technologies was $2.87 billion, a decrease of $100 million from the third quarter of 2023 and an increase of $75 million from the fourth quarter of 2022.
Current wording
New orders booked during the quarter totaled $757 million, representing a book-to-bill of 121 percent when compared to the $628 million shipped from backlog. As of December 31, 2024, backlog for capital equipment orders for Energy Equipment was $4.43 billion, an increase of $279 million from the fourth quarter of 2023.
Previous wording
NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including technologies to reduce the environmental impact of oil and gas operations and technologies to accelerate the energy transition that are responsive to the longer-term needs of NOV’s customers. We believe this strategy will further advance the Company’s competitive position in all market conditions.
Current wording
Regardless of the operating environment, NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including technologies to reduce the environmental impact of oil and gas operations, and technologies to improve the economics of alternative energy that are responsive to the longer-term needs of NOV’s customers. We believe this strategy will further advance the Company’s competitive position in all market conditions.
Previous wording
The following table summarizes the Company’s revenue and operating profit (loss) by operating segment (in millions):
Current wording
The following table summarizes the Company’s revenue and operating profit by operating segment (in millions):
Previous wording
Included in operating profit are Other Items related to the Company's voluntary early retirement program (VERP), and other charges and credits. Other items included in operating profit for Completion & Production Solutions was $26 million for the year ended December 31, 2023 and $36 million for the year ended December 31, 2022.
Current wording
Included in operating profit are Other Items related to severance, facility closure costs, and other charges and credits. Other Items included in operating profit for Energy Products and Services were $7 million for the year ended December 31, 2024 and $53 million for the year ended December 31, 2023.
Previous wording
Included in operating profit are Other Items related to a non-cash discount charge on royalty receivables, voluntary early retirement program, and other charges and credits. Other Items included in operating profit for Wellbore Technologies were $44 million for the year ended December 31, 2023 and $60 million for the year ended December 31, 2022.
Current wording
Included in operating profit are Other Items related to the gain on the divestiture of the segment’s Pole Products business, gains on sales of previously reserved inventory, severance, facility closure costs, and other charges and credits. Other items included in operating profit for Energy Equipment was a net credit of $118 million for the year ended December 31, 2024 and a net credit of $14 million for the year ended December 31, 2023.
Previous wording
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 $2,868 million at December 31, 2023, an increase of $75 million, or 3 percent, from backlog of $2,793 million at December 31, 2022. 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 $810 million of revenue out of backlog in 2024 and the remaining in 2025 and thereafter. At December 31, 2023, approximately 27 percent of the capital equipment backlog was for offshore products and approximately 95 percent of the capital equipment backlog was destined for international markets.
Current wording
The Energy Equipment 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 $4.43 billion at December 31, 2024, an increase of $279 million, or 7 percent, from backlog of $4.15 billion at December 31, 2023. 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 41 percent of backlog to become revenue during 2025 and the remainder thereafter. At December 31, 2024, approximately 51 percent of the capital equipment backlog was for offshore products and approximately 92 percent of the capital equipment backlog was destined for international markets.
Previous wording
Eliminations and corporate costs were $274 million for the year ended December 31, 2023 compared to $253 million for the year ended December 31, 2022. This change is primarily due to an increase in intersegment sales. 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 and corporate costs include intercompany transactions conducted between the three reporting segments that are eliminated in consolidation, as well as corporate costs not allocated to the segments. Intercompany transactions within each reporting segment are eliminated within each reporting segment.
Current wording
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 two reporting segments that are eliminated in consolidation. Intrasegment transactions are eliminated within each segment. Eliminations remained flat when compared to 2023, while corporate costs declined 6 percent due to our cost savings initiatives and workforce reductions taken in 2023.
Previous wording
Other expense, net was $98 million for the year ended December 31, 2023 compared to $35 million for the year ended December 31, 2022. The increase in expense was primarily due to higher foreign exchange losses for 2023.
Current wording
Other expense, net was $28 million for the year ended December 31, 2024 compared to $98 million for the year ended December 31, 2023. The decrease in expense was primarily due to larger foreign currency fluctuations in the prior year, particularly with the currency devaluation in Argentina.
Previous wording
The effective tax rate for the year ended December 31, 2023 was (60.9) percent, compared to 34.9 percent for 2022. For the year-ended 2023, the effective tax rate was favorably impacted by the release of $485 million in valuation allowances in numerous jurisdictions. During the fourth quarter of 2023, the Company determined it was more likely than not the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions. In reaching this determination, the Company considered the growing trend of profitability over the last three years, particularly in the United States, as well as expectations regarding the generation of future taxable income and the sources of future taxable income. As a result of this analysis, the Company recognized a discrete tax benefit related to the release of valuation allowances of $299 million in the United States and $186 million outside the United States. The Company continues to maintain a valuation allowance of $346 million primarily related to foreign tax credit carryforwards in the United States and deferred tax assets in certain other jurisdictions. The effective tax rate was also favorably impacted by adjustments related to utilization of losses and tax credits for current and prior year tax returns, partially offset by current year losses in certain jurisdictions with no tax benefit.
Current wording
The effective tax rate for the year ended December 31, 2024 was 23.6 percent, compared to (60.9) percent for 2023. For the year ended 2024, the effective tax rate was negatively impacted by increased withholding taxes, nondeductible expenses, and losses in certain jurisdiction with no tax benefit, partially offset by a lower rate of U.S. tax on certain earnings generated outside of the United States and the release of valuation allowances in certain jurisdictions with net operating losses as a result of improving forecasted taxable income. During 2023, the Company determined it was more likely than not that the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions and released valuation allowances on certain deferred tax assets. The effective tax rate was favorably impacted by the adjustments related to utilization of losses and tax credits for current and prior year tax returns, partially offset by current year losses in certain jurisdictions with no tax benefit.
Previous wording
The Company defines Adjusted EBITDA as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items. Management believes this is important information to provide because it is used by management to evaluate the Company’s operational performance and trends between periods and manage the business. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s results of ongoing operations. Adjusted EBITDA is not intended to replace GAAP financial measures, such as Net Income.
Current wording
The Company defines Adjusted EBITDA as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items. Adjusted EBITDA % is a ratio showing Adjusted EBITDA as a percentage of sales. Management believes this is important information to provide because it is used by management to evaluate the Company’s operational performance and trends between periods and manage the business. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s results of ongoing operations. Adjusted EBITDA and Adjusted EBITDA % are not intended to replace GAAP financial measures, such as Net Income and Operating Profit %.
Previous wording
The following tables set forth the reconciliation of Adjusted EBITDA to its most directly comparable GAAP financial measures (in millions):
Current wording
The following tables set forth the reconciliation of Adjusted EBITDA to its most comparable GAAP financial measures (in millions):
Previous wording
At December 31, 2023, the Company had cash and cash equivalents of $816 million, and total debt of $1,725 million. At December 31, 2022, cash and cash equivalents were $1,069 million and total debt was $1,730 million. As of December 31, 2023, approximately $728 million of the $816 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash, if repatriated to the U.S., could be subject to foreign withholding taxes and incremental U.S. taxation. If opportunities to invest in the U.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.
Current wording
At December 31, 2024, the Company had cash and cash equivalents of $1,230 million, and total debt of $1,740 million. At December 31, 2023, cash and cash equivalents were $816 million and total debt was $1,725 million. As of December 31, 2024, approximately $633 million of the $1,230 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash, if repatriated to the U.S., could be subject to foreign withholding taxes and incremental U.S. taxation. If opportunities to invest in the U.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.
Previous wording
The Company has a revolving credit facility with a borrowing capacity of $2.0 billion through October 30, 2024, and a borrowing capacity of $1.7 billion from October 31, 2024, to October 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 Secured Overnight Financing Rate (SOFR), NIBOR or CDOR plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The credit facility contains a financial covenant regarding maximum debt-to-capitalization ratio of 60%. As of December 31, 2023, the Company was in compliance with a debt-to-capitalization ratio of 23.9% and had no outstanding letters of credit issued under the facility, resulting in $2.0 billion of available funds.
Current wording
On September 12, 2024, the Company entered into a new $1.5 billion five-year unsecured revolving credit facility. This new credit facility replaced the Company’s previous $2.0 billion revolving credit facility. The Company has the right to increase the aggregate commitments under this new agreement to an aggregate amount of up to $2.5 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), Euro Interbank Offered Rate (EURIBOR), Sterling Overnight Index Average (SONIA), Canadian Overnight Repo Rate Average (CORRA), or Norwegian Interbank Offered Rate (NIBOR), plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The new credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%. As of December 31, 2024, the Company was in compliance with a debt-to-capitalization ratio of 23.8% and had no outstanding letters of credit issued under the facility, resulting in $1.5 billion of available funds.
Previous wording
A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of December 31, 2023, the joint venture was in compliance. The facility construction was completed in the fourth quarter of 2022, and the joint venture will not have future borrowings on the line of credit. The line of credit repayment schedule began in December 2022 with final payment no later than June 2032. As of December 31, 2023, the Company has a carrying value of $104 million in borrowings related to this line of credit. The Company has $10 million in payments related to this line of credit due in the next twelve months.
Current wording
A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of December 31, 2024, the joint venture was in compliance. The facility construction was completed in the fourth quarter of 2022, and the joint venture will not have future borrowings on the line of credit. The line of credit repayment schedule began in December 2022 with final payment no later than June 2032. As of December 31, 2024, the Company has a carrying value of $94 million in borrowings related to this line of credit. The Company has $11 million in payments related to this line of credit due in the next twelve months.
Previous wording
The Company’s outstanding debt at December 31, 2023 consisted primarily of $1,091 million in 3.95% Senior Notes, $495 million in 3.60% Senior Notes, and other debt of $139 million. The Company was in compliance with all covenants at December 31, 2023. Long-term lease liabilities totaled $558 million at December 31, 2023.
Current wording
The Company’s outstanding debt at December 31, 2024 consisted primarily of $1,091 million in 3.95% Senior Notes, $496 million in 3.60% Senior Notes, and other debt of $153 million. The Company was in compliance with all covenants at December 31, 2024. Long-term lease liabilities totaled $544 million at December 31, 2024.
Previous wording
The Company had $495 million of outstanding letters of credit at December 31, 2023, primarily in the U.S. and Norway, that are under various bilateral letter of credit facilities. Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.
Current wording
The Company had $500 million of outstanding letters of credit at December 31, 2024, primarily in the U.S. and Norway, that are under various bilateral letter of credit facilities. Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.
Previous wording
Significant uses of cash during 2023
Current wording
Significant uses and sources of cash during 2024:
Previous wording
Cash flows provided by operating activities were $143 million. This included changes in the primary components of our working capital (inventories, contract assets, and accounts payable).
Current wording
Cash flows provided by operating activities were $1.30 billion, primarily driven by higher levels of profitability and changes in the primary components of our working capital (inventories, contract assets, receivables, and accounts payable).
Previous wording
Business acquisitions, net of cash acquired, were $22 million.
Current wording
Business acquisitions, net of cash acquired, were $298 million.
Previous wording
Payments of $79 million in dividends to our shareholders.
Current wording
Payments of $108 million in dividends to our shareholders.
Previous wording
The effect of the change in exchange rates on cash was zero for the year ended December 31, 2023, and a decrease of $9 million, and $7 million for the years ended December 31, 2022 and 2021, respectively.
Current wording
The effect of the change in exchange rates on cash was a decrease of $13 million for the year ended December 31, 2024, no change for the year ended December 31, 2023, and a decrease of $9 million for the years ended December 31, 2022.
Previous wording
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.
Current wording
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 flows 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.
Previous wording
As of December 31, 2023, the Company had $67 million of unrecognized tax benefits. This represents the tax benefits associated with various tax positions taken, or expected to be taken, on domestic and international tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution. Due to the uncertainty of the timing of future cash flows associated with these unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. For further information related to unrecognized tax benefits, see Note 15 to the Consolidated Financial Statements.
Current wording
As of December 31, 2024, the Company had $68 million of unrecognized tax benefits. This represents the tax benefits associated with various tax positions taken, or expected to be taken, on domestic and international tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution. Due to the uncertainty of the timing of future cash flows associated with these unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. For further information related to unrecognized tax benefits, see Note 15 to the Consolidated Financial Statements.
Previous wording
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 and impairment of goodwill and other indefinite-lived intangible assets. 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.
Current wording
In preparing the financial statements, we make assumptions, estimates and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments that are most critical in nature which are related to revenue recognition under long-term construction contracts and impairment of goodwill and other indefinite-lived intangible assets. Our estimates are based on historical experience and on our future expectations that we believe are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates and those differences may be material.
Previous wording
Revenue is recognized over-time for certain long-term construction contracts in the Completion & Production Solutions and Rig Technologies segments. These contracts include custom designs for customer-specific applications that are unique and require significant engineering efforts. Revenue is recognized as work progresses on each contract. Right to payment is enforceable for performance completed to date, including a reasonable profit.
Current wording
Revenue is recognized over-time for certain long-term construction contracts in the Energy Equipment segment. These contracts include custom designs for customer-specific applications that are unique and require significant engineering efforts. Revenue is recognized as work progresses on each contract. Right to payment is enforceable for performance completed to date, including a reasonable profit.
Previous wording
We generally use the cost-to-cost (input) measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs. Estimating total revenue and cost at completion of long-term construction contracts is complex, subject to many variables and requires significant judgement. Under the cost-to-cost measure of progress, progress towards completion of each contract is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. These costs include labor, materials, subcontractors’ costs, and other direct costs. Any expected losses on a project are recorded in full in the period in which the loss becomes probable.
Current wording
We generally use the cost-to-cost (input) measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs. Estimating total revenue and cost at completion of long-term construction contracts is complex, subject to many variables and requires significant judgment. Under the cost-to-cost measure of progress, progress towards completion of each contract is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. These costs include labor, materials, subcontractors’ costs, and other direct costs. Any expected losses on a project are recorded in full in the period in which the loss becomes probable.
Previous wording
It is common for our long-term contracts to contain late delivery fees, work performance guarantees, and other provisions that can either increase or decrease the transaction price. We estimate variable consideration as the most likely amount we expect to receive. We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur, or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of our anticipated performance and historical, current and forecasted information that is reasonably available to us. Net revenue recognized from performance obligations satisfied in previous periods was $39 million for the year ended December 31, 2023 primarily due to change orders.
Current wording
It is common for our long-term contracts to contain late delivery fees, work performance guarantees, and other provisions that can either increase or decrease the transaction price. We estimate variable consideration as the most likely amount we expect to receive. We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur, or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of our anticipated performance and historical, current and forecasted information that is reasonably available to us. Net revenue recognized from performance obligations satisfied in previous periods was $19 million for the year ended December 31, 2024 primarily due to change orders.
Previous wording
The Company has approximately $1.6 billion of goodwill as of December 31, 2023. Generally accepted accounting principles require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances indicate that goodwill might be impaired. Events or circumstances which could indicate a potential impairment include (but are not limited to) a significant sustained reduction in worldwide oil and gas prices or drilling; a significant sustained reduction in profitability or cash flow of oil and gas companies or drilling contractors; a sustained reduction in the market capitalization of the Company; a significant sustained reduction in capital investment by drilling companies and oil and gas companies; or a significant sustained increase in worldwide inventories of oil or gas.
Current wording
Goodwill represents the excess of acquisition price paid over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The Company has approximately $1.6 billion of goodwill as of December 31, 2024. Generally accepted accounting principles require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances indicate that goodwill might be impaired. Events or circumstances which could indicate a potential impairment include (but are not limited to): a significant sustained reduction in worldwide oil and gas prices or drilling; a significant sustained reduction in profitability or cash flow of oil and gas companies or drilling contractors; a significant sustained reduction in the market capitalization of the Company; a significant sustained reduction in capital investment by drilling companies and oil and gas companies; and a significant sustained increase in worldwide inventories of oil or gas.
Previous wording
The Company performs its goodwill test based on the Company’s discounted cash flow analysis. The discounted cash flow is based on management’s forecast of operating performance for each reporting unit. The two main assumptions used in measuring goodwill impairment, which bear the risk of change and could impact the Company’s goodwill impairment analysis, include the cash flow from operations from each of the Company’s individual reporting units and the weighted average cost of capital. The starting point for each of the reporting unit’s cash flow from operations is the detailed annual plan or updated forecast. Cash flows beyond the specific operating plans were estimated using a terminal value calculation, which incorporated historical and forecasted financial cyclical trends for each reporting unit and considered long-term earnings growth rates. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. During times of volatility, significant judgement must be applied to determine whether credit changes are a short-term or long-term trend. The valuation techniques used in the annual test were consistent with those used during previous testing. The inputs used in the annual test were updated for current market conditions and forecasts.
Current wording
If and when the Company performs a quantitative assessment, it is based on the Company’s discounted cash flow analysis. The discounted cash flow is based on management’s forecast of operating performance for each reporting unit. The two main assumptions used in measuring goodwill impairment, which bear the risk of change and could impact the Company’s goodwill impairment analysis, include the cash flows from operations from each of the Company’s individual reporting units and the weighted average cost of capital. The starting point for each of the reporting unit’s cash flows from operations is the detailed annual plan or updated forecast. Cash flows beyond the specific operating plans were estimated using a terminal value calculation, which incorporated historical and forecasted financial cyclical trends for each reporting unit and considered long-term earnings growth rates. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. During times of volatility, significant judgment must be applied to determine whether credit changes are a short-term or long-term trend.
Previous wording
During 2023, 2022, and 2021 we recorded inventory provision charges (credits) to inventory reserves of $28 million, $(18) million, and $73 million, respectively, consisting primarily of obsolete and surplus inventories. At December 31, 2023 and 2022, inventory reserves totaled $354 and $378 million, or 14.1% and 17.3% of gross inventory, respectively.
Current wording
During 2024, 2023, and 2022 we recorded inventory provision charges (credits) to inventory reserves of $31 million, $28 million, and $(18) million, respectively. At December 31, 2024 and 2023, inventory reserves totaled $286 and $354 million, or 12.9% and 14.1% of gross inventory, respectively.
Previous wording
The Company’s annual tax provision is based on taxable income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. The determination and evaluation of the annual tax provision and tax positions involves the interpretation of the tax laws in the various jurisdictions in which the Company operates. It requires significant judgement and the use of estimates and assumptions regarding significant future events such as the amount, timing and character of income, deductions and tax credits. Changes in tax laws, regulations, and treaties, foreign currency exchange restrictions or the Company’s level of operations or profitability in each jurisdiction could impact the tax liability in any given year. The Company also operates in many jurisdictions where the tax laws relating to the pricing of transactions between related parties are open to interpretation, which could potentially result in aggressive tax authorities asserting additional tax liabilities with no offsetting tax recovery in other countries. In 2022, the Company received and paid a $51 million transfer pricing tax assessment in Denmark. The Company and its advisors believe the assessment is without merit. The Company is presently appealing and believes it will be reimbursed following a successful appeals process. The payment has been recorded as a long-term receivable.
Current wording
The Company’s annual tax provision is based on taxable income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. The determination and evaluation of the annual tax provision and tax positions involves the interpretation of the tax laws in the various jurisdictions in which the Company operates. It requires significant judgment and the use of estimates and assumptions regarding significant future events such as the amount, timing and character of income, deductions and tax credits. Changes in tax laws, regulations, treaties, foreign currency exchange restrictions or the Company’s level of operations or profitability in each jurisdiction could impact the tax liability in any given year. The Company also operates in many jurisdictions where the tax laws relating to the pricing of transactions between related parties are open to interpretation, which could potentially result in aggressive tax authorities asserting additional tax liabilities with no offsetting tax recovery in other countries. In 2022, the Company received and paid a $51 million transfer pricing tax assessment in Denmark. The Company and its advisors believe the assessment is without merit. The Company is presently appealing and believes it will be reimbursed following a successful appeals process. The payment has been recorded as a long-term receivable.
Previous wording
The Company maintains liabilities for estimated tax exposures in jurisdictions of operation. The annual tax provision includes the impact of income tax provisions and benefits for changes to liabilities that the Company considers appropriate, as well as related interest. Tax exposure items primarily include potential challenges to intercompany pricing and certain operating expenses that may not be deductible in foreign jurisdictions. These exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means. The Company is subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company believes that an appropriate liability has been established for estimated exposures under the guidance in ASC Topic 740 “Income Taxes” (“ASC Topic 740”). However, actual results may differ materially from these estimates. The Company reviews these liabilities quarterly and to the extent audits or other events result in an adjustment to the liability accrued for a prior year, the effect will be recognized in the period of the event. The IRS is examining the Company’s tax returns for 2017 and 2018 and has proposed an adjustment to certain restructuring steps which occurred in 2017. The Company and its advisors believe these restructuring steps were properly completed in accordance with U.S. tax laws and regulations and has appealed the proposed adjustment. However, if the Company is unsuccessful in the appeals process, the IRS proposed adjustment would be substantially offset by the utilization of foreign tax credit carryforwards which subsequently expired unused or are fully reserved by a valuation allowance and $48 million additional income tax expense would be owed.
Current wording
The Company maintains liabilities for estimated tax exposures in jurisdictions of operation. The annual tax provision includes the impact of income tax provisions and benefits for changes to liabilities that the Company considers appropriate, as well as related interest. Tax exposure items primarily include potential challenges to intercompany pricing and certain operating expenses that may not be deductible in foreign jurisdictions. These exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means. The Company is subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company believes that an appropriate liability has been established for estimated exposures under the guidance in ASC Topic 740 “Income Taxes” (“ASC Topic 740”). However, actual results may differ materially from these estimates. The Company reviews these liabilities quarterly and to the extent audits or other events result in an adjustment to the liability accrued for a prior year, the effect will be recognized in the period of the event. The IRS has proposed an adjustment to certain restructuring steps which occurred in 2017. The Company and its advisors believe these restructuring steps were properly completed in accordance with U.S. tax laws and regulations and has appealed the proposed adjustment. However, if the Company is unsuccessful in the appeals process, the IRS proposed adjustment would be substantially offset by the utilization of foreign tax credit carryforwards which subsequently expired unused or are fully reserved by a valuation allowance and $48 million additional income tax expense would be owed. The Canada Revenue Agency has proposed an adjustment for dividends received in Canada between 2016 and 2018. The Company and its advisors believe its filing position is consistent with Canadian tax law and tax court cases and has appealed the proposed adjustment. If the Company is unsuccessful in the process, $31 million additional income tax expense would be owed.
Previous wording
As of December 31, 2023, the Company has recorded valuation allowances of $346 million that the Company intends to maintain until it is more likely than not the deferred tax assets will be realized. During the fourth quarter of 2023, the Company determined it was more likely than not the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions. In reaching this determination, the Company considered the growing trend of profitability over the last three years, particularly in the United States, as well as expectations regarding the generation of future taxable income and the sources of future taxable income. As a result of this analysis, the Company recognized a discrete tax benefit related to the release of valuation allowances of $299 million in the United States and $186 million outside the United States. Management applied significant judgment in assessing the positive and negative evidence available in the determination of the amount of deferred tax assets that were more likely than not to be realized in the future. Although the Company considered future taxable income in its assessment, the Company concluded that, as of December 31, 2023, a valuation allowance was still required for certain United States foreign tax credit carryforwards and deferred tax assets in certain other jurisdictions due to several factors, including specific jurisdictions in which the Company does not project to generate sufficient future taxable income to realize all or a portion of its deferred tax assets specific to that jurisdiction; the specific nature and timing of future taxable income required to realize certain tax credit carryforwards, most notably U.S. foreign tax credits; and the timing of expiration of certain tax credit carryforwards. Income tax expense recorded in the future will be reduced to the extent of any additional decreases in the Company’s valuation allowances. The realization of remaining deferred tax assets is primarily dependent on future taxable income. Any reduction in future taxable income including but not limited to any future restructuring activities may require that the Company record an additional valuation allowance against deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in such period and could have a significant impact on future earnings.
Current wording
During 2023, the Company determined it was more likely than not that the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions and released valuation allowances on certain deferred tax assets. Management applied significant judgment in assessing the positive and negative evidence available in the determination of the amount of deferred tax assets that were more likely than not to be realized in the future. Although the Company considered future taxable income in its assessment, the Company concluded that, as of December 31, 2023, a valuation allowance was still required for certain United States foreign tax credit carryforwards and deferred tax assets in certain other jurisdictions.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
As of December 31, 2024, the Company has recorded valuation allowances of $266 million that the Company intends to maintain until it is more likely than not the deferred tax assets will be realized. Income tax expense recorded in the future will be reduced to the extent of any additional decreases in the Company’s valuation allowances. The realization of remaining deferred tax assets is primarily dependent on future taxable income. Any reduction in future taxable income, including but not limited to any future restructuring activities, may require that the Company record an additional valuation allowance against deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in such period and could have a significant impact on future earnings.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The Completion & Production 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 signed contract related to a construction project. The capital equipment backlog was $1,822 million at December 31, 2023, an increase of $220 million, or 14 percent from backlog of $1,602 million at December 31, 2022. 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 $1,393 million of revenue out of backlog in 2024 and approximately $429 million of revenue out of backlog in 2025 and thereafter. At December 31, 2023, approximately 66 percent of the capital equipment backlog was for offshore products and approximately 78 percent of the capital equipment backlog was destined for international markets.
Previous report — wording carried elsewhere
For the year ended December 31, 2022, the effective tax rate was negatively impacted by losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to the foreign currency translation gains and the utilization of losses and tax credits for prior year tax returns.