National Oilwell Varco (NOV) operates just about everywhere oil and gas is extracted, enjoying a healthy share of the worldwide market for integrated oilfield equipment. Yet global reach and an extensive portfolio of products do not necessarily translate to a better customer experience, for NOV or its competitors.
EnergyPoint's most recent survey data suggest NOV's customer satisfaction ratings, while certainly competitive within its peer group, have slowly trended downward as the company logged lower scores in various categories.
To be fair, ratings for capital drilling equipment manufacturers remain below average industry-wide. However, NOV has been sliding from its previous perch. Coinciding with the downtick in customer satisfaction, the company has been in dynamic empire-building mode.
For example, it juiced up its oilfield distribution business with acquisitions of Wilson Supply in April of last year and CE Franklin a month later. Those deals, along with this February's acquisition of equipment maker Robbins & Myers, with its line of blowout preventers and other products, held the promise of increasing NOV's scale efficiency.
Rethinking The Model?
But that was then, and NOV now appears to be sharpening its focus. In a near about face, the company recently announced plans to spin off its now heftier oilfield distribution business.
The new entity will include NOV's legacy distribution operations as well as those of CE Franklin and Wilson Supply. Interestingly, NOV has undertaken this pruning even as customers like Transocean (RIG) and Noble Corp. (NE) have made efforts to slim down and focus their own organizations.
So, will this reversal in direction, however modest, help right NOV's rudder? Possibly.
A slimmer NOV should be able to concentrate its wherewithal on its strengths, such as rig technology. With so much drilling activity on the horizon, companies like NOV stand to be right in the middle of things.
Clay Williams, NOV's recently named President and COO, sees the company positioning itself to grow as two-thirds of the world's oceans are explored. For NOV to maximize growth, customers will need to believe in the quality of their offerings. Regardless of how promising NOV's latest redirect may be, it does not immediately make its products better.
Clearly, opportunities abound for equipment manufacturers. But, from our perspective, suppliers whose customers regularly rate their products and organizations higher are better positioned to profit from the opportunity. As it stands, NOV and peers like Aker Solutions, Cameron Int'l (CAM), GE Oil & Gas (GE) and Forum Energy Technologies (FET) will need to produce more consistent customer experiences if they hope to take full advantage.
Market Place Pushback
One area ripe for improvement surrounds the hitting of delivery schedules for products. We note management's acknowledgement that tighter schedules resulting from development methods and technologies shifting have led to some customer discontent and growing pushback on pricing for deepwater-related equipment and systems. Our surveys suggest paltry levels of customer satisfaction with installation, operation and maintenance costs might be a culprit.
Also, as many companies with acquisition hangovers find, the closer one gets to becoming a one-stop-shop, the lower its customer satisfaction ratings tend to be. As we see things, it's this dynamic that has in the past helped sandbag NOV with lower margins in certain segments.