National Oilwell Varco Denmark I/S

Ledelsesberetning

Statement of policy for data ethics

Beskrivelse af virksomhedens væsentligste aktiviteter

Business review
National Oilwell Varco Denmark I/S engineers, manufactures and delivers flexible pipe systems for the purpose of recovering hydrocarbon oil and gas from offshore fields as well as solutions for the purpose of transporting chemicals and water to in-shore installations based on the use of flexible pipe products. The company is ultimately owned by NOV Inc.
The existing product range consists of flexible pipe solutions ranging from 2” – 16” (approx. 50 – 406 mm inside diameter) and designed to operate under very demanding offshore conditions in all parts of the world. The products are unique, because they remain flexible even under very high working pressure, up to 1,000 bars, and at the same time they are able to withstand working temperatures up to 130 Celsius. Flexible pipe systems are superior to other pipe solutions in respect of flexibility, ability to withstand different design conditions and capability to convey challenging mixtures of liquid and gaseous fluids.
Today, flexible pipe systems are used to recover oil and gas at water depths down to 2,500 meters, and National Oilwell Varco Denmark I/S’ products are qualified for use in these water depths.
National Oilwell Varco Denmark I/S also offers a unique condition monitoring solution for its flexible pipe systems based on the use of optical fibers embedded in the pipes' steel armor wires.
Apart from the flexible pipe products manufactured at the Kalundborg factory, National Oilwell Varco Denmark I/S also supplies a wide range of additional equipment to the market, such as accessories and steel structures required in a given system configuration. The ability to correctly design and to procure such elements is an important part of being a solution provider to the offshore oil and gas market.
By the end of December 2023 National Oilwell Varco Denmark I/S counted approx. 658 employees. 46% of the employees work at the Danish factory primarily concerned with the production of flexible pipe products. The remaining 54% of the employees work in the headquarters in Denmark and are engaged in research and development, project management, engineering work, general management and administration. In addition, National Oilwell Varco Denmark I/S has a small department in Aalborg primarily focused on research and development.

Beskrivelse af usikkerhed ved indregning eller måling

Recognition and measurement uncertainties
The recognition and measurement of items in the annual report is not associated with any uncertainty.

Beskrivelse af usædvanlige forhold, der kan have påvirket indregningen eller målingen

Unusual matters
In 2023, Management carried out an impairment test of the carrying amount of tangible assets. The recoverable amount in form of the value in use is deemed to exceed the carrying amount. As a result, the extraordinary impairment recorded in 2020 was proportionally reversed, increasing the profit before net financials by 92,4 million DKK in 2023.
Other than the event mentioned above, the Company's financial position at 31. December 2023 and the results of its operation for the financial year ended 31. December 2023 are not affected by unusual matters.

Beskrivelse af udviklingen i virksomhedens aktiviteter og økonomiske forhold

Financial review
The company's income statement for the year ended 31 December 2023 shows a net profit of 267.2 million DKK and the balance sheet at 31 December 2023 shows equity of 1,293 million DKK.
In 2023, National Oilwell Varco Denmark I/S realized revenue of 1,520 million DKK compared to revenue of 1,360 million DKK in 2022, equivalent to an increase of 11.8%.
The profit for the year before amortization and depreciation amounts to 173.9 million DKK compared to a profit of 50.2 million DKK in 2022, equivalent to an increase of 246.6%.
The net profit for 2023 amounts to 267.2 million DKK compared to a net profit of 669.9 million DKK in 2022, equivalent to a decrease of 60%. The decrease in net profit is explained by the non-recurring event of the sale of the shares in NOV Flexibles Holding ApS, which had generated a non-operating profit of 488 million DKK in 2022.
The revenue for 2023 was 1% above the expectations compared to the highest part of the expected range, and EBITDA was 190% above expectations compared to the highest part of the expected range. The earnings were positively impacted by certain events such as: 1) non-refundable payment from a customer after cancelling a project, and 2) efficiency improvements accross the organization. In relation to what had been forecasted, Management considers 2023 EBITDA result to be satisfactory.
Project related risks
On a current basis the company evaluates the need for provisions for technical risks on the individual projects.
Customer contracts typically contain a late-delivery clause enabling day fines of up to 10% of the contract value. If the production schedules indicate delays, the need to make provision is evaluated on a case-by-case basis.
Contracts entered into by the company typically include a provision that the company will be indemnified for consequential losses caused by the use of the company’s products.
In the event of a breach of the contract obligations, the overall and cumulative liability of the company is normally limited to the contract amount or lower.
Currency related risks
Activities abroad result in earnings and equity to be affected by exchange rate and interest rate developments for a number of currencies. According to the company's policy the company may hedge commercial currency risks. Hedging takes place primarily through forward exchange hedges to reduce the risk of adverse price movements from expected sales and purchases. The company does not engage in speculative currency positions

Omtale af betydningsfulde hændelser, som er indtruffet efter regnskabsårets afslutning

Business related risks
National Oilwell Varco Denmark I/S is dependent upon the level of activity in the oil and gas industry, which is volatile and has caused, and may cause future fluctuations in our operating results.
The oil and gas industry historically has experienced significant volatility. The demand for National Oilwell Varco Denmark I/S products is dependent on the number of oil rigs in operation, the number of oil wells being drilled, and the debt ratio, and drilling characteristics/conditions of these wells’ reservoirs. The last of which ultimately drives the operating companies’ decision to not only produce but how the field will be produced, driving subsea infrastructure and architecture decisions.
The willingness of the oil operators to make capital expenditures to explore for and produce oil and the willingness of oilfield service companies to invest in capital equipment will continue to be influenced by numerous factors over which we have no control, the two most critical are capex spend (discipline) and one of these factors are the volatility of the oil prices. Expectations for future oil prices may cause shifts in the strategies and expenditure levels of oil companies, drilling contractors, service companies, and subsea equipment companies. Particularly with respect to decisions when and how to purchase major capital equipment of the type National Oilwell Varco Denmark I/S manufactures. Oil prices, which are determined by the marketplace, may shift to a range that is below the acceptable levels for certain of our customers, which could result in reduced demand for our products and have a material adverse effect on our financial condition, results of operations and cash flows. Conversely, sustained higher commodity pricing could enable a growth period that has a positive effect on these same business drivers.

Beskrivelse af virksomhedens forventede udvikling

Expected development of the company, including specific prerequisites and uncertainties
Since the steep decline in oil prices during 2020 Q1, oil commodities pricing has been steadily rising, with a peak mid 2022 (related to the war in Ukraine) and now trailing at fairly stable level.
The outlook for 2024 is to see a continued strong demand and increasing pricing levels, due to both higher costs of materials, as well as higher margins. Most offshore operators will hold firm on capital discipline, and a future demand for flexible pipes is expected to remain on high levels with Brazilian projects being of the major contributors. Based on the visibility of projects, revenue is expected to increase and end 2024 in the range from 1,685 million DKK to 1,785 million DKK.
Management expects a profit before financial items, depreciation, and amortization (EBITDA) to be recorded in 2024 in the range from 200 million DKK to 260 million DKK. EBITDA 2024 is materializing higher margin projects after exhausting the low margin projects in the portfolio in 2023.