What happened with DNOW today?
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DNOW Inc. buys products mainly from manufacturers, stocks them across its distribution network and sells them to customers that build, operate and maintain energy and industrial facilities. Pipe, valves, fittings and associated automation and measurement products account for most sales; pumps and production and process equipment are another major part of the business. Customers include oil and gas producers, pipeline operators, refineries, utilities and industrial businesses. The United States supplies most revenue.
Customers can also pay DNOW to handle purchasing, warehousing, inventory and delivery, sometimes with DNOW employees working at their sites. Its digital systems connect with customer and supplier systems to support these activities. DNOW has acquired MRC Global and continues to use its brand and MRCGO platform while integrating the businesses.
Demand depends substantially on oil and gas customers’ spending on new projects and ongoing operations. Gas-utility orders also depend partly on regulatory approval of customers’ infrastructure projects. To fulfill orders, DNOW needs manufacturers to supply products and must keep the right inventory available when customers need it.
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NOV and DNOW depend on the same drilling and production budgets: NOV supplies equipment and consumables to energy producers and contractors, while DNOW distributes equipment and supplies to those markets. NOV's shorter-cycle consumables sales offer a view of spending relevant to DNOW without waiting for large equipment projects.
Forum Energy Technologies, Inc. competes for oilfield, pipeline and refinery customers' equipment spending by manufacturing production equipment, artificial-lift products and consumables that overlap DNOW's distribution offerings. Watch its Artificial Lift and Downhole business for demand in production equipment also sold by DNOW.
Baker Hughes competes with DNOW for energy and industrial buyers' spending on artificial-lift, flow-control and production equipment, selling equipment and related services where DNOW distributes products. Its artificial-lift and flow-control business is more relevant to DNOW than its broader company results.
Cactus, Inc. sells production trees, spoolable pipe and fittings to oil and gas operators, competing for spending that also supports DNOW's pipe, fittings and production-equipment sales. Watch Cactus's wellhead and production-tree sales: demand comes mainly from new wells drilled, rather than maintenance of existing wells.
Flowco Holdings Inc. competes with DNOW's artificial-lift and production-equipment offerings by selling systems that help oil and gas producers maintain and optimize well output. Its Production Solutions revenue offers a view of producers' spending throughout wells' producing lives, not just when new wells are drilled.
Weatherford and DNOW both depend on operators' spending to develop and maintain oil and gas wells: Weatherford provides well equipment and services, while DNOW distributes production equipment. Weatherford's Production and Intervention results are the clearest place to watch spending on keeping existing wells productive.
Patterson-UTI Energy Inc and DNOW share exposure to U.S. drilling and completion spending: Patterson-UTI performs that work for oil and gas producers, while DNOW sells equipment and supplies to the operators and contractors undertaking it. Its drilling- and completion-services revenue helps track the activity behind that part of DNOW's demand.
Helmerich & Payne, Inc.'s rig utilization helps gauge demand from drilling contractors, an important customer group for DNOW: H&P operates rigs for oil and gas producers, while DNOW supplies contractors with equipment and consumables. Watch how many of H&P's marketed North American rigs are active under contract.
Halliburton and DNOW both rely on producers' investment from drilling through production: Halliburton supplies well services and products, while DNOW distributes oilfield equipment. Halliburton's Completion and Production results offer a view of spending on bringing wells into production and sustaining output, including artificial lift also sold by DNOW.
Halliburton Company earningsHAL
Halliburton’s Completion and Production results will show how much spending to bring wells online and sustain output could support DNOW’s production-equipment sales.
Use Halliburton’s Completion and Production results to gauge spending on bringing wells into production and keeping them productive. Steady or stronger results would indicate continued support for demand for DNOW’s production equipment; weaker results would point to tighter budgets that could reduce demand for those sales.
Baker Hughes Company earningsBKR
Baker Hughes’s artificial-lift and flow-control results will show both buyers’ demand for overlapping equipment and its competition with DNOW for that spending.
Read Baker Hughes’s results in the relevant businesses against DNOW’s equipment-distribution activity. Stronger results would show that shared buyer spending is holding up, but also that Baker Hughes is competing more strongly in overlapping products; weaker results could mean less competitive pressure, or a shrinking pool of buyer spending. The distinction is whether the change signals market demand or how hard DNOW must compete for orders.
Patterson-UTI Energy Inc earningsPTEN
Patterson-UTI Energy’s drilling- and completion-services revenue will show how U.S. oilfield activity may affect DNOW customers’ demand for equipment and supplies.
Watch Patterson-UTI Energy’s drilling- and completion-services revenue to gauge whether U.S. oilfield work is expanding or contracting. Stronger revenue points to more work by contractors and producers, which can support their purchases from DNOW; weaker revenue signals less activity and possible pressure on DNOW’s related demand, which may respond with a lag.
DNOW Inc. earningsThis company
DNOW’s report will show whether its larger sales base is turning into better profit.
Read gross margin alongside U.S. segment operating profit, and compare reported gross margin with adjusted gross margin, which excludes specified items including some inventory-related charges. Improvement in both margins and U.S. operating profit would show that added sales are converting into profit; stable adjusted margin but weak reported margin would point to continuing charges despite steadier underlying product economics; weakness in both margins with another U.S. segment loss would show that sales growth has not solved the profit problem.
