Registered number: 00873028
NATIONAL OILWELL VARCO UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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NATIONAL OILWELL VARCO UK LIMITED
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COMPANY INFORMATION
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Unit 10 Oldends Lane Industrial Estate
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NATIONAL OILWELL VARCO UK LIMITED
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CONTENTS
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Directors' Responsibilities Statement
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Independent Auditor's Report
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Statement of Comprehensive Income
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Statement of Changes in Equity
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Notes to the Financial Statements
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors present their Strategic Report for the year ended 31 December 2023.
The Company's principal activity during the year was that of manufacturing, sale, rental and servicing of equipment and accessories to the energy industry.
During the year, National Oilwell Varco UK Limited operated under three segments: Rig Technologies, Completion and Production Solutions and Wellbore Technologies, and traded as the following divisions throughout the year: Amclyde Norson Engineering, APL (UK), Coil Services (North Sea), CTES, Dynamic Drilling Solutions (MD-Totco), Elmar, Grant Prideco, Hydra Rig, Intervention and Stimulation Equipment, NOV Flexibles UK, Pressure Performance Systems (PPS), Process & Flow Technologies, Procon Engineering, Rig Technologies, Tuboscope, Well Site Services - Axiom, Well Site Services - Brandt, Wellstream Processing and XL Systems. The Company also operates branches in Azerbaijan, Norway, Netherlands, Denmark, Saudi Arabia, Cameroon and Ivory Coast.
On 1 July 2023, the Company contributed its Wellbore Technologies division, including the Well Site Services, Tuboscope, and M/d Totco business units, to NOV Downhole Eurasia Limited, a subsidiary undertaking for a value equal to its net assets value of £51,525,000.
On 1 November 2023, the Company purchased the trade and assets of Pipex Limited, a subsidiary undertaking, for a consideration of £5,971,000.
Key performance indicators
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The Company's key performance indicators during the year were as follows:
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Profit/(loss) before taxation (£000)
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Capital and reserves (£000)
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Average number of employees
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Carbon intensity (tCO2e/Turnover £000)
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Turnover for the year ended 31 December 2023 was £374,554,000, an increase of 24% from the prior year. The Company reported a gross profit of £65,358,000 in 2023, representing a gross profit margin of 17.4%, compared to £53,457,000 in 2022, representing a gross profit margin of 17.7%. Revenue and gross profit have increased from the prior year following higher activity levels and maintaining a strong focus on the cost control. The average 2023 International rig count (as measured by Baker Hughes) increased by 11% to 948 compared to 851 in 2022, which reflects increased demand for the Company's products and services.
Despite a large increase in administrative expenses during 2023 caused by favourable movements in foreign exchange in 2022 compared to an adverse movement in 2023, and higher intercompany management charges from fellow group companies in 2023, the Company generated profit before taxation of £10,140,000 compared to a loss in 2022 of (£9,733,000). The improvement was mainly driven by higher income from shares in group undertakings (note 9) and lower impairment charges on fixed asset investments (note 15).
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Key performance indicators (continued)
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Shareholders' funds increased from £302,886,000 to £319,664,000 mainly due to the profit for the year. No dividends were distributed during the year (2022 - nil).
Future developments
Management believes the industry is in the early stages of an extended recovery. Macro environment and geopolitical uncertainties drive volatility and 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.
The Company 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 our customers. We believe this strategy will further advance the Company’s competitive position in all market conditions.
Principal risks and uncertainties
Market risks
The sale of oilfield equipment and services to the offshore oil and gas industry correlates strongly with the price of oil and drilling activity which is outside the Company's direct control. However, the Directors are confident that the Company is positioned in a manner that will enable it to meet the demands of its markets and business environment.
Customers in this sector purchase globally and there are a number of competitors of various sizes in Europe, North America and Asia. The Company seeks to minimise the competitive risk by being a leader in redesigning processes, managing information and providing quality products, services and solutions that deliver a competitive advantage to its customers. The Company also endeavours to utilise the strengths of being part of a large successful multinational group, NOV Inc. to strategically acquire businesses to strengthen its market position.
Foreign exchange risk
The Company is exposed to foreign currency exchange rate fluctuations, primarily between British pound sterling and United States dollar. The Company uses forward foreign currency contracts to reduce this exposure.
Other risks and uncertainties
When designing a new product, the Company ensures that the legislative requirements of the end user are met fully. When renting products to the client, the Company ensures the equipment has been fully tested and is accompanied with current certification before being sent to the customer.
Climate change
Climate-related risks are discussed in the Task Force on Climate-related Financial Disclosure set out on pages 7 to 12.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' statement of compliance with duty to promote the success of the Company
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The Company is a wholly-owned subsidiary of NOV Inc. (“NOV”). NOV and the Company are committed to, and recognise the importance of, good corporate governance and high ethical standards. Information on NOV’s Corporate Governance and Corporate Responsibility, including an introduction to the NOV Board of Directors and the relevant governance of the NOV group of companies, can be found at www.nov.com under the relevant section.
The Company’s Directors are fully aware of their duties under Section 172 of the UK Companies Act 2006.
Section 172 of the Companies Act 2006 requires that a director of a company must act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
a) the likely consequences of any decisions in the long-term;
b) the interests of the company’s employees;
c) the need to foster the company’s business relationships with suppliers, customers and others;
d) the impact of the company’s operations on the community and environment;
e) the desirability of the company maintaining a reputation for high standards of business conduct; and
f) the need to act fairly as between members of the company.
The Directors and senior management of the Company execute decision-making with the above principles embedded in their consideration. Stakeholder groups include shareholders, employees, customers, supplier, the local communities in which the Company operates, trade unions, pension trustees, regulators, government agencies, and non-governmental organizations.
Stakeholder engagement at the Company is conducted at the level and in a format best suited to the context and the stakeholder. Depending on the stakeholder, this engagement may occur globally, locally, regionally or functionally, and may be by the board or senior management of the Company.
The below table sets out the Company’s key stakeholder groups, their material issues and how the Company engages with and considers the interest of each group.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' statement of compliance with duty to promote the success of the Company (continued)
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' statement of compliance with duty to promote the success of the Company (continued)
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' statement of compliance with duty to promote the success of the Company (continued)
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How the Company engages and considers stakeholder interests
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Credibility, trust, reliability and reputation
Long-term partnerships with a collaborative approach
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NOV, including the Company, is committed to making a positive impact in the communities in which its employees live and work. We do this through corporate donations, both monetary and in-kind, and employee voluntary hours. In 2023, we continued to focus on education, poverty, children, and human rights. Many of our community investment initiatives are employee-led and company-supported, and truly represent the giving spirit of the global NOV family. This not only strengthens community ties, but also helps the Company to build NOV’s brand awareness and reputation in the local communities and makes the Company a more attractive long-term partner for potential employee candidates, customers, and suppliers.
The Company supports and encourages its employees to be involved in their local communities. Our employees continue to support local charities through fundraisers and charity appeals. This year, NOV supported Willow Wood Hospice and the Roxburghe House, two charities that offer specialized palliative care for patients facing critical illnesses. NOV also supported Help for Heroes, a charity that supports military members to thrive after completing their service.
The Company makes regular donations to charitable causes, for example, in 2023, NOV made a financial gift to The Motor Neurone Disease (MND) Association which supports MND patients and their family with resources, community support, financial assistance, and medical equipment loans, and NOV donated to The Girls’ Network, a nonprofit organization whose mission is to inspire and empower girls from the least advantaged communities by connecting them with a mentor and a network of professional role models who are women.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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Task Force on Climate-related Financial Disclosure (TCFD)
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In accordance with The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022, the Directors present climate disclosures aligned with the Task Force on Climate-related Financial Disclosures.
Board Oversight of Climate-Related Risks and Opportunities
The Company's ultimate parent company, NOV Inc. ("NOV") has a ten-member board of directors (the “Board”), nine of which are non-executive directors. The Board meets quarterly, and also attend occasional ad hoc meetings. The Board bears responsibility for oversight of Company management, including overall direction and implementation of business strategy, enterprise risk management, and protection of shareholder and other stakeholder interests. The Board has three standing subcommittees: Audit Committee; Governance and Nominating Committee; and Compensation Committee. At the Board level, progress on selected sustainability strategies is reviewed at scheduled meetings at least annually.
The Board provides strategic oversight to management, provides overall budgetary approval of resources as necessary to successfully execute the selected strategies, and gives direction on potential additional climate-related risks and opportunities (“CROs”) and sustainability topics for evaluation. Given the increasing scope of financial reporting requirements concerning climate change and greenhouse gas emissions, the Audit Committee receives periodic reports on regulatory requirements concerning disclosure and financial reporting and the Company's progress toward compliance with such requirements.
NOV's management of CROs is comprised of activities at multiple layers of the Company’s day-to-day activities, with reporting and compliance centred around the Sustainability Committee.
The Sustainability Committee is made up of senior Environmental, Human Resources, Operations and Legal Compliance management and is responsible for evaluating relevant aspects of sustainability (including climate-related aspects), reviewing for materiality to NOV's global operations, and where appropriate, formulating and proposing strategies to address relevant items identified.
These strategy proposals are then submitted for review and consideration by other members of the broader NOV management team. Approved strategies are then resourced and implemented accordingly.
Sub-groups consisting of subject matter experts provide best-practice recommendations and research data to the Sustainability Committee on identified topics to ensure the Committee remains appropriately informed.
In the UK, the Directors of National Oilwell Varco UK Limited ("NOVUKL") have formed a UK Leadership Committee (the “LeadCo”) made up of leaders throughout our business activities and corporate functions. This LeadCo will meet quarterly and will be joined by subject matter experts in areas such as Environment, Human Resources, Health & Safety and Finance. These subject matter experts will present CROs identified by NOVs Board and Sustainability Committee for awareness and assessment. The objectives of the LeadCo include (1) raising awareness of approved sustainability strategies and support their implementation where relevant and, (2) ensuring that NOVUKL has identified and is monitoring the CROs within our UK business activities. In these early days of the LeadCo it is anticipated that discussions will focus on raising awareness of approved sustainability strategies and global CROs.
Management’s role in assessing and managing climate-related risks and opportunities
Potential sustainability risks and opportunities, including climate-related risks, are identified by ongoing NOV management (global and UK) which bases its analysis on a broad range of resources, including facility insurer climate impact analyses, consultation with internal & external expertise, and reference to global reporting frameworks and sustainability disclosure legislation.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Task Force on Climate-related Financial Disclosure (TCFD) (continued)
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Risks are evaluated for their likelihood and financial impact by subject matter experts, and the conclusions validated by management, using a matrix that considers potential short, medium, and long-term severity, scope, and (where applicable) remediability. Mitigated risks are monitored by the relevant disciplines to ensure ongoing alignment with strategic goals.
Risks are managed by engaging appropriate expertise and implementing steps as needed to control and/or mitigate the risks. The specific approach varies depending on the nature of the risk (physical, transitional market, transitional reputation, legislative, etc.). Appropriate sub-groups from within NOV are tasked with ongoing implementation and monitoring to ensure adequate long-term mitigation.
Climate change and the energy transition present opportunity along with risks. At NOV, opportunities are evaluated for strategic alignment and potential returns as part of the broader business opportunity spectrum, with input from relevant business operations and marketing leaders. Some of the identified opportunities include:
Fixed Offshore Wind: NOV is as a global leader in the design and manufacture of installation systems for fixed offshore wind turbine installation vessels (WTIVs). Most of the world’s installed offshore wind power outside of China has been built with NOV-designed equipment. In the North Sea alone, two-thirds of wind turbines are installed with an NOV-designed jack-up system. Engineering and manufacturing resources currently operating as part of NOVUKL are already supporting clients in this subsection of energy transition.
Floating Offshore Wind: To address the shortage of installation vessels for floating wind, NOV is developing the Enhydra Modular Service and Operations Vessel (MSOV). This flexible and integrated design serves a wind farm’s entire lifecycle, from construction to decommissioning. NOV also continues to pursue opportunities to supply its floating and mooring system for offshore wind projects in development. Engineering and business development resources currently operating as part of NOVUKL are already supporting clients in this subsection of energy transition.
Onshore Wind: NOV, through its Keystone Tower Systems business that has patented a tapered spiral-welding process for wind turbine towers, is advancing the technology and manufacturing processes needed to build taller wind towers for onshore projects. Taller towers will unlock stronger, steadier winds at higher altitudes. Additionally, at greater heights, higher capacity turbines with longer blades can be used, increasing the swept area and energy potential of onshore wind developments. NOVUKL currently has no resources dedicated to onshore wind opportunities.
Geothermal: NOV continues to develop high-performance bits with leading edge cutters to drill through hard, abrasive granite formations in less time, with less bit damage, and fewer trips. NOV also continues to offer and develop improved drill pipe liner technologies targeted at improving corrosion resistance, thermal insulation, and flow efficiency that help reduce our customers’ carbon footprint. Engineering and technical support resources currently operating as part of NOVUKL are already supporting clients with their geothermal initiatives.
Carbon Capture & Storage: NOV has designed and engineered carbon capture systems for specific customer needs, including modular and standardized post-combustion carbon capture flue systems for smaller facilities and dehydration technologies that process CO2 using triethylene glycol, molecular sieves, and sorbent gel beds. For CO2 deoxygenation, we offer efficient catalyst-based systems, and for CO2 transport, we offer fiberglass and glass-reinforced epoxy (GRE)-lined pipe technologies with a proven performance record in oil and gas. Our Fiber Glass Systems (FGS) business unit provides corrosion-resistant composite equipment for CCUS applications, including post-combustion ducting, CO2 handling/transport, and water treatment. Engineering and manufacturing resources currently operating as part of NOVUKL are already supporting clients in this subsection of energy transition.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Task Force on Climate-related Financial Disclosure (TCFD) (continued)
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Processes for identifying, assessing, and managing climate-related risks
We assess climate change risk as an integral part of our risk management processes, which select and evaluate potential risks using climate-related research and reporting frameworks to assess both physical risks (primarily the potential impact of drought, storms, flooding on business operations) and transitional risks (e.g., potential impacts of market changes, legislative reporting burdens, carbon taxes, and environmental policy changes) and incorporate them into our broader risk framework.
Having completed a review of climate risks and opportunities, we have concluded that CROs identified are most appropriately managed by existing operational infrastructure, supported by appropriate internal and external subject matter expertise.
Time Horizons
The climate-related risk and opportunity assessment was evaluated across the following defined time horizons:
- Short term: 0 – 1 years. Our analysis of climate-related risks and opportunities identified in the short term provides leadership with visibility to ensure our operational and financial planning is appropriately aligned to mitigate impacts and/or leverage opportunities.
- Medium term: 2 - 5 years. Striving to understand potential risks and opportunities in the medium term, in addition to optimizing alignment of resources, is intended to provide sufficient time to design and implement more comprehensive strategic plans where required.
- Long term: > 5 years. Study, analysis, and continued assessment of long-term potential risks and opportunities and technological development support NOV’s consideration of the myriad uncertainties inherent in the trends and key variables affecting climate risk, energy transition, and the opportunity landscape. This extended perspective allows for appropriate strategic or structural adjustments to be implemented.
Actual and potential impacts of the principal climate-related risks and opportunities
We have undertaken transitional and physical climate risk analyses across a range of climate-related issues potentially relevant to our business, and the results of these analyses have been incorporated into our materiality assessment.
Physical Climate Risk Analysis
NOV works closely with our insurance provider, FM Global, which conducts regular inspections across NOV facilities. It is our understanding that FM Global uses sophisticated computer modelling to assess physical risk from weather events.
NOV’s threshold for conducting a periodic physical inspection of a facility is a total insured value, inclusive of business interruption, of USD 25,000,000. “Total insured value” is defined as the aggregate of property value (leased & owned) including physical inventory plus business interruption insurance values. NOVUKL has adopted this same threshold for periodic physical inspections which has resulted in visits to 14 NOV UK sites in the past 5 years.
The scenarios used in the analysis consider Representative Concentration Pathways (RCP). These pathways describe the future evolution of CO2 concentration in the atmosphere in response to greenhouse gas emissions and the radiative forcing induced by it at the top of the atmosphere, which in turn affects global temperatures
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Task Force on Climate-related Financial Disclosure (TCFD) (continued)
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Low: Based on the RCP 2.6 scenario, the radiative forcing is limited to 2.6 W/m2. This scenario is considered the best case for limiting climate change impacts. It requires a major turnaround in climate policies and concerted worldwide actions.
Intermediate: Based on the RCP 4.5 scenario, the radiative forcing is limited to 4.5 W/m2. This scenario assumes a stabilization of greenhouse gas emissions by 2050 and declining afterwards.
High: Based on the RCP 8.5 scenario, the radiative forcing is assumed to increase up to 8.5W/m2. This scenario represents a possible worst-case scenario with continued rise of greenhouse gas emissions.
The analysis considers both acute and chronic risks.
Acute: Event-driven risks, including the increased severity of extreme weather events such as tropical cyclones or floods.
Chronic: Longer-term shifts in climate patterns such as sustained higher temperatures changes in drought and sea level rise.
A facility visited within the last 5 years is assessed using site visit information, natural hazard maps, and global climate model data. The five climate perils considered are:
Extreme precipitation: A location exposed to 100-year or 500-year flood.
Wind: A location situated in a region with 100-year wind speeds exceeding 100 mph.
Temperature and Drought: A location situated in a region where future changes in temperature or drought exceed the 75th percentile of the global climate change model projections for any of three climate change scenarios and based on the selected time period (by 2030 or by 2050).
Sea level rise: A location situated in a coastal flood zone as determined by engineering data (if available), or low elevation coastal zone (defined as a region with less than 10m terrain elevation above mean sea level and within 60 miles of the nearest coastline).
We have reviewed the physical climate risk information received from FM Global in relevance to the locations under NOVUKL. In addition, using publicly available climate change models, we have performed a detailed review specifically on sea level rise to better understand any potential impacts to operations that are at a low elevation and/or located near to the coast.
These reviews have revealed that only one of our sites could be at risk to any of the climate change perils described above. This specific site is at physical risk of drought in the ‘high’ scenario. This site is close to the coast and +150m above sea level. Management believe the physical risk to this site to be very low.
Transitional Climate Risk Analysis
For this transitional assessment, NOV chose the Stated Policies Scenario (STEPS) produced by the International Energy Agency (IEA). We also considered the Net Zero Emissions by 2050 (NZE) Scenario, however we consider it an extremely unlikely scenario considering the historic lack of progress towards global decarbonization.
The STEPS Scenario, which uses the Global Energy and Climate (GEC) model, runs to the year 2100 and is based on stated policies and targets. Potential transitional climate risks are considered in the following timelines and from the perspectives of double materiality:
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Task Force on Climate-related Financial Disclosure (TCFD) (continued)
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Short term (0 - 1 years):
We included transitional risks such as geo-political, emerging legislation, supply chain constraints, and trade compliance in our short-term analysis. We also considered adverse weather events such as hurricanes, tsunamis, and tornados. NOVUKL serves international clients in Europe, Middle East and Africa and there is no over-reliance on client activities in specific countries. Therefore, no specific UK risks have been identified.
Opportunities for the short term include the application of our established engineering and project execution and support capabilities to the renewable infrastructure build-out. in addition, the global demand for oil and gas is driving sustained high prices and provides an opportunity for ongoing profitability in our legacy hydrocarbon businesses.
Medium term (2 - 5 years):
For medium-term transitional risks, we considered potential adverse investor opinions, employee hiring, and retention concerns due to industry reputation, the potential for increasing air quality and emission restrictions, the potential implications of carbon taxation, global pressures towards localization, possible local energy blackouts, and regional energy cost increases. By constantly screening climate related developments by internal subject matter experts, the Directors will continue to raise awareness of specific trends and strategies to the LeadCo. The LeadCo may also escalate developments they have become aware of to the Directors to derive the risk exposure. No specific medium-term risks have been identified for the UK at this time.
Long term (5+ years):
Long term transitional risks considered include the impacts of future, potentially more stringent carbon- and energy-related policies, the possibility of a faster-than-expected decline in the fossil fuel market and corresponding obsolescence of current product lines, potential challenges with diversifying into the renewables market, possible pressures to move towards cyclic business models, and increasing sector-specific pressure and associated reputational risks. Again, by constantly screening climate related developments by internal subject matter experts, the Directors will continue to raise awareness of specific trends and strategies to the LeadCo. The LeadCo may also escalate developments they have become aware of to the Directors to derive the risk exposure. Depending on the risk exposure rating this may be escalated to NOV’s Sustainability Committee for further action as appropriate. No specific long-term risks have been identified for the UK at this time.
Resilience
Both globally and in the UK, we have developed extensive, world-class engineering, manufacturing, project execution and aftermarket support capability within the energy industry. Our strategy is to leverage our scale and global footprint to deliver technologies, equipment, and services that help lower the marginal cost and environmental impact of the development and production of oil, gas, and renewable sources of energy.
We leverage our core capabilities and competencies to assist our customers’ efforts to reduce their environmental impact and support the energy transition. When evaluating potential energy transition opportunities, we look for opportunities and attractive industry structure and, where possible, look for opportunities in which we can lean into what we view as one of our chief competitive advantages, namely the manufacturing of complex equipment that improves the efficiency, profitability, emissions, and safety profile of our customers. By focusing on areas where we believe we are capable of supporting our customers’ success, such as wind, geothermal, and carbon capture and sequestration, we believe we can generate greater returns on capital.
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NATIONAL OILWELL VARCO UK LIMITED
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STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Task Force on Climate-related Financial Disclosure (TCFD) (continued)
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By continuing to provide for long-term, essential fossil fuel demand during the energy transition, as well as developing products and services to support the emerging renewables industries, we believe that we will have the flexibility to adapt to the changing needs of the global energy industry and thereby build resilience into our long-term business strategy.
Metrics and targets
We have not yet set a net zero target. We have been unable to identify a credible path to net zero emissions by 2050 within the current global low-carbon manufacturing and energy technology infrastructure. In our view like research scientists working to cure a disease without a specified timetable, the fact that we have not established a specific date by which we can achieve success, does not diminish our efforts or commitment. As noted above, NOV is actively engaged in reducing its carbon footprint and supporting the efforts of industry participants to reduce GHG in meaningful ways. NOV’s technology to support renewable energy and support the energy transition have the potential to substantially exceed NOV’s total GHG emissions.
This report was approved by the board on 29 August 2024 and signed on its behalf.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors present their report and the financial statements for the year ended 31 December 2023.
The profit for the year, after taxation, amounted to £17,431,000 (2022 - loss £13,119,000).
No dividends were distributed during either year.
The Directors who served during the year and to the date of this report were:
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I Broughton (appointed 30 March 2023)
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R Oudendijk (resigned 30 March 2023)
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Likely future developments in the business of the Company are discussed in the Strategic Report.
The Company’s operations expose it to a variety of financial risks that include the effects of interest rate risk, liquidity risk, credit risk and price risk.
Interest rate risk
On 31 March 2020, the Company issued a Eurobond with a 4.2% note due on 31 March 2028. Interest on this Eurobond is payable bi-annually on 31 March and 30 September in accordance with the terms of the bond. The Eurobond has a fixed rate of 4.2% and therefore has no risk from interest fluctuations. As the Company has no other external debt, its exposure to interest rate risk is considered low.
The Company has a limited exposure to interest rate risk on its intercompany interest-bearing borrowings. The Company's policy is to monitor interest rates on intragroup borrowings closely to mitigate interest rate risk.
Liquidity risk
The Company has available cash reserves and as such, the Directors consider the Company’s exposure to liquidity risk to be low.
Credit risk
The Company does have an element of credit risk attributable to its trade receivables, but is rigorous in its financial appraisal of potential customers before entering into sales contracts. The Company has a large and geographically diverse customer base which also mitigates the potential exposure on receivables. The amounts presented in the Balance Sheet are shown net of provisions for doubtful receivables. An allowance for impairment has been made where there is an identifiable loss event, or the likelihood of failure to be able to collect amounts based on previous experience and the current business situation for specific customers.
Price risk
The Directors believe that the Company is well placed to mitigate against this risk due to its diversity of product and flexibility of service.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Research and development activities
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The Company continues to develop and enhance its product offering across all of its divisions. The total research and development spend in 2023 was £269,000 (2022 - £148,000), the majority of which was incurred by the Intervention and Stimulation Equipment division.
Engagement with employees
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During the year, the policy of providing employees with information about the group has been continued via the NOV intranet website. Regular meetings are held between local management and employees to allow a free flow of information and ideas.
Further information on employee engagement is included within the Strategic Report.
Engagement with suppliers, customers and others
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Information on engagement with suppliers, customers and others in a business relationship with the Company is included within the Strategic Report.
The Company gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by a disabled person. Where existing employees become disabled, it is the Company policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training, career development and promotion to disabled employees wherever appropriate.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Greenhouse gas emissions, energy consumption and energy efficiency action
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The Directors recognise that our operations have an environmental impact and as we grow and develop our business, we need to take steps to mitigate equivalent increases in our emissions where we can do so.
As a business we are also aware of our reporting obligations under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. As such, we are reporting our greenhouse gas emissions (GHG) publicly on an annual basis. We first reported in 2020 and will build on this baseline for the business going forward. Results from 2023 are presented alongside results from 2022 to allow comparison.
The Streamlined Energy and Carbon Reporting requirements for a Large Unquoted Company are listed below:
UK Energy Use and Associated Carbon Emissions
UK energy use (as a minimum gas, electricity and transport, including UK offshore area). This is divided into the following GHG scopes:
Scope 1 (Direct GHG Emissions)
• Combustion of fuel (e.g. natural gas);
• Mobile combustion – fuels used in transportation; and
• Facility operation – process emissions, or fugitive emissions (such as refrigerants).
Scope 2 (Indirect Emissions)
• Electricity Consumption (market and location based)
We report on all material emissions in scope 1 and 2, using an operational control approach. The methodology used to compile our greenhouse gas emissions inventory is in accordance with the requirements of the following standards: the WRI GHG Protocol Corporate Standard (revised version) and DEFRA’s Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting requirements (March 2019).
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2023
Carbon Emissions (tCO2e)
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2022
Carbon Emissions (tCO2e)
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Scope 1 - Emissions resulting from activities for which the Company is responsible involving the combustion of gas or consumption of fuel for the purposes of transport
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Scope 2 - Emissions resulting from the purchase of the electricity by the Company for its own use, including the purposes of transport
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Greenhouse gas emissions, energy consumption and energy efficiency action (continued)
Intensity Metric
Intensity ratios are used to standardise reporting and the comparison of emissions data. An intensity metric of tCO2e per £million revenue has been applied for the annual emissions of NOV:
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Company Revenue (£million)
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Carbon Intensity (tCO2e/£million)
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Energy Efficiency and Performance Impacts
The Company qualifies as a large entity under Energy Savings Opportunity Scheme (ESOS) and is currently in the process of completing energy audits across the UK. Energy audits have been conducted to cover more than 95% of the total energy consumption.
In 2023, the total emissions for the Company have shown a slight reduction compared to 2022, decreasing from 4,097.82 tCO2e to 3,762.38 tCO2e. This measures successfully delivered to date reflects positively on the Company's efforts to improve energy efficiency and performance. This is further supported by the reduction in carbon intensity having decreased from 13.56 to 10.05 indicating that the Company has been able to generate higher operations while maintaining a lower carbon footprint.
Additionally, as part of the contribution of the Wellbore Technologies division to NOV Downhole Eurasia Limited on 1 July 2023, there has been a transfer of sites to the subsidiary and so emissions for those sites are included only for the period between 1 January 2023 to 1 July 2023 while part of the Company. This included four facilities in Aberdeen and Aberdeenshire and one in Great Yarmouth.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
In assessing the basis of preparation of the financial statements for the year ended 31 December 2023, the Directors have taken into account all available information about the future for a period of 12 months from the date of approval of the financial statements. In order to satisfy themselves that the Company has adequate resources to remain in operational existence, the Directors have undertaken a review of the Company’s ability to generate cash from trading activities, liquidity position and existing debt levels, covering the period of 12 months from the date of approval of the balance sheet.
Management has prepared extended financial forecasts to assist with the assessment of going concern. In preparing these forecasts management has taken into account reasonably possible downside scenarios. The forecasts cover the going concern assessment period and demonstrate that the Company is in a strong position in terms of its ability to generate cash from trading activities. The Company has achieved strong year on year growth in revenues during 2023 and expects this trend to continue into 2024 and stabilise thereafter. This growth is driven by the recovering energy markets and increase in oil price, which in recent months stabilised at around $80 per barrel.
As at 31 December 2023, the Company's principal debt facility of £516.8 million comprises of the balance due on the listed Eurobond held by a fellow group entity, maturing on 31 March 2028, with annual interest of £21.7 million payable bi-annually in March and September. There are no covenants attached to this debt. The Company is the Treasurer of a Zero Balancing Arrangement ("ZBA") cash pool facility with fellow group entities. This ZBA arrangement allows for cash to be available to the Company to assist with working capital and liquidity needs as and when necessary. The Company does not hold any other debt and has no debt external to the NOV Inc. group.
At 31 December 2023, the Company has a strong Balance Sheet with net current assets of £330.1 million and net assets of £319.7 million.
Based on the results of the going concern assessment, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and have no reason to believe that a material uncertainty exists that may cast significant doubt over the ability of the Company to continue as a going concern. In an unlikely event that the Company requires assistance to meet its financial obligations, the ultimate parent undertaking would be able to provide support to the Company. The Directors have received a letter of support from the ultimate parent undertaking, confirming it will provide financial support to the Company if needed, for a period of 12 months from the date of approval of the balance sheet. The Directors have assessed the ability of the ultimate parent undertaking to provide financial support and are confident that the ultimate parent has adequate cash resources to assist the Company in meeting its liabilities as and when they fall due, if necessary. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
Disclosure of information to auditor
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Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
∙the Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Post balance sheet events
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On 13 February 2024, the Company purchased 50% share capital of Hellenes Limited, a company incorporated in Scotland, for a consideration of USD $3,688,000.
On 3 May 2024, the Company purchased the remaining 50% share capital of Hellenes Limited, a company incorporated in Scotland, for a consideration of USD $3,688,000.
On 29 June 2024, following an event that was indicative of conditions that arose after the reporting period, a reserve for doubtful receivables totalling £8.1m was recognised against loan notes receivable from an unrelated third party. A further £1m was advanced during August 2024. The balance at the end of the reporting period was £7.7m (see note 17).
There have been no other significant events affecting the Company since the year end.
The auditor, Ernst & Young LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board on 29 August 2024 and signed on its behalf.
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NATIONAL OILWELL VARCO UK LIMITED
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DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies in accordance with Section 10 of FRS 102 and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
∙provide additional disclosures when compliance with the specific requirements in FRS 102 is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;
∙state whether applicable UK Accounting Standards, including FRS 102 have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a Directors’ Report, that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
Opinion
We have audited the financial statements of National Oilwell Varco UK Limited (the ‘company’) for the year ended 31 December 2023 which comprise the Profit and Loss Account, the Balance Sheet, the Statement of comprehensive income, the Statement of changes in equity and the related notes 1 to 32 including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
give a true and fair view of the company’s affairs as at 31 December 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included:
In conjunction with our walkthrough of the Company’s financial close process, we confirmed our understanding of management’s going concern assessment process and ensured all key factors were considered in their assessment.
We obtained management’s going concern assessment, including the company cash forecast for the going concern period for a period of 12 months from date of approval of balance sheet. We checked the arithmetical accuracy of the forecasts and agreed to underlying documentation where appropriate. The Directors obtained a letter of support from its parent company. The Directors have assessed the ability of the parent undertaking to provide financial support and are confident that the parent has adequate cash resources to assist the Company in meeting its liabilities as and when they fall due, if necessary.
Management have prepared a company cash flow forecast model including a base and worst-case scenario by applying sensitivities to revenue and costs, both of which showed they have sufficient cash to continue for a period of 12 months from date of approval of balance sheet. However, as the company is part of a multinational group where the treasury function is centralised, the directors have obtained a letter of support.
We obtained the calculation and related judgements performed by management. This includes obtaining, understanding and the evaluation of the process management followed to make its assessment, which was the free cash flow forecast model to determine whether it was an appropriate method of concluding on going concern.
We evaluated the Company’s going concern disclosures included in the annual report and determined that the disclosures were appropriate and in conformity with the reporting standards.
To determine whether the Group has the ability to support the Company to continue as a going concern,
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
these additional procedures were performed:
°Obtained management’s assessment of the Group’s ability to continue as a going concern, including the prospective financial information that supports their assessment.
°Considered the monetary amount that could be required for the company to continue as a going concern and whether the Group has sufficient liquid resources to provide if needed. The group has cash and cash equivalents of over $1bn and access to borrowing facilities in excess of $1.5bn.
°Considered whether there are any events not considered by management in their assessment of going concern based on our understanding of the entity and the industry.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of 12 months from date of approval of balance sheet.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.
Overview of our audit approach
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Impairment of investments
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Overall materiality of £11m which represents 3% of revenue.
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An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the company and effectiveness of controls, the potential impact of climate change and changes in the business environment when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team.
Changes from the prior year
There have been no changes from the prior year.
Climate change
Stakeholders are increasingly interested in how climate change will impact National Oilwell Varco UK Limited. The company has determined that the most significant future impacts from climate change on its operations will be from Energy Transition Risk to the wider NOV Group. These are explained on pages 7-12 in the required Task Force On Climate Related Financial Disclosures and on page 2 in the principal risks and uncertainties. They have also explained their climate commitments on page 12. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the company’s business and any consequential material impact on its financial statements.
There are no significant judgements or estimates relating to climate change in the notes to the financial statements.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
As explained in the Task Force On Climate Related Financial Disclosures, climate change risks are still developing and are not expected to have a material impact in the Company’s financial reporting judgements, estimates or going concern assessment as the Company has developed adequate long- term mitigations against such risks and foresee opportunities from energy transition. We have considered the exposure of the group to climate change risk impacting its ability to provide financial support and concluded this is low given its experience in the energy transition market.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating the Company's management’s assessment of the impact of climate risk, physical and transition, their climate commitments, the effects of material climate risks disclosed on pages 7-12 and the significant judgements and estimates disclosed in note 2 and whether these have been appropriately reflected. As part of this evaluation, we performed our own risk assessment to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
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Key observations communicated to those charged with governance
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Carrying value of investments (2023: £488m, 2022: £439m)
Refer to accounting policies (page 44); and Note 15 of the Financial Statements (page 57-61)
The carrying value of investments in subsidiaries are subject to impairment assessments under FRS 102.
At each reporting date an entity shall assess whether there is an indication that an asset may be impaired. If any such indications exist, the entity shall estimate the recoverable amount of the asset.
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We have obtained an understanding of the process and confirmed the key controls in place to identify impairment triggers.
We have obtained management’s impairment assessment and using our knowledge of the company, and the energy industry, determined whether they have sufficiently evaluated the existence of impairment indicators.
We tested the mathematical accuracy of the calculations and formulae used in management’s impairment assessment.
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We have concluded that the carrying value of investments is materially correct and that management’s assumptions in calculating this were appropriate.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
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Key observations communicated to those charged with governance
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Significant judgement is required to determine the key assumptions in the cashflow model required to calculated the value in use. There is a risk that management may apply an inappropriate assumption in the impairment assessment resulting in incorrect carrying values for the investments.
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We understood and challenged the key assumptions used in the cashflows. We identified the key assumptions in the discounted cashflow to be the Weighted Average Cost of Capital (WACC), long-term revenue growth rate and cost assumptions. We agreed the WACC to the Company’s third party specialist’s report; evaluating their objectivity and competence. We involved our EY specialist to consider whether the WACC is within a reasonable range. We compared the long- term growth rate and cost assumptions to historic performance. We audited the stress test performed by management by determining the suitability of the stressed assumptions and then reperforming the calculations to conclude that even in these severe but plausible scenarios the investments were not impaired.
Where management have determined that an impairment reversal was required, we confirmed that the investment was appropriately adjusted.
We evaluated the Company’s disclosures included in the financial statements and determined that they are appropriate and in conformity with the reporting standards.
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In the prior year, our auditor’s report included key audit matters in relation to valuation of Defined Benefit pension scheme liabilities and risk of misstatement due to management override. In the current year, we no longer consider these to be key audit matters. The pension scheme is currently in surplus, however this is restricted as per paragraph 28.22 of FRS 102 and not recognised on the Company balance sheet therefore there would need to be a significant increase in the underlying pension liability to change the balance sheet position. Our testing with regards to management override focussed on testing on top journals, historically no errors have been identified and the number of year end on top journals is reducing.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the company to be £11 million (2022: £8 million), which is 3% (2022: 3%) of revenue. We believe that the users of the financial statements focus on revenue and consequently we deem this to be the most appropriate measurement basis for setting materiality.
During the course of our audit, we reassessed initial materiality and noted no change was required following the completion of our audit procedures.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the company’s overall control environment, our judgement was that performance materiality was 75% (2022: 75%) of our planning materiality, namely £8.25m (2022: £6m). We have set performance materiality at this percentage due to the low level of misstatements found in the prior year audit.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with those charged with governance that we would report to them all uncorrected audit differences in excess of £550k (2022: £400k), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1-18, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 19, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and management.
∙We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are those which relate to the reporting framework (UK GAAP and the Companies Act 2006) and relevant tax compliance regulations in the jurisdictions in which the entity operates Additionally, we concluded that there are certain laws and regulations in respect of Health and Safety, Environmental , employee matters and bribery and corruption. We understood how National Oilwell Varco UK Limited is complying with those frameworks by making enquiries with management and those charged with governance, internal audit and those responsible for legal and compliance procedures to understand how the company maintains and communicates its policies and procedures in these areas. We corroborated our enquiries with examination of the board minutes of the company, noting there was no contradictory evidence.
∙We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur by making enquiries with management, internal audit and other employees within the company to understand their policies and procedures which they have in place. We also obtained documentation on the entity level controls environment to determine whether it supported the prevention, detection and correction of material misstatements, including those which are due to fraud.
∙Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved enquiry with management and considering whether any events or conditions during the audit might have indicated non-compliance with laws and regulations. We also read correspondence with regulatory authorities. Our procedures on journal entries testing included a focus on journals meeting our defined risk criteria, including those posted by those charged with governance, based on our understanding of the business and enquiry with management. Where instances of higher risk journals were identified, we performed audit procedures to address each identified risk. These procedures included testing transactions back to source information.
∙Our procedures on judgements and estimates made in the financial statements included challenging the assumptions made and models used in determining estimates for impairment of investments and revenue recognition. We searched for evidence of contra indicators to challenge management’s assumptions.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk /auditorsresponsibilities. This description forms part of our auditor’s report.
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF NATIONAL OILWELL VARCO UK LIMITED
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Tom Sanders (Senior statutory auditor)
for and on behalf of
Ernst & Young LLP
Aberdeen
29 August 2024
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NATIONAL OILWELL VARCO UK LIMITED
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PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
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Gain on disposal of tangible fixed assets
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Income from shares in group undertakings
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Impairment of fixed asset investments
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Reversal of impairment of fixed asset investments
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Loss on disposal of fixed asset investments
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Gain on sale of intangible assets
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Amounts reversed against provisions
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Profit/(loss) for the financial year
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The notes on pages 33 to 75 form part of these financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Profit/(loss) for the financial year
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Other comprehensive income
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Actuarial (loss)/gain on defined benefit schemes
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Change in irrecoverable pension surplus not recognised
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Other comprehensive loss for the year
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Total comprehensive income/(loss) for the year
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The notes on pages 33 to 75 form part of these financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
REGISTERED NUMBER:00873028
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BALANCE SHEET
AS AT 31 DECEMBER 2023
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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Provisions for liabilities
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Share based payment reserve
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The financial statements were approved and authorised for issue by the board and were signed on its behalf on 29 August 2024.
The notes on pages 33 to 75 form part of these financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Share based payment reserve
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Comprehensive income for the year
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Actuarial loss on pension scheme (note 27)
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Total comprehensive income for the year
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Amounts paid to fellow subsidiary for vested restricted share awards (note 24)
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Share based payments (note 25)
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Realisation of Share based payment reserve (note 24)
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The notes on pages 33 to 75 form part of these financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Share based payment reserve
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Comprehensive loss for the year
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Actuarial loss on pension scheme (note 27)
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Total comprehensive loss for the year
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Equity distribution: excess share based payments recharge (note 24)
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Amounts paid to fellow subsidiary for vested restricted share awards (note 24)
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Share based payments (note 25)
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Realisation of Share based payment reserve (note 24)
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The notes on pages 33 to 75 form part of these financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
National Oilwell Varco UK Limited is a limited liability company incorporated in England and Wales, limited by shares. The registered office is Stonedale Road, Unit 10 Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, GL10 3RQ.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
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Financial Reporting Standard 102 - reduced disclosure exemptions
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The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
• the requirements of Section 7 Statement of Cash Flows;
• the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
• the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47,
11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
• the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a),
12.29(b) and 12.29A;
• the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and
26.23;
• the requirements of Section 33 Related Party Disclosures paragraph 33.7.
The information required by sections 11, 12 and 26 noted above is included in the consolidated financial statements of NOV Inc. as at 31 December 2023 and these financial statements may be obtained from its principal office at 10353 Richmond Avenue, Houston, Texas, 77042, USA.
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Exemption from preparing consolidated financial statements
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The Company is a wholly owned subsidiary company of NOV Inc. and the Company and all of its subsidiary undertakings are included in the consolidated accounts of NOV Inc. The registered office of NOV Inc. is 10353 Richmond Avenue, Houston, Texas, 77042, USA. The Company is therefore exempt from the requirement to prepare group accounts by virtue of section 401 of the Companies Act 2006. These financial statements therefore present information about the Company as an individual undertaking and not about its group.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
In assessing the basis of preparation of the financial statements for the year ended 31 December 2023, the Directors have taken into account all available information about the future for a period of 12 months from the date of approval of the financial statements. In order to satisfy themselves that the Company has adequate resources to remain in operational existence, the Directors have undertaken a review of the Company’s ability to generate cash from trading activities, liquidity position and existing debt levels, covering the period of 12 months from the date of approval of the balance sheet.
Management has prepared extended financial forecasts to assist with the assessment of going concern. In preparing these forecasts management has taken into account reasonably possible downside scenarios. The forecasts cover the going concern assessment period and demonstrate that the Company is in a strong position in terms of its ability to generate cash from trading activities. The Company has achieved strong year on year growth in revenues during 2023 and expects this trend to continue into 2024 and stabilise thereafter. This growth is driven by the recovering energy markets and increase in oil price, which in recent months stabilised at around $80 per barrel.
As at 31 December 2023, the Company's principal debt facility of £516.8 million comprises of the balance due on the listed Eurobond held by a fellow group entity, maturing on 31 March 2028, with annual interest of £21.7 million payable bi-annually in March and September. There are no covenants attached to this debt. The Company is the Treasurer of a Zero Balancing Arrangement ("ZBA") cash pool facility with fellow group entities. This ZBA arrangement allows for cash to be available to the Company to assist with working capital and liquidity needs as and when necessary. The Company does not hold any other debt and has no debt external to the NOV Inc. group.
At 31 December 2023, the Company has a strong Balance Sheet with net current assets of £330.1 million and net assets of £319.7 million.
Based on the results of the going concern assessment, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and have no reason to believe that a material uncertainty exists that may cast significant doubt over the ability of the Company to continue as a going concern. In an unlikely event that the Company requires assistance to meet its financial obligations, the ultimate parent undertaking would be able to provide support to the Company. The Directors have received a letter of support from the ultimate parent undertaking, confirming it will provide financial support to the Company if needed, for a period of 12 months from the date of approval of the balance sheet. The Directors have assessed the ability of the ultimate parent undertaking to provide financial support and are confident that the ultimate parent has adequate cash resources to assist the Company in meeting its liabilities as and when they fall due, if necessary. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentation currency is British pound sterling (GBP). The Company’s financial statements are prepared in GBP and rounded to the nearest £'000.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end, foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Profit and Loss Account except when deferred in Other Comprehensive Income as qualifying cash flow hedges.
All foreign exchange gains and losses are presented in the Profit and Loss Account within 'Administrative expenses'.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
∙the Company has transferred the significant risks and rewards of ownership to the buyer;
∙the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the transaction; and
∙the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to profit or loss at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income. There are no conditions attached to the grants.
Grants of a revenue nature are recognised in the Profit and Loss Account in Other operating income in the same period as the related expenditure.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of its identifiable assets, liabilities and contingent liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight line basis to the Profit and Loss Account over its useful economic life.
Other intangible assets
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. Other intangibles are amortised on a straight line basis to the Profit and Loss Account over the useful economic life.
The useful lives are determined by reference to the expected period over which economic benefits are expected to be derived. The estimated useful lives range as follows:
Goodwill - 5 - 20 years
Software - 4 - 5 years
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is determined. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
Amortisation is included in 'Cost of sales' in the Profit and Loss Account.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'Gain on sale of intangible assets' in the Profit and Loss Account.
Tangible assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is determined. An impairment loss is recognised in Cost of sales where the carrying amount exceeds the recoverable amount.
The Company adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the Company. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Tangible fixed assets (continued)
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Land is not depreciated. Assets in the course of construction are stated at cost and are not depreciated until they are available for use. Depreciation on other assets is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
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Plant, machinery and rental equipment
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'Gain on disposal of tangible fixed assets' in the Profit and Loss Account.
In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if, and only if, certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight-line basis over their useful economic lives, which range from 3 to 6 years.
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
Investments are classed as subsidiaries or joint ventures according to control exercised by the Company.
Investments in subsidiaries and joint ventures are measured at cost less accumulated impairment.
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is determined. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads.
At each Balance Sheet date, stocks are assessed for impairment. If stock is impaired, the carrying value is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with an insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Interest income is recognised in profit or loss using the effective interest method.
The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The gain or loss on the derivative instrument is recognised in Administrative expenses, together with the gain or loss on the hedged nonfunctional monetary accounts. The Company has determined the fair value of its derivative financial instruments using level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange and interest rates at each financial reporting date.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
The Company participates in a group share-based payment plan, in which the ultimate parent grants share options and restricted shares directly to the employees of the Company. These share-based payment transactions are treated as equity-settled in the financial statements of the Company as there is no obligation to provide shares to its employees.
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the ultimate parent company (market conditions). No expense is recognised for awards that do not ultimately vest for failure to meet service conditions or non-market vesting conditions.
At each Balance Sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions on the number of equity instruments that will ultimately vest as described above. The movement in cumulative expense since the previous Balance Sheet date is recognised in the Profit and Loss Account, with a corresponding entry in equity.
There is a contractual recharge agreement in place requiring the Company to reimburse a fellow group company for the cost of the share-based payments. The cost of these transactions to the Company is measured at fair value, which is established initially at the grant date and at each Balance Sheet date thereafter until the awards are settled. During the vesting period a liability is recognised representing the product of the fair value of the award and the portion of the vesting period expired as at the Balance Sheet date. From the end of the vesting period until settlement, the liability represents the full fair value of the award as at the balance sheet date. The liability recognised during the vesting period and changes in the carrying amount for the liability are recognised in equity as a repayment of capital contribution for the equity-settled awards and anything in excess of that contribution is a distribution.
Assets subject to operating leases are presented in the Balance Sheet according to the nature of the asset.
Income from operating leases is recognised in the Turnover from rental of equipment in the Profit and Loss Account on a straight line basis over the period of the lease.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
Increases in provisions are generally charged as an expense to profit or loss.
Where the unavoidable costs of a lease exceed the economic benefit expected to be received from it, a provision is made for the present value of the obligations under the lease.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid, the Company has no further payment obligations.
The contributions are recognised as an expense in the Profit and Loss Account when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.
The Company is also the sponsoring employer of a defined benefit pension scheme, the assets of which are held separately from those of the Company in the trustee administered funds.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligations) and is based on actuarial advice. When a settlement or a curtailment occur the change in the present value of the plan liabilities and the fair value of the plan assets reflects the gain or loss which is recognised in the Profit and Loss Account during the period in which it occurs. Past service costs are recognised in net benefit expense on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to the scheme, the past service cost is recognised immediately in the Profit and Loss Account.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, at the start of the period taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in the Profit and Loss Account as other finance income or expense.
The re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability (excluding amounts included in net interest) are recognised immediately in Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Profit and Loss Account in subsequent periods.
The net defined benefit pension asset or liability in the Balance Sheet comprises the total of the present value of the defined benefit obligation less the fair value of plan assets out of which the obligations are to be settled directly. The value of the net defined benefit pension asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
The Company accounts for group reconstructions, where the trade and net assets of an entity are acquired from an entity within the same group, using the merger accounting method.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, except that a charge attributable to an item of income and expense recognised as Other Comprehensive Income or to an item recognised directly in equity is also recognised in Other Comprehensive Income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except that:
• The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
• Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the Balance Sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
a. Critical judgements in applying the entity’s accounting policies
(i) Investment impairment
The Company considers all investments for evidence of impairment annually. For the 2023 review, management has assessed all relevant external and internal sources of information including; key industry indicators for oil and gas and related industries, outlook for the oilfield services sector, future energy transitional opportunities, as well as consideration of financial results to date and forecasts for future performance. Based on management's assessment of these factors, indicators of impairment were considered to exist at the reporting date. In determining the recoverable amounts of investments management has calculated the value in use based on a discounted cash flow model using expected cash flows derived from the budget for the next five years. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and the growth rate used for extrapolation purposes. Judgement is also applied in assessing the amount by which to impair any investments where future profitability cannot be certain or where specific circumstances have led to a reduction in net assets.
Consideration was given as to whether previously recognised impairment losses should be reversed in the current year. Judgement was applied to determine whether the circumstances that caused the prior impairment losses have permanently ceased to exist.
For further detail refer to Note 15.
b. Critical accounting estimates and assumptions
(i) Useful lives of tangible fixed assets
The annual depreciation charge for tangible fixed assets is sensitive to changes in the estimated useful lives of the assets. They are amended when necessary to reflect current estimates, based on future investment and the physical condition of the asset.
(ii) Revenue recognition – percentage of completion method
The Company applies the percentage of completion method ("POC") in accounting for construction contracts and contracts to provide services as outlined in the accounting policy 2.6. The use of the POC method requires the management to determine the stage of completion by reference to the contract costs incurred for work performed to date in proportion to the estimated total contract costs. Based on this estimated stage of completion, a respective portion of the expected revenue is recognised. If circumstances arise that may change the original estimates of revenues, costs or extent of progress towards completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in the Profit and Loss Account in the period in which the circumstances that give rise to the revision become known to the management. Experience, systematic use of the project execution model and focus on core competencies reduce, but do not eliminate, the risk that estimates associated with POC may change significantly.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Judgements in applying accounting policies and key sources of estimation uncertainty (continued)
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b. Critical accounting estimates and assumptions (continued)
(iii) Defined benefit pension
The cost of defined benefit pension schemes is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation and the long term nature of these plans, such estimates are subject to uncertainty. FRS 102 requires that the discount rate should be the current rate of return on “a high quality corporate bond of equivalent currency and term to the plan liabilities”. The Global RATE:Link term matching model has been used to derive a single discount rate that reflects the term structure of interest rates. The discounted mean term (or duration) of the plans’ liabilities was calculated to be around 12 years based on the most recent actuarial valuation calculations available. Based on this average duration, a discount rate of 4.50% per annum was adopted based on market conditions as at 31 December 2023. In accordance with the accounting standard, the proposed base table mortality assumption has been set in line with the best estimate tables identified by the Scheme Actuary at the most recent valuation. The proposed future mortality improvements (Males 111% S3PMA and Females 105% S3PFA) reflect the most recent CMI model, CMI_2022, which was published in June 2023. Future salary increases and pension increases are based on expected future inflation rates. Further details are given in note 27.
The benefits provided under the Plans are uncertain to the extent that the impact of GMP equalisation has not yet been fully reflected in the Plan’s benefits. An allowance has been included in the liabilities to reflect the expected value of these additional benefits.
On 25 July 2024, the Court of Appeal returned a decision in the Virgin Media Ltd v NTL Pension Trustees II case. The issues in the Virgin Media case dealt with contracted-out pension scheme benefits and the statutory requirements for making changes to those benefits. Based on available information which included a review of the pension plan amending deeds in the 6 April 1997 to 6 April 2016 ‘window period’, the Directors of the Company are satisfied there is no impact on the pension liabilities and hence the Company’s financial statements.
(iv) Inventory provision
The Company considers the recoverability of the cost of inventory and associated provisioning required. When calculating the inventory provision, management considers the nature and condition of inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials.
(v) Other provisions
Other provisions recognised at the Balance sheet date include provision for warranty costs and dilapidations. These provisions require management’s best estimate of the costs that will be incurred based on legislative and contractual requirements. In addition, the timing of the cash flows and the discount rates used to establish net present value of the obligations require management’s judgement.
(vi) Deferred taxation
Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further details are contained in note 21.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Turnover and segmental analysis
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Turnover represents the amounts derived from provision of services which fall within the Company's ordinary activities, stated net of value added tax. The Company engages in one principal area of activity represented by the manufacturing, sale, rental and servicing of equipment and accessories to the oil and gas industry.
An analysis of turnover by category is as follows:
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A geographical analysis of turnover is provided below. Turnover has been attributed to geographic areas on the basis of the location of the customer.
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Turnover and segmental analysis (continued)
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A geographical analysis of intangible and tangible fixed assets is as follows:
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Segmental analysis has not been presented as the management reporting for the Company is reviewed by the Chief Operating Decision Maker on the basis of the Company rather than segments.
The following items have not been presented as, given the diverse nature of the Company’s products, services and customers, the information is not available and the cost to develop the information would be excessive, and bring no benefit to the readers of these financial statements:
∙Revenues from external customers for each product and service or for each group of similar products;
∙Revenues from external customers, analysed between amounts attributed to the entity’s country of domicile and the total of those attributed to all foreign countries, and any material revenue from external customers attributed to an individual foreign country; and
∙Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts, analysed between assets located in the entity’s country of domicile and the total of those located in all foreign countries.
|
There were no single customers from which the Company generates 10 per cent or more of the Company’s revenues.
The Directors consider that no disclosure should be made of the geographical analysis of Profit before taxation and Net assets as this information is not provided to or analysed by the Company's Chief Operating Decision Maker. All Turnover, Profit before taxation and Net assets are attributable to the supply of materials, equipment and services for the oil and gas industry.
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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The operating profit is stated after charging/(crediting):
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Research & development charged as an expense
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Change in fair value of hedging instruments
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Operating lease rentals:
- plant and machinery
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Auditor's remuneration (note 6)
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Impairment of stock (note 16)
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Depreciation of tangible fixed assets (note 14)
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Amortisation of intangible assets, including goodwill (note 13)
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During the year, the Company obtained the following services from the Company's auditor:
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Fees payable to the Company's auditor for the audit of the Company's annual accounts
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The audit of financial statements of UK subsidiaries of the Company pursuant to legislation, borne by the Company
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Taxation advisory services provided to the Company
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The audit of financial statements of UK subsidiaries of the Company pursuant to legislation, borne by respective subsidiaries
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Staff costs were as follows:
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Cost of defined contribution scheme (note 27)
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Share based payments (note 25)
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The average monthly number of employees, including the Directors, during the year was as follows:
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Average number of employees reported above include 588 (2022 - 472) employees whose contracts of employment were with National Oilwell Varco UK Limited, but whose costs were borne by fellow subsidiary companies within the NOV UK group, for the benefit of which these employees worked.
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Amounts receivable under long-term incentive schemes
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Company contributions to defined contribution pension schemes
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The Directors of the Company are also directors of various UK holding companies, UK subsidiary undertakings and fellow UK group companies.
Two of the Directors are employed and paid by the Company. The Directors do not believe it is practicable to apportion their time, and therefore their remuneration, between service as a Director and employee of the Company and their service as a Director of the Company's subsidiary undertakings and fellow UK group companies.
The other Director was employed and paid by a holding company outside the UK. The remuneration attributable to this Director for their service as a Director of the UK group companies, included within the aggregate directors' remuneration above, is represented by the charges borne by the Company under a contractual recharge agreement in respect of qualifying services as Director of the Company and its subsidiary undertakings.
The highest paid Director during the financial year received remuneration of £471,000 (2022 - £277,000). The value of the Company's contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £16,000 (2022 - £12,000).
During the year retirement benefits were accruing to 2 Directors (2022 - 1) in respect of defined contribution pension schemes.
During the year 2 Directors (2022 - 1) received shares in respect of qualifying services and no Directors (2022 - nil) exercised share options.
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Income from shares in group undertakings
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Hebei Huayouyiji Tuboscope Coating Co. Ltd.
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National Oilwell Varco Almansoori Services LLC
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NOV Oil & Gas Services Senegal SARL
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Interest receivable on loans to group undertakings
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Bank and other interest receivable
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Interest payable on loans from group undertakings
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Foreign tax on income for the year
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Foreign tax in respect of prior periods
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Losses carried forward recognised
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Deferred tax recognised on capital losses
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Deferred tax recognised on non trade loan relationships
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Deferred tax adjustments relating to prior periods
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Effect of changes in tax rates
|
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Total deferred tax (note 21)
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Taxation on profit/(loss)
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
12.Taxation (continued)
|
Factors affecting tax (credit)/charge for the year
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The tax assessed for the year differs from the standard rate of corporation tax in the UK of 23.52%
(2022 - 19%). The differences are explained below:
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Profit/(loss) multiplied by standard rate of corporation tax in the UK of 23.52% (2022 - 19%)
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Expenses not deductible for tax purposes
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Impairment of fixed asset investments not allowable for tax purposes
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Adjustments to tax charge in respect of prior periods
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Non trade loan relationship recognised
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Income from shares in group undertakings not taxable
|
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Deferred tax adjustments relating to prior periods
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Effect of changes in tax rate
|
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Total tax (credit)/charge for the year
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Factors that may affect future tax charges
|
UK corporation tax is calculated at 23.52% (2022 - 19%) of the estimated assessable profit or loss for the year.
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions the NOV worldwide Group operates. The legislation will be effective for NOV’s financial year beginning 1 January 2024. The Pillar Two effective tax rates in most of the jurisdictions in which the Group operates, including the UK, are above 15%. As the UK corporate income tax rate is 25%, we do not expect the Company to be materially impacted by the Pillar Two legislation.
The deferred taxation balances have been measured using the rates expected to apply in the reporting periods when the timing differences reverse.
Deferred taxes on the Balance Sheet have been measured at 25% which represents the future corporation tax rate that was enacted at the Balance Sheet date.
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
12.Taxation (continued)
As at 31 December 2023, the Company has an unrecognised deferred tax asset of £4,870,000 (2022 - £10,894,000) in relation timing differences, overseas tax credits, non trade loan relationships and UK tax losses.
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|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
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Machinery and rental equipment
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Transfers between classes
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
14.Tangible fixed assets (continued)
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Transfers between classes
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Included in disposals above are tangible fixed assets with cost £80,745,000 and depreciation £60,995,000 represented by the tangible fixed assets attributable to the Wellbore Technologies division, the trade and assets of which were contributed to NOV Downhole Eurasia Limited, a subsidiary undertaking, at net book value.
Included in additions above are tangible fixed assets with cost £3,890,000 represented by the net tangible fixed assets transferred to the Company from Pipex Limited, a subsidiary undertaking, at net book value.
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|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
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Reversal of prior impairment loss
|
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|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
On 4 April 2023, the Company formed NOV Doha Factory for Metal Products LLC, under the laws of Qatar, with 1000 shares of QAR 3,000 each (equivalent to £630,000).
On 1 July 2023, the Company sold its 10% equity interest in NOV Saudi Arabia Co Ltd. to NOV Downhole Eurasia Limited, a subsidiary undertaking. On 1 November 2023, the Company sold its 100% equity interest in NOV Products Middle East FZE to NOV Downhole Eurasia Limited, a subsidiary undertaking. A Loss on disposal of fixed asset investments of £5,623,000 was realised following these transactions.
During the year the Company made capital contributions to NOV Downhole Eurasia Limited and in doing so, increased its investment in the subsidiary by £52,297,000.
The Company considers all investments for evidence of impairment annually. For the 2023 review, management has assessed all relevant external and internal sources of information including; key industry indicators for oil and gas and related industries, outlook for the oilfield services sector, future energy transitional opportunities, as well as consideration of financial results to date and forecasts for future performance. Based on management's assessment of these factors, indicators of impairment were considered to exist at the reporting date. In determining the recoverable amounts of investments management has calculated the value in use based on a discounted cash flow model using expected cash flows derived from the budget for the next five years. These calculations resulted in an impairment charge of £4,000 recognised in the Profit and loss account.
A prior impairment loss of £2,715,000 has been reversed in the year as the circumstances that caused this prior impairment loss have permanently ceased to exist in relation to the trading activities of Pipex Limited.
In the opinion of the Directors, the aggregate value of the investments in subsidiary undertakings is not less than the amount at which they are stated in the financial statements.
|
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NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
The following were subsidiary undertakings of the Company:
|
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LB10120, Jebel Ali Free Zone, Dubai, United Arab Emirates
|
|
|
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Arabian Rig Manufacturing Company [3]
|
P.O. Box 5000, Dhahran, 31311, the Kingdom of Saudi Arabia
|
|
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P.O. Box 146, Road Town, Tortola,
British Virgin Islands
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|
|
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Elmar Far East Pty Limited
|
G J WALSH & CO, 213 Brisbane Street, IPSWICH, QLD 4305, Australia
|
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Fjords Processing Limited
|
C/O National Oilwell Varco Stonedale Road, Unit 10 Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
Hebei Huayouyiji Tuboscope Coating Co., Ltd
|
No.102# East Road of Dong Huan, Qing County, Cangzhou City, Hebei Province, China
|
|
|
|
Mono Group Pension Trustees Limited
|
C/O National Oilwell Varco, Badentoy Crescent, Badentoy, Industrial Park, Portlethen, Aberdeen, Aberdeenshire, United Kingdom, AB12 4YD
|
|
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|
Mono Pumps New Zealand Company [4]
|
35-41 Fremlin Place, Avondale, Auckland, New Zealand
|
|
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National Oilwell (U.K.) Limited
|
Stonedale Road, Unit 10 Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
National Oilwell Varco Almansoori Services [1]
|
PO Box 27011, Mussafah Industrial Area, Abu Dhabi, United Arab Emirates
|
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NOV Australia Pty Ltd [4]
|
75 Frankston Gardens Drive, Carrum Downs, Victoria 3201, Australia
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Corporation Trust Centre, 1209 Orange Street, Wilmington, NEW Castle, Delaware 19801
|
|
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|
NOV Completion and Production Solutions Korea Ltd
|
13F, 48, Centum Jungang-ro, Haeundae-gu, Busan, South Korea
|
|
|
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NOV Doha Energy Trading and Services LLC
|
NOV Doha Energy Trading and Services LLC, Building No. 38, Street No. 512, Zone 57, Old Industrial Area, Doha, Qatar
|
|
|
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NOV Doha Factory for Metal Products LLC
|
NOV Doha Factory for Metal Products LLC, Building No. 38, Street No. 512, Zone 57, Old Industrial Area, Doha, Qatar
|
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|
NOV Downhole Eurasia Limited
|
Stonedale Road, Unit 10 Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
NOV Downhole Kazakhstan, LLP [5]
|
Business Centre KZ 123 V, Utemisov M. street, Atyrau 060005, Kazakhstan
|
Limited partnership interest
|
|
|
NOV Elmar (Middle East) Limited
|
National Oilwell Varco Badentoy Crescent, Badentoy Park, Portlethen, Aberdeen, Aberdeenshire, United Kingdom, AB12 4YD
|
|
|
|
NOV Equipment Manufacturing LLC [2]
|
Plots 72, 73, Mussafah M-42, Abu Dhabi, United Arab Emirates
|
|
|
|
|
|
|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Subsidiary undertakings (continued)
|
NOV Grant Prideco LLC [1], [6]
|
Abu Dhabi - Mussafffah - ICAD II - (5AR17)
|
|
|
|
|
SK Offices, Block E1, Raphta Road Westlands, Nairobi, Kenya
|
|
|
|
|
PO Box 261108, Jebel Ali Free Zone, Dubai, United Arab Emirates
|
|
|
|
NOV Oil & Gas Services Senegal S.A.R.L
|
37, Cite CPI - VDN - 3EME ETAGE - Dakar, Senegal
|
|
|
|
NOV Oil Services Angola Limitada [1], [8]
|
Rua Kima Kienda, s/n, Cercania do Porto de Luanda, Bairro Boavista, Distrito Urbano da Ingombota, Luanda, Angola
|
|
|
|
NOV Process & Flow Technologies UK Limited
|
Stonedale Road, Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
NOV Products Middle East FZE [3]
|
PO Box 261108, Jebel Ali Free Zone, Dubai, United Arab Emirates
|
|
|
|
NOV Saudi Arabia Co. Ltd. [3]
|
Dammam 2nd Industrial City, Bldg 3648 Unit1, 34332-7358 Dammam, the Kingdom of Saudi Arabia
|
|
|
|
NOV Saudi Arabia Trading Co. Ltd. [3]
|
Dammam The Business Gate Center, Bldg 3648 Unit 20, 34332-7358 Dammam, the Kingdom of Saudi Arabia
|
|
|
|
NOV Tuboscope Italia S.R.L.
|
Companies House, Corso Lodi 18, Milano, Italy
|
|
|
|
NOV UK (Angola Acquisitions) Limited
|
National Oilwell Varco Badentoy Crescent, Badentoy Park, Portlethen, Aberdeen, United Kingdom, AB12 4YD
|
|
|
|
|
Unit 10 Stonedale Road, Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
|
C/O National Oilwell Varco Stonedale Road, Oldends Lane Industrial Estate, Stonehouse, Gloucestershire, United Kingdom, GL10 3RQ
|
|
|
|
R&M Singapore Holding LLC
|
c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange St., Wilmington, New Castle County, Delaware 19801, United States of America
|
|
|
|
ReedHycalog UK Limited [3]
|
L'Estrange & Brett, Arnott House, 12/16 Bridge Street, Belfast, United Kingdom, BT1 1LS
|
|
|
|
Tuboscope Vetco Capital Limited
|
C/O National Oilwell Varco, Badentoy Crescent, Badentoy Park, Portlethen, Aberdeen, Aberdeenshire, United Kingdom, AB12 4YD
|
|
|
|
Tubular Coating Solutions Ltd
|
Plot 0300L01: 017-044, 3rd Dammam Industrial City, the Kingdom of Saudi Arabia
|
|
|
|
|
|
|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Subsidiary undertakings (continued)
|
[1] Controlled by the Company due to power to govern the financial and operating policies of the entities under a statute or an agreement
[2] Held by NOV Products Middle East FZE
[3] Held by NOV Downhole Eurasia Limited
[4] Held by NOV Process & Flow Technologies UK Limited
[5] Held by NOV Downhole Eurasia Limited (99%) and National Oilwell Varco UK Limited (1%)
[6] Held by Big Red Tubulars Limited
[7] Held by National Oilwell Varco UK Limited (99%) and NOV Downhole Eurasia Limited (1%)
[8] Held by Tuboscope Vetco Capital Limited
|
|
Raw materials and consumables
|
|
|
|
Work in progress (goods to be sold)
|
|
|
|
Finished goods and goods for resale
|
|
|
|
|
|
|
|
|
|
|
|
Inventory impairment losses totalling £3,290,000 (2022 - £2,301,000) were recognised in Cost of sales in the Profit and Loss Account. The inventory impairment expense was based on an update of assumptions relating to estimates of future demand.
|
|
|
|
|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Due after more than one year
|
|
|
|
Amounts owed by fellow subsidiary undertakings (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by parent undertakings (c)
|
|
|
|
Amounts owed by fellow subsidiary undertakings (d)
|
|
|
|
Amounts owed by subsidiary undertakings (e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxation (note 21)
|
|
|
|
Corporation tax repayable
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
Trade debtors are stated after provisions for impairment of £643,000 (2022 - £853,000).
(a) Amounts owed by fellow subsidiary undertakings due after more than one year of £3,465,000 (2022 - 3,602,000) is represented by a loan facility with National Oilwell Varco Guyana Inc. with interest rate of 1.2%, repayable to the Company in whole or in part at any time before the maturity date of 2 November 2026. Early repayment is at the discretion of the debtor.
(b) Other debtors due after more than one year in 2022 was represented by a convertible loan instrument with an unrelated third party of up to £4,500,000, interest rate of 6% per annum and maturity date of 31 May 2024. Other debtors due within one year includes two loan balances with an unrelated third party of up to £7,500,000, interest rate ranging between 6% and 7.5% per annum and maturity dates ranging between 31 May 2024 and 30 June 2024. The balance outstanding at 2023 is presented as short term in line with the terms of the loan agreements. Following an event that was indicative of conditions that arose after the reporting period, this balance has been reserved in full subsequent to the year end.
(c) Amounts owed by parent undertakings due within one year includes the following:
(i) £49,817,000 (2022 - £56,046,000) represented by a loan facility with NOV Worldwide BV of up to $300,000,000 and interest rate of 6% (2022 - 3.6%), repayable to the Company in whole or in part at any time before the maturity date of 6 September 2024.
|
|
|
|
|
NATIONAL OILWELL VARCO UK LIMITED
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
(ii) £13,406,000 (2022 - 12,097,000) represented by a loan facility with NOV International Holdings LLC with principal of $16,430,000 and interest rate of 2.17%, repayable to the Company in whole or in part at any time before the maturity date of 30 September 2025. As the Company has the right to demand early repayment, the balance has been presented as due within one year.
(d) Amounts owed by fellow subsidiary undertakings due within one year includes the following:
(i) £14,726,000 (2022 - £20,100,000) represented by short term loan notes with Tuboscope Vetco France SAS and NOV Brandt Europe France, with interest rate of 5.75%, repayable to the Company in whole or in part at any time before the maturity date of 6 December 2024.
(ii) £675,000 (2022 - £6,259,000) represented by a loan facility with National Oilwell Varco Muscat LLC of up to $12,000,000 and interest rate of 1.5%, repayable to the Company in whole or in part at any time before the maturity date of 4 March 2024. The balance was settled during February 2024.
(iii) £1,660,000 (2022 - £1,713,000) represented by a loan facility with Coil Services ME LLC of $2,000,000 and interest rate of 2%, repayable to the Company in whole or in part at any time before the maturity date of 3 March 2027. As the Company has the right to demand early repayment, the balance has been presented as due within one year.
(e) Amounts owed by subsidiary undertakings due within one year includes the following:
(i) £20,576,000 (2022 - £18,129,000) represented by a loan facility with Tubular Coating Solutions Limited of up to $26,100,000 and interest rate of 4.6%, repayable to the Company in whole or in part at any time before the maturity date of 15 May 2026. As the Company has the right to demand early repayment, the balance has been presented as due within one year.
(ii) £16,434,000 (2022 - £8,410,000) represented by a loan facility with NOV Products Middle East FZE of up to $25,000,000 and interest rate of 5%, repayable to the Company in whole or in part at any time before the maturity date of 7 September 2026. As the Company has the right to demand early repayment, the balance has been presented as due within one year.
None of the other above balances are interest bearing.
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Cash and cash equivalents
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The Company is the Treasurer of a zero balancing cash pool with fellow UK group companies.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Creditors: Amounts falling due within one year
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Payments received on account
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Amounts owed to fellow subsidiary undertakings
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Amounts owed to subsidiary undertakings
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Amounts owed to parent undertakings
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Taxation and social security
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Derivative financial instruments
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(a) Deferred income includes deferred government grant income of £103,000 (2022 - £135,000). The conditions attached to the grant have been satisfied. The remaining amounts included in deferred income are represented by advances received from customers and billing in excess of cost.
None of the above balances are interest bearing.
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Creditors: Amounts falling due after more than one year
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Amounts owed to fellow subsidiary undertaking - listed Eurobond
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The listed Eurobond balance falling due after more than one year comprises a 4.2% Eurobond with face value of £516,800,000 issued and listed on the Cayman Islands Stock Exchange on 31 March 2020 due on 31 March 2028. The carrying value of this Eurobond at 31 December 2023 and 31 December 2022 was £522,271,000 with associated interest payable of £5,471,000 presented within Amounts owed to fellow subsidiary undertakings within Creditors: Amounts falling due within one year (Note 19).
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Charged to Profit and loss (note 12)
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The deferred tax asset recognised was made up as follows:
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Non trade loan relationships
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Transferred to subsidiary undertaking
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
22.Other provisions (continued)
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Warranty provision
A provision is recognised for expected warranty claims on products sold. It is expected that most of these costs will be incurred in the next financial year.
Onerous lease provision
Where leasehold properties become vacant, the Company provides for all costs, net of anticipated income, to the end of the lease or the anticipated date of the disposal or sublease. This provision related to a property in Aberdeen which was vacated during 2016 and was surplus to the Company's requirements. The provision was expected to be utilised over the life of the related lease to 2023. This lease and associated provision was transferred to NOV Downhole Eurasia Limited on 1 July 2023 as part of the contribution of the Wellbore business.
Dilapidations provision
As part of the Company’s property leasing arrangements, there is an obligation to repair damages which incur during the life of the lease, such as wear and tear. The cost is charged to profit and loss as the obligation arises. The provision is expected to be utilised as the leases terminate.
Other Provision
During 2020, the Company recognised a provision relating to an audit by HMRC in respect of Customs and International trade matters for the years 2017 onwards. The remaining provision has been reversed during the year as no further costs are expected.
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Allotted, called up and fully paid
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77,916,495 Ordinary shares of £1 each
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Share premium account
This reserve records the amount above the nominal value received for shares issued, less transaction costs.
Merger reserve
The Merger reserve is represented by amounts that arose on group reconstructions where merger accounting has been applied. Any differences between the consideration paid and the net assets acquired on such group reconstructions have been recorded in the merger reserve in accordance with FRS 102 section 19 and Tech 02/17BL para 9.36.
Share based payment reserve
At each Balance Sheet date, the cumulative cost of equity-settled transactions with employees is calculated. The movement in cumulative expense since the previous Balance Sheet date is recognised in the Profit and Loss Account, with a corresponding entry in equity. During 2020, a recharge agreement was entered into with the parent company. From 2020 onwards, the parent company (via a fellow subsidiary) recharges the Company annually for the equivalent cost of vested restricted share awards and this is recorded as a reduction to the Share based payment reserve, with a corresponding entry to the Amounts owed to fellow subsidiary undertakings. The realised element of the Share based payment reserve is transferred annually to the Profit and loss reserve.
Profit and loss account
The Profit and Loss Account does not include any non-distributable amounts.
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Senior Executive Plan
Share options in the Company's ultimate parent undertaking, NOV Inc., are granted to senior executives. The exercise price of the options is equal to the closing market price of NOV Inc. common stock on the date of the grant. The options vest over a three year period starting one year from the date of the grant and expire ten years from the date of the grant. There are no cash settlement alternatives.
Restricted shares
NOV Inc. issues restricted stock awards with no exercise price to officers and key employees in addition to share options. During the year the Company granted restricted shares to key employees at a fair value of £18.11 (2022 - £12.36). These shares will vest in three equal amounts annually on the anniversary of the date of grant.
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At 31 December 2023 the Company had capital commitments as follows:
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Contracted for but not provided in these financial statements
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £3,899,000 (2022 - £3,748,000). Contributions totalling £NIL (2022 - £NIL) were payable to the fund at the Balance Sheet date.
The Company also operates a defined benefit pension plan.
The National Oilwell (U.K.) Limited Pension Plan is a defined benefit plan for the legacy employees of National Oilwell (U.K.) Limited, providing benefits based on final pensionable salaries. The assets of the plan are held separately from those of the Company, being invested by managers for this purpose. The plan closed to future accrual on 30 June 2012. As a result, the current service cost is only in respect of the period up until closure and the surplus and expected return on assets have been restricted as per paragraph 28.22 of FRS 102. The assets of the plan are held in separate trustee administered funds.
The most recent formal actuarial valuation prepared by a qualified independent actuary of the plan has an effective date of 31 December 2021. The method used in this valuation is the projected unit method. The valuation showed that the market value of the assets was £53,940,000 resulting in a pension plan deficit. The restoration of the funding level of the Plan to 100% over a period of 5 years from 1 January 2023 was agreed between the Trustees and the Company and formalised in a Recovery Plan and in the Schedule of Contributions. To eliminate the remaining shortfall the Trustees and the Company agreed that contributions totalling £960,000 per annum will be paid to the Plan in equal monthly instalments from 1 January 2023 to 31 December 2025. An assessment will be carried out on a quarterly basis starting 30 September 2023 and if the Plan is over 100% funded on the Technical Provisions basis over two consecutive quarters, then the Company may, following consultation with the Trustees, reduce or suspend the contributions.
The Schedule of Contributions also requires the Company to pay Scheme expenses and levies to the PPF and the Pensions Regulator.
The next full actuarial valuation will be carried out with an effective date of 31 December 2024.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
27.Pension commitments (continued)
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Reconciliation of present value of plan liabilities:
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Opening defined benefit obligation
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Remeasurement of defined benefit obligation
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Reconciliation of present value of plan assets:
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Opening fair value of plan assets
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Return on plan assets less than discount rate
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Contributions by employer
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Composition of plan assets:
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The pension plans have not invested in any of the Company's own financial instruments nor in properties or other assets used by the Company.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
27.Pension commitments (continued)
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Amounts recognised on the Balance Sheet
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Fair value of plan assets
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Present value of plan liabilities
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Net defined benefit pension scheme liability
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At the end of the current and prior year, the National Oilwell (U.K.) Limited Pension Plan was in surplus. The Company has not recognised the defined benefit pension asset as it does not expect to be able to recover the surplus either through reduced contributions or agreed refunds from the scheme.
The amount recognised in the Profit and Loss Account was nil in both years. The amounts recognised in the Statement of Other Comprehensive Income are as follows:
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Amounts recognised in other comprehensive income
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Actual return on plan assets
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Less: amounts included in the net interest on the defined benefit liability
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Return on plan assets less than discount rate
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Remeasurement of defined benefit obligation
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Actuarial (loss)/gain recorded in other comprehensive income
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
27.Pension commitments (continued)
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Change in irrecoverable surplus
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Irrecoverable surplus at the beginning of year
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Interest on irrecoverable surplus
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Change in irrecoverable surplus during the year
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Irrecoverable surplus at the end of the year
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Principal actuarial assumptions at the Balance Sheet date (expressed as weighted averages):
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- at 65 for a male aged 50 now
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- for a female aged 65 now
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- at 65 for a female aged 50 now
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*The assumption for future pension increases and inflation was in line with RPI assumption of 3.1% less 1% to 2030 and 0% thereafter (2022 - 3.2% less 1% to 2030 and 0% thereafter).
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Commitments under operating leases
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At 31 December 2023 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Later than 1 year and not later than 5 years
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The Company also acts as a lessor under leasing agreements with customers for the use of various rental equipment owned by the Company. Such leasing agreements are cancellable operating leases based on fixed monthly invoicing with no lease incentives included in the terms of the lease.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Related party transactions
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As FRS 102 does not require disclosure of transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such group, these transactions have not been disclosed.
During the year the Company entered into transactions, in the ordinary course of business, with other related parties. These related parties are members of the NOV Inc. group which are not wholly owned by the ultimate parent. Transactions entered into, and trading balances outstanding were as follows:
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2023
Sales and recharges to related party
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2023
Amounts
owed by related party
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2022
Sales and recharges to related
party
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2022
Amounts
owed by related
party
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Entities over which the Company has joint control or significant influence
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Arabian Rig Manufacturing Company
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National Oilwell Varco Almansoori Services LLC
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Coil Services Middle East LLC
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NOV Brandt Oilfield Services Middle East LLC
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NOV Intelliserv UK Limited
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NOV Oil and Gas Services Ghana Limited
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NOV Tanajib Kuwait for Services and Maintenance of Oil Rigs
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Related party transactions (continued)
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2023 Purchases from related party
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2023 Amounts owed to related party
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2022 Purchases from related party
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2022 Amounts owed to related party
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Entities over which the Company has joint control or significant influence
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National Oilwell Varco Almansoori Services LLC
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NOV Oil Services Angola Lda
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Arabian Rig Manufacturing Company
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Coil Services Middle East LLC
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Fiber Glass Systems Oman LLC
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NOV Brandt Oilfield Services Middle East LLC
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NOV Intelliserv UK Limited
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NOV Oil and Gas Services Ghana Limited
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NOV Tuboscope Middle East LLC
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Terms and conditions of transactions with related parties
Outstanding balances with entities are unsecured, interest free and cash settlement is expected within 90 days of invoice. The Company has not provided or benefited from any guarantees for any related party receivables or payables. During the year ended 31 December 2023, the Company has not made any provision for doubtful debts relating to amounts owed by related parties (2022 - nil).
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At 31 December 2023, the Company had contingent liabilities in respect of outstanding guarantees given for performance bonds and contracting agreements amounting to £18,505,000 (2022 - £15,539,000) entered into in the normal course of business. No outflow is expected from these guarantees. Included within that amount is £12,577,000 (2022 - £13,259,000) entered into on behalf of fellow group companies, for which any liability would be expected to be borne by the respective group company.
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NATIONAL OILWELL VARCO UK LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Post balance sheet events
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On 13 February 2024, the Company purchased 50% share capital of Hellenes Limited, a company incorporated in Scotland, for a consideration of USD $3,688,000.
On 3 May 2024, the Company purchased the remaining 50% share capital of Hellenes Limited, a company incorporated in Scotland, for a consideration of USD $3,688,000.
On 29 June 2024, following an event that was indicative of conditions that arose after the reporting period, a reserve for doubtful receivables totalling £8.1m was recognised against loan notes receivable from an unrelated third party. A further £1m was advanced during August 2024. The balance at the end of the reporting period was £7.7m (see note 17).
There have been no other significant events affecting the Company since the year end.
The Company’s immediate parent undertaking is NOV UK Holdings LLC, a limited liability company incorporated in the US.
The Company’s ultimate parent undertaking is NOV Inc., a company incorporated in the United States of America. The consolidated accounts of NOV Inc. are those of the smallest and largest group of which the Company is a member and for which group accounts are prepared. Copies of these accounts are available from its principal office at 10353 Richmond Avenue, Houston, Texas 77042, USA.
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