Top U.S. oilfield equipment maker National Oilwell Varco warned of a severe downturn in its business after orders for its drilling parts plunged nearly 90 percent, underscoring the extent of the spending cuts caused by the oil price slump.
The gloomy outlook outweighed a better-than-expected fourth-quarter profit, sending the company's shares down 5.3 percent on Tuesday.
Crude prices have more than halved since June due to global oversupply and tepid demand growth, prompting oil producers to pull out of lower-margin projects.
"Customers are delaying purchases of both capital and consumables wherever possible, seeking to conserve cash in the face of market uncertainty," Chief Executive Clay Williams said on a post-earnings call.
"Our customers are quickly cutting spending and the downturn we face will be severe in 2015 and possibly beyond," Williams said.
Orders in National Oilwell's rig technology business, which makes drilling equipment, slumped to $470 million in the quarter ended Dec. 31, from $3.61 billion, a year ago. The unit accounted for nearly half of total revenue.
Barclays said the orders were well below their forecast of $1 billion and did "nothing to assuage concerns about economic viability of offshore" markets.
Wall Street analysts on average had been expecting orders of $1.1 billion.
"Booking levels show the paralysis sent through the oil services system in the fourth quarter," Tudor, Pickering, Holt & Co analysts wrote in a note.
National Oilwell Chief Financial Officer Jeremy Thigpen said revenue at the rig parts unit could decline in the high single-digit in percentage terms in the current quarter.
Baker Hughes Inc's oil rig count, considered an industry barometer, fell for the eighth straight week to its lowest since 2012, according to data released on Jan. 30.
National Oilwell said it expects revenue out of backlog to decline "modestly" in the second quarter and "more steeply" over the rest of 2015.
In contrast, total revenue rose 8 percent to $5.71 billion in the fourth quarter.
Adjusted profit was $1.69 per share in the fourth quarter, higher than the average analyst estimate of $1.60, according to Thomson Reuters I/B/E/S.
National Oilwell shares were down 5 percent at $55.53 in morning trade.