Varco International Lists Loss of $9.2 Million for ’86

Varco International Inc. reported a net loss of $9.2 million for 1986, contrasted with a 1985 net loss of $1.7 million, reflecting a decline in drilling activity that officials of the Orange-based oil service company expect to continue to harm business through 1987.

Varco’s revenue for 1986 was $42.5 million, down nearly 30% from $60.6 million.

In the fourth quarter of 1986, the company posted a net loss of $2.6 million, contrasted with net income of $504,000 for the previous year’s quarter. Fourth-quarter revenue in 1986 was $6.9 million, a 56% drop from $15.8 million in revenue for the comparable quarter of 1985.

“There has been a modest pickup in the domestic market in the second half of 1986, but the international market has continued to see the (drilling) rig count fall,” said Richard Kertson, Varco’s chief financial officer. “I think this is going to continue to be a very tough year for our industry,” he added.

Varco Chairman Ben Reinhold said that while the company took steps to cut costs during 1986, they weren’t sufficient “to fully offset the very substantial decline in revenue.”

Earl A. Stolz, an oil service industry analyst with New Orleans-based Howard, Weil Financial Corp., said one of Varco’s smartest moves during the year was to complete a public offering of $23 million in convertible debentures, a portion of which was used to retire approximately $10.4 million in bank and institutional debt. The remainder will be used for working capital and general corporate purposes. The extra money, Stolz said, will keep Varco financially strong.