Varco Posts $5.4 Million in Losses for Third Quarter

Varco International Inc. on Thursday reported a $5.4-million loss for the third quarter, citing the closure of a Houston manufacturing facility and a drop in natural gas drilling activity.

Varco, which makes oil- and gas-drilling equipment, said the loss, equal to 16 cents a share, contrasts with a profit of $3.8 million, or 12 cents a share, for the same period a year earlier. Sales fell 33% to $37.8 million from $56.8 million.

The Orange-based company charged $5 million against its latest quarterly earnings as part of a plan to shut down the Houston facility, which was one of two oil-tool plants it bought from Baroid Corp. of Houston in July. The closure, to be completed early next year, is expected to save the company about $2 million annually, said Richard Kertson, Varco’s chief financial officer.

“We couldn’t operate two of the same types of large plants in the same city,” he said.

In the first nine months of the year, the company reported a loss of $2.7 million, or 8 cents a share, contrasted with a profit of $10.5 million, or 34 cents a share, for the same period a year earlier. Sales were down 23% to $122.6 million from $159.2 million.

Throughout the year, drilling activity has been down substantially as natural gas prices have declined.

Even so, Varco officials said, there is reason for optimism: The company recently received a letter of intent from Dreco Group of Cos. in Edmonton, Canada, to buy two Varco drilling systems and two pipe-handling machines. The order, the largest in the company’s 84-year history, is scheduled for delivery in late 1993.