In Q3 National Oilwell Varco NOV delivered revenue of $3.31 billion and eps of $0.41. Analysts were expecting revenue of $3.48 billion. Results fell shy of revenue expectations by 5%. I had the following takeaways on the quarter:

Revenue Remains In Free Fall

Total revenue was down by 15% sequentially. This comes after a 19% decline in Q2.

Revenue from Rig Systems was down 22%. As an accommodation to clients the company has modified delivery schedules for certain rigs. That accommodation has hurt the top line. This segment still represents about 45% of the company’s total revenue. According to Barron’s orders for offshore rigs and subsea trees have dried up due to lower oil prices and rising costs for deep water development. Management expects orders to remain low through 2016, with scheduled outflows from its $8 billion backlog of about $2.4 billion.

Revenue from Rig Aftermarket and Wellbore Technologies both fell 13% Q/Q. As more rigs went idle during the quarter they created fresh spare parts for owners; this hurt Rig After market sales as companies had less need for new parts. Wellbore Technologies, which is driven by rig activity, saw demand and prices for all of its products decline during the quarter. Until rig activity picks up it should be more of the same going forward.

Expense Management

As revenue continues to decline, expense management will be the narrative for National Oilwell going forward. EBITDA margins ticked down from 17% in Q2 to 16% this quarter. This means the company is cutting its costs practically in lockstep with double-digit revenue declines. In Q2 the company had 1,500 head count reductions. I expect deep cuts to head count going forward as revenue continues to decline. SG&A expense was 11% of revenue — the same as Q2. This expense bucket appears to be an opportunity to for more cuts.

The company incurred a $112 million cost this quarter for restructuring, asset impairments and facilities closures. In addition to head count reductions, look for National Oilwell to close more facilities next quarter.