What DNOW Inc. told the SEC could break it.

As a distributor of energy products (pipe, valves, fittings) to upstream/midstream operators, DNOW's revenue is a derivative of oil & gas activity: it tracks worldwide/U.S. rig count, WTI crude, natural-gas prices, hot-rolled-coil steel, and U.S. wells completed as demand drivers, and explicitly attributes revenue moves to them (e.g. its Canada segment fell on lower project activity from rig-count and commodity-price declines, with WTI down 14.5% to $65.46/bbl in 2025). A sustained drop in crude prices or a pullback in E&P capital spending and drilling would directly reduce distribution volumes.

“The decrease was primarily due to lower project related activity as a result of rig count and commodity price declines.”

DNOW carries a specific tariff-to-cost exposure: a significant portion of the products it distributes are made from steel, and U.S. steel tariffs were expanded throughout 2025, raising product costs. It also sources a portion of products from China and India (including certain valve sub-assemblies finished in the U.S.), exposing it to those tariff regimes; Canada/Mexico tariffs have lesser impact as they aren't a significant share of purchases. As a thin-margin distributor (~23% adjusted gross margin), tariff-driven input-cost inflation that can't be fully passed through pressures margins.

“The U.S. government has imposed tariffs on steel products, which were expanded throughout 2025. A significant portion of the products that we sell are made from steel. In addition, a portion of the products that we sell are sourced from China and India, including certain valve sub-assemblies that are finished in the U.S.”