National Oilwell Varco 2010 Annual Report Download - page 34

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Overview
The Company is a leading worldwide provider of highly engineered drilling and well-servicing equipment, products and services to the
exploration and production segments of the oil and gas industry. With operations in over 825 locations across six continents, we design,
manufacture and service a comprehensive line of drilling and well servicing equipment; sell and rent drilling motors, specialized downhole tools,
and rig instrumentation; perform inspection and internal coating of oilfield tubular products; provide drill cuttings separation, management and
disposal systems and services; provide expendables and spare parts used in conjunction with our large installed base of equipment; and provide
supply chain management services through our distribution network. We also manufacture coiled tubing, manufacture high pressure fiberglass
and composite tubing, and sell and rent advanced in-line inspection equipment to makers of oil country tubular goods. We have a long tradition
of pioneering innovations which improve the cost-effectiveness, efficiency, safety, and environmental impact of oil and gas operations.
Our revenues and operating results are directly related to the level of worldwide oil and gas drilling and production activities and the profitability
and cash flow of oil and gas companies and drilling contractors, which in turn are affected by current and anticipated prices of oil and gas. Oil
and gas prices have been and are likely to continue to be volatile. See Risk Factors. We conduct our operations through three business
segments: Rig Technology, Petroleum Services & Supplies and Distribution Services. See Item 1. Business for a discussion of each of these
business segments.
Operating Environment Overview
Our results are dependent on, among other things, the level of worldwide oil and gas drilling, well remediation activity, the price of crude oil and
natural gas, capital spending by other oilfield service companies and drilling contractors, and the worldwide oil and gas inventory levels. Key
industry indicators for the past three years include the following:
% %
2010 v 2010 v
2010* 2009* 2008* 2009 2008
Active Drilling Rigs:
U.S. 1,541 1,086 1,878 41.9% (17.9)%
Canada 351 221 379 58.8% (7.4)%
International 1,094 997 1,079 9.7% 1.4%
Worldwide 2,986 2,304 3,336 29.6% (10.5)%
West Texas Intermediate Crude Prices (per barrel) $ 79.40 $ 61.65 $ 99.63 28.8% (20.3)%
Natural Gas Prices ($/mmbtu) $ 4.39 $ 3.95 $ 8.86 11.1% (50.5)%
* Averages for the years indicated. See sources below. 34