National Oilwell Varco 2015 Annual Report Download - page 17

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Table of Contents
Although the Company believes that this intellectual property has value, competitive products with different designs have been successfully developed and
marketed by others. The Company considers the quality and timely delivery of its products, the service it provides to its customers and the technical
knowledge and skills of its personnel to be as important as its intellectual property in its ability to compete. While the Company stresses the importance of its
research and development programs, the technical challenges and market uncertainties associated with the development and successful introduction of new
products are such that there can be no assurance that the Company will realize future revenue from new products.

The manufacturing processes for the Company’s products generally consist of machining, welding and fabrication, heat treating, assembly of manufactured
and purchased components and testing. Most equipment is manufactured primarily from alloy steel. The availability and price of alloy steel castings,
forgings, purchased components and bar stock is critical to the production and timing of shipments.
Rig Systems provides drilling rig components, as well as complete land drilling rigs, and offshore drilling equipment packages. The primary manufacturing
facilities are located in Houston, Texas; Orange, California; and Ulsan, South Korea.
Rig Aftermarket provides comprehensive aftermarket products and services to support land rigs and offshore rigs, and drilling rig components manufactured
by Rig Systems. Primary facilities are located in Houston, Texas; New Iberia, Louisiana; Aberdeen, Scotland; Singapore; and Dubai, UAE.
Wellbore Technologies designs, manufactures, rents, and sells a variety of equipment and technologies used to perform drilling operations, and offers
services that optimize their performance, including: solids control and waste management equipment and services, drilling fluids, premium drill pipe, wired
pipe, drilling optimization services, tubular inspection and coating services, instrumentation, downhole tools, and drill bits. Primary facilities are located in
Houston, Conroe, Navasota, Cedar Park, Texas; Veracruz, Mexico; and Dubai, UAE.
Completion & Production Solutions integrates technologies for well completions and oil and gas production. The segment designs, manufactures, and sells
equipment and technologies needed for hydraulic fracture stimulation, including pressure pumping trucks and pumps, blenders, sanders, hydration units,
injection units, flowline, manifolds and wellheads; well intervention, including coiled tubing units, coiled tubing, and wireline units and tools; onshore
production, including composite pipe, surface transfer and progressive cavity pumps, and artificial lift systems; and, offshore production, including floating
production systems and subsea production technologies. Primary facilities are located in Houston, Fort Worth, Texas; Tulsa, Oklahoma; Senai, Malaysia;
Kalundborg, Denmark; Superporto du Acu, Brazil; and Manchester, England.

The Company believes that materials and components used in its operations are generally available from multiple sources. The prices paid by the Company
for its raw materials may be affected by, among other things, energy, steel and other commodity prices; tariffs and duties on imported materials; and foreign
currency exchange rates. The Company has experienced rising, declining and stable prices for mild steel and standard grades in line with broader economic
activity and has generally seen specialty alloy prices continue to rise, driven primarily by escalation in the price of the alloying agents. The Company has
generally been successful in its effort to mitigate the financial impact of higher raw materials costs on its operations by applying surcharges to, and adjusting
prices on, the products it sells. Higher prices and lower availability of steel and other raw materials the Company uses in its business may adversely impact
future periods.

The Company monitors its backlog of orders within its Rig Systems and Completion & Production Solutions segments to guide its planning. Backlog
includes orders which typically require more than three months to manufacture and deliver.
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