National Oilwell Varco 2002 Annual Report Download - page 3

Item 1. Business
GENERAL
National Oilwell is a worldwide leader in the design, manufacture and sale of comprehensive systems, components,
and products used in oil and gas drilling and production, as well as in distributing products and providing supply
chain integration services to the upstream oil and gas industry.
Our Products and Technology segment is a global leader in the design and manufacture of complete land drilling
and workover rigs, and for drilling related systems on offshore rigs. Technology has increased the desirability of
one vendor assuming responsibility for the entire suite of components used in the drilling process, as mechanical
and hydraulic components are replaced by or augmented with integrated computerized systems. In addition to
traditional components such as drawworks, mud pumps, top drives, derricks, cranes, jacking and mooring systems,
and other structural components, we provide automated pipehandling, control and electrical power systems. We
have also developed new technology for drawworks and mud pumps applicable to the highly demanding offshore
markets.
Non-capital products produced by our Products and Technology segment include drilling motors and specialized
downhole tools that are sold or rented, spare parts and service on the large installed base of our equipment,
expendable parts for mud pumps and other equipment, and smaller downhole, progressive cavity and transfer
pumps.
Our Distribution Services segment provides maintenance, repair and operating supplies and spare parts to drill site
and production locations throughout North America and to offshore contractors worldwide. Increasingly, this
business also is expanding to locations outside North America, including the Middle East, Southeast Asia, and
South America. Using our information technology platforms and processes, we can provide complete procurement,
inventory management, and logistics services to our customers.
BUSINESS STRATEGY
National Oilwell's business strategy is to enhance its market positions and operating performance in the upstream
oil and gas business by:
Leveraging our Capital Equipment Installed Base
We believe our market position and comprehensive product offering present substantial opportunities to capture a
significant portion of expenditures for the construction of new drilling rigs and equipment as well as the upgrade
and refurbishment of existing drilling rigs and equipment. Over the next few years, the advanced age of the existing
fleet of drilling rigs, coupled with drilling activity involving greater depths and extended reach, is expected to
generate demand for new equipment. National Oilwell's automation and control systems offer the potential to
improve the performance of new and existing drilling rigs. The large installed base of our equipment also provides
recurring demand for spare parts and expendable products necessary for proper and efficient operation.
Expanding our Non-Capital Products Business
Our non-capital equipment revenues continue to represent over half of our products and technology business. We
are a leader in the rental and sale of high-performance drilling motors and downhole tools and in the manufacture of
certain expendable products and spare parts needed in the drilling and production process. We believe additional
expansion in the non-capital upstream oil and gas industry would be beneficial to our business and our customers.
Furthering our Information Technology and Process Improvement Strategy
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