National Oilwell Varco 2003 Annual Report Download - page 2

Download and view the complete annual report

Please find page 2 of the 2003 National Oilwell Varco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 60

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60

1
Item 1. Business
GENERAL
National Oilwell designs, manufactures and sells comprehensive systems, components, and
products used in oil and gas drilling and production, as well as distributes products and provides
services to the exploration and production segment of the oil and gas industry.
Our Products and Technology segment designs and manufactures complete land drilling and
workover rigs, as well as 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 (the
hoisting winch used to raise and lower drill pipe), mud pumps (used to circulate drilling fluids),
top drives (used to turn drill pipe), derricks, cranes, jacking and mooring systems (used to raise,
lower and anchor offshore jackup drilling rigs), 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 revenue sources within 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 approximately half of our products and
technology business. We rent and sell high-performance drilling motors and downhole tools and