National Oilwell Varco 2003 Annual Report Download - page 3

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2
manufacture 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
National Oilwell has developed an integrated information technology and process improvement
strategy to enhance procurement, inventory management and logistics activities. As a result of the
need to improve industry efficiency, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers to achieve cost and capital
improvements. We believe we are well positioned to provide these services as a result of our:
- large and geographically diverse network of distribution service centers in major oil and
gas producing areas;
- strong relationship with a large community of industry suppliers;
- knowledge of customer’s procurement processes, supplier’s capabilities and product’s
performance; and
- information systems that offer customers and suppliers enhanced capabilities.
In addition, the integration of our distribution expertise, extensive network and growing base of
customer alliances provides an increased opportunity for cost-effective marketing of our
manufactured parts and equipment.
Continuing our Acquisitions Strategy
We believe the oilfield service and equipment industry will continue to experience consolidation
as businesses seek to align themselves with other market participants in order to gain access to
broader markets and integrated product offerings. Since 1997, we have completed thirty-nine
acquisitions and plan to continue to participate in this consolidation trend. The aggregate effect of
these acquisitions has positively impacted our ability to provide complete drilling equipment
systems to our customers.
OPERATIONS
Products and Technology
National Oilwell designs, manufactures and sells drilling systems and components for both land
and offshore drilling rigs as well as complete land drilling and well servicing rigs. Mechanical
components include drawworks, mud pumps, top drives, solids control equipment (used to
remove particulates from drilling fluids), traveling equipment (hooks and blocks used to hoist and
lower drill pipe) and rotary tables (used to rotate drill pipe). These components are essential to
pump fluids and hoist, support and rotate the drill string. Many of these components are designed
specifically for applications in offshore, extended reach and deep land drilling operations. This
equipment is installed on new rigs and often replaced during the upgrade and refurbishment of
existing rigs.