National Oilwell Varco 2011 Annual Report Download - page 36

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Index to Financial Statements
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 900 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 & Transmission.
See Item 1. Business for a discussion of each of these business segments.
Unless indicated otherwise, results of operations data are presented in accordance with accounting principles generally accepted in the United States (GAAP). In an effort
to provide investors with additional information regarding our results of operations, certain non-GAAP financial measures, including operating profit excluding other costs,
operating profit percentage excluding other costs and diluted earnings per share excluding other costs, are provided. See Non-GAAP Financial Measures and Reconciliations
in Results of Operations for an explanation of our use of non-GAAP financial measures and reconciliations to their corresponding measures calculated in accordance with
GAAP.
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:
$0000,00000 $0000,00000 $0000,00000 $0000,00000 $0000,00000
2011* 2010* 2009*
%
2011 v
2010
%
2011 v
2009
Active Drilling Rigs:
U.S. 1,875 1,541 1,086 21.7% 72.7%
Canada 423 351 221 20.5% 91.4%
International 1,168 1,094 997 6.8% 17.2%
Worldwide 3,466 2,986 2,304 16.1% 50.4%
West Texas Intermediate Crude Prices (per barrel) $ 94.90 $ 79.40 $ 61.65 19.5% 53.9%
Natural Gas Prices ($/mmbtu) $ 4.00 $ 4.39 $ 3.95 (8.9%) 1.3%
* Averages for the years indicated. See sources below.
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