National Oilwell Varco 2012 Annual Report Download - page 14

Index to Financial Statements
NOV Downhole also manufactures and sells drilling jars and fishing tools. Drilling jars are placed in the drill string, where they can be used to generate a sudden, jarring
motion to free the drill string should it become stuck in the wellbore during the drilling process. This jarring motion is generated using hydraulic and/or mechanical force
provided at the surface. In the event that a portion of the drill string becomes stuck and cannot be jarred loose, fishing tools are run into the wellbore on the end of the drill
string to retrieve the portion that is stuck.
Through its Coring Services business line, NOV Downhole offers coring solutions that enable the extraction of actual rock samples from a drilled well bore and allow
geologists to examine the formations at the surface. One of the coring services utilized is the Companys unique Corion Express® system which allows the customer to drill
and core a well without tripping pipe. Corion Express® utilizes wireline retrievable drilling and coring elements which allow the system to transform from a drilling assembly
to a coring assembly and also to wireline retrieve the geological core. This capability enables customers to save significant time and expense during the drilling and coring
process.
NOV Downhole offers a wide variety of industry leading technologies to enable customers to enlarge the diameter of a drilled hole below a restriction (typically a casing
string) via its Borehole Enlargement business line. Borehole enlargement services are typically utilized in deep water drilling where customers wish to maximize the size of
each successive casing string in order to preserve a relatively large completion hole size through which to produce hydrocarbons from the reservoir. Borehole enlargement is
also employed where customers wish to reduce the fluid velocity and pressure within the well-bore annulus to reduce the risk of formation erosion or accidental fracture.
Borehole Enlargement provides bi-centered drill bits, expandable reamers (marketed under the AnderReamer brand name) and associated equipment along with well-site
service technicians who deliver 24 hour support during hole enlargement operations.
NOV Downhole offers drilling optimization services via its Advanced Drilling Solutions (ADS) business line. ADS services incorporate various downhole vibration
measurement and mitigation tools along with dedicated, highly trained personnel who interpret such data and provide drilling parameter guidance intended to improve drilling
efficiency and reduce drilling risk.
Pumps & Expendables. The Companys Pumps & Expendables business designs, manufactures, and sells pumps that are used in oil and gas drilling operations, well service
operations, production applications, as well as industrial applications. These pumps include reciprocating positive displacement and centrifugal pumps. High pressure mud
pumps are sold within the Rig Technology segment. These pumps are sold as individual units and unitized packages with drivers, controls and piping. The Company also
manufactures fluid end expendables (liners, valves, pistons, and plungers), fluid end modules and a complete line of dies and inserts for pipe handling. The Company offers
popular industry brand names like Wheatley, Gaso, and Omega reciprocating pumps, acquired in 2000; Halco Centrifugal Pumps, acquired in 2002; Petroleum Expendable
Products (PEP), acquired in 1997; and Phoenix Energy Products, acquired in 1998.
The Company also manufactures a line of commodity and high end valves, chokes, and flow line equipment used in both production and drilling applications. Additionally
these products are used in the fabrication of choke and kill standpipe, cement, and production manifolds. The Company manufactures its pump products in Houston, Odessa
and Marble Falls, Texas; Tulsa and McAlester, Oklahoma; Scott, Louisiana; Newcastle, England and Buenos Aires, Argentina.
XL Systems. The Companys XL Systems product line offers the customer an integrated package of large-bore tubular products and services for offshore wells. This product
line includes the Companys proprietary line of wedge thread marine connections on large-bore tubulars and related engineering and design services. The Company provides
this product line for drive pipe, jet strings and conductor casing. The Company also offers weld-on connections and service personnel in connection with the installation of
these products. In early 2007, the Company completed development of its new high-strength Viper weld-on connector that it believes will permit the Company to penetrate
traditional markets that do not require the enhanced performance of its proprietary wedge-thread design.
Customers and Competition. Customers for the Petroleum Services & Supplies tubular services include major and independent oil and gas companies, national oil
companies, drilling and workover contractors, oilfield equipment and product distributors and manufacturers, oilfield service companies, steel mills, and other industrial
companies. The Companys competitors include, among others, EDO Corporation; ShawCor Ltd.; Schlumberger, Ltd.; Franks International, Inc.; Baker Hughes
Incorporated; Halliburton Company; Weatherford International Ltd.; Patterson Tubular Services; Vallourec & Mannesmann; and Precision Tube (a division of Tenaris). In
addition, the Company competes with a number of smaller regional competitors in tubular inspection. Certain foreign jurisdictions and government-owned petroleum
companies located in some of the countries in which the Company operates have adopted policies or regulations that may give local nationals in these countries certain
competitive advantages. Within the Companys corrosion control products, certain substitutes such as non-metallic tubulars, inhibitors, corrosion resistant alloys, cathodic
protection systems, and non-metallic liner systems also compete with the Companys products. Management believes that the principal competitive factors affecting this
business are performance, quality, reputation, customer service, availability of products, spare parts, and consumables, breadth of product line and price.
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