Wednesday, July 25, 2007


HOUSTON, Jul. 25, 2007 (Business Wire) -- National Oilwell Varco, Inc. (NYSE:NOV) today reported that for the second quarter ended June 30, 2007 it earned net income of $318.5 million, or $1.79 per fully diluted share, compared to first quarter ended March 31, 2007 net income of $275.9 million, or $1.55 per fully diluted share. Earnings per share more than doubled from the second quarter of 2006, when the Company earned $147.9 million or $0.84 per fully diluted share.

Revenues for the second quarter of 2007 were $2,384.9 million, an increase of 10 percent from the first quarter of 2007 and an increase of 44 percent from the second quarter of 2006. Operating profit for the quarter was $497.2 million or 20.8 percent of sales. Operating profit flow-through, or the increase in operating profit divided by the increase in revenue, was 32 percent from the first quarter of 2007 to the second quarter of 2007, and was 34 percent from the second quarter of 2006 to the second quarter of 2007.

Backlog for capital equipment orders for the Company's Rig Technology segment at June 30, 2007 increased to $7.2 billion, compared to $6.4 billion at March 31, 2007, with new orders during the quarter of $1.8 billion. The increase in the Company's backlog for capital equipment reflected the strong demand for its drilling equipment products, particularly for international offshore rigs.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, 'We are very pleased with the strong results we achieved this quarter. Our solid operating results were due to the strong demand for our oilfield products and services, especially capital equipment products, and the efficient execution of our business. Our record backlog for drilling equipment leads us to believe that we can continue to build off of the positive results we have achieved so far this year. I am extremely proud of the job our employees have done to meet the needs of our customers. We remain optimistic about market conditions for the remainder of this year.'

Rig Technology

Second quarter revenues for the Rig Technology segment were $1,409.2 million, an increase of 16 percent over the first quarter of 2007 and an increase of 67 percent from the second quarter of 2006. Operating profit for this segment was $340.8 million, or 24.2 percent of sales, an increase of 27 percent from the first quarter. Operating profit flow-through from the first quarter of 2007 to the second quarter of 2007 was 38 percent, and operating profit flow-through from the second quarter of 2006 to the second quarter of 2007 was 37 percent. Revenue out of backlog for the segment rose 21 percent sequentially and 82 percent year-over-year, to $957 million for the second quarter of 2007.

Petroleum Services & Supplies

Revenues for the second quarter of 2007 for the Petroleum Services & Supplies segment were $746.1 million, up 8 percent compared to first quarter results and up 26 percent from the second quarter of 2006. Operating profit was $177.8 million, or 23.8 percent of revenue, an increase of 4 percent from the first quarter. Operating profit flow-through from the first quarter of 2007 to the second quarter of 2007 was 13 percent, and operating profit flow-through from the second quarter of 2006 to the second quarter of 2007 was 33 percent. Strong results from most of the group's businesses around the world overcame a general decline in Canada.

Distribution Services

The Distribution Services segment generated second quarter revenues of $344.8 million, representing a 2 percent decrease from the first quarter and an 8 percent increase from the second quarter of 2006. Second quarter operating profit was $23.1 million or 6.7 percent of sales, $1.8 million lower than the first quarter and $2.9 million higher than the second quarter of 2006. Strong top line growth in domestic markets did not overcome soft market conditions in Canada.

The Company has scheduled a conference call for July 25, 2007, at 9:00 a.m. Central Time to discuss second quarter results. The call will be broadcast through the Investor Relations link on National Oilwell Varco's web site at www.nov.com, and a replay will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 303-205-0033 prior to the scheduled start time.

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry.

Statements made in this press release that are forward-looking in nature are intended to be 'forward-looking statements' within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by National Oilwell Varco with the Securities and Exchange Commission, including the Annual Report on Form 10-K, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.



NATIONAL OILWELL VARCO, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data) June 30, December 31, 2007 2006 ------------ ------------ (Unaudited) ASSETSCurrent assets: Cash and cash equivalents $1,032.7 $957.4 Receivables, net 1,886.2 1,614.6 Inventories, net 2,243.2 1,828.8 Costs in excess of billings 440.4 308.9 Deferred income taxes 115.7 101.6 Prepaid and other current assets 231.1 154.3 ------------ ------------ Total current assets 5,949.3 4,965.6Property, plant and equipment, net 1,133.4 1,022.1Deferred income taxes 40.3 56.1Goodwill 2,373.7 2,244.7Intangibles, net 785.3 705.2Other assets 28.3 25.6 ------------ ------------ $10,310.3 $9,019.3 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $587.3 $505.2 Accrued liabilities 1,576.6 1,420.2 Billings in excess of costs 819.8 564.4 Current portion of long-term debt and short-term borrowings 110.0 5.6 Accrued income taxes 126.3 169.8 ------------ ------------ Total current liabilities 3,220.0 2,665.2Long-term debt 740.7 834.7Deferred income taxes 424.2 389.0Other liabilities 71.7 71.4 ------------ ------------ Total liabilities 4,456.6 3,960.3 ------------ ------------Commitments and contingenciesMinority interest 44.2 35.5 ------------ ------------Stockholders' equity: Common stock - par value $.01; 178,104,322 and 175,571,663 shares issued and outstanding at June 30, 2007 and December 31, 2006 1.8 1.8 Additional paid-in capital 3,574.6 3,461.7 Accumulated other comprehensive income 130.2 46.1 Retained earnings 2,102.9 1,513.9 ------------ ------------ 5,809.5 5,023.5 ------------ ------------ $10,310.3 $9,019.3 ============ ============



NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except per share data) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------- 2007 2006 2007 2006 --------- -------- --------- ---------Revenue: Rig technology $1,409.2 $845.8 $2,629.0 $1,561.1 Petroleum services and supplies 746.1 589.9 1,437.9 1,130.9 Distribution services 344.8 319.1 696.7 645.6 Eliminations (115.2) (97.4) (213.0) (168.4) --------- -------- --------- --------- Total revenue 2,384.9 1,657.4 4,550.6 3,169.2Gross profit 683.8 400.7 1,298.8 750.5Gross profit % 28.7% 24.2% 28.5% 23.7%Selling, general, and administrative 186.6 154.1 374.5 298.2Integration costs -- -- -- 7.9 --------- -------- --------- ---------Operating profit 497.2 246.6 924.3 444.4Interest and financial costs (13.1) (13.0) (25.4) (26.6)Interest income 10.0 3.3 19.1 5.0Other income (expense), net (0.8) (11.0) (3.7) (14.0) --------- -------- --------- ---------Income before income taxes and minority interest 493.3 225.9 914.3 408.8Provision for income taxes 172.0 76.3 312.7 137.6 --------- -------- --------- ---------Income before minority interest 321.3 149.6 601.6 271.2Minority interest in income of consolidated subsidiaries 2.8 1.7 7.2 3.0 --------- -------- --------- ---------Net income $318.5 $147.9 $594.4 $268.2 ========= ======== ========= =========Net income per share: Basic $1.80 $0.84 $3.37 $1.53 ========= ======== ========= ========= Diluted $1.79 $0.84 $3.36 $1.52 ========= ======== ========= =========Weighted average shares outstanding: Basic 177.2 175.2 176.6 174.9 ========= ======== ========= ========= Diluted 178.2 176.6 177.2 176.6 ========= ======== ========= =========



NATIONAL OILWELL VARCO, INC. OPERATING PROFIT - SUPPLEMENTAL SCHEDULE (Unaudited) (In millions) Three Months Ended Six Months Ended ----------------------------- ------------------- June 30, March 31, June 30, ------------------- --------- ------------------- 2007 2006 2007 2007 2006 --------- --------- --------- --------- ---------Revenue: Rig technology $1,409.2 $845.8 $1,219.8 $2,629.0 $1,561.1 Petroleum services and supplies 746.1 589.9 691.8 1,437.9 1,130.9 Distribution services 344.8 319.1 351.9 696.7 645.6 Eliminations (115.2) (97.4) (97.8) (213.0) (168.4) --------- --------- --------- --------- --------- Total revenue $2,384.9 $1,657.4 $2,165.7 $4,550.6 $3,169.2 ========= ========= ========= ========= =========Operating profit: Rig technology $340.8 $134.1 $268.8 $609.6 $227.8 Petroleum services and supplies 177.8 127.0 171.0 348.8 242.1 Distribution services 23.1 20.2 24.9 48.0 40.6 Unallocated expenses and eliminations (44.5) (34.7) (37.6) (82.1) (66.1) --------- --------- --------- --------- --------- Total operating profit $497.2 $246.6 $427.1 $924.3 $444.4 ========= ========= ========= ========= =========Operating profit %: Rig technology 24.2% 15.9% 22.0% 23.2% 14.6% Petroleum services and supplies 23.8% 21.5% 24.7% 24.3% 21.4% Distribution services 6.7% 6.3% 7.1% 6.9% 6.3% Other unallocated -- -- -- -- -- --------- --------- --------- --------- --------- Total operating profit % 20.8% 14.9% 19.7% 20.3% 14.0% ========= ========= ========= ========= =========Note: Stock-based compensation expense and integration costs have been allocated to the respective business segments and unallocated expenses for all periods presented.



NATIONAL OILWELL VARCO, INC. AS ADJUSTED EBITDA RECONCILIATION EXCLUDING INTEGRATION COSTS (Unaudited) (In millions) Three Months Ended Six Months Ended ----------------------------- ------------------- June 30, March 31, June 30, ------------------- --------- ------------------- 2007 2006 2007 2007 2006 --------- --------- --------- --------- ---------Reconciliation of EBITDA (Note 1):GAAP net income $318.5 $147.9 $275.9 $594.4 $268.2Provision for income taxes 172.0 76.3 140.7 312.7 137.6Interest expense 13.1 13.0 12.3 25.4 26.6Depreciation and amortization 51.9 38.7 47.3 99.2 77.1Integration costs -- -- -- -- 7.9 --------- --------- --------- --------- ---------EBITDA (Note 1) $555.5 $275.9 $476.2 $1,031.7 $517.4 ========= ========= ========= ========= =========Note 1: EBITDA means earnings before interest, taxes, depreciation, amortization, and integration costs, and is a non-GAAP measurement. Management uses EBITDA because it believes it provides useful supplemental information regarding the Company's on-going economic performance and, therefore, uses this financial measure internally to evaluate and manage the Company's operations. The Company has chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.


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