Geneseo Student Managed Investment FundFeb-29

Company Overview

National Oilwell Varco, designs, constructs, manufactures, and sells systems, components, and products for oil and gas drilling and production, as well as provides oilfield services and supplies, and supply chain integration services to the upstream oil and gas industry worldwide.

Source: Finviz.com

Business Segments

• Rig Technology• Offers offshore and onshore drilling components and services used in the

construction of oil and gas rigs.

• Petroleum Services & Supplies• Markets consumables used in the extraction process of oil and gas

• Distribution & Transmission• Provides pipe maintenance, spare parts, and repair & operating supplies.

Source: NOV 10K- FYE 2012

Business Segments

Source: NOV 10K- FYE 2012

Oil & Gas Industry

• 2004-2008• $30 per barrel at the beginning of 2004 to more than $130 by mid 2008• Attracted investment in oil and gas exploration and development• Increased utilization, 70% to over 90%

• 2008• Collapse of spot price of oil from $140 to under $50• Diminished utilization to a meager 40%

• Perpetuated by a stalling economy, nearly halted exploration and rig construction

• 2009-present• Recovery in oil prices, approaching $100 per barrel• Growing Utilization rates, approaching 90%

Source: NOV Rig Census 2011

Utilization

Source: Rigzone.com

Source: NOV Rig Census 2011

Source: NOV Rig Census 2011

Period of High Utilization

Source: NOV Rig Census 2011

Backlog – National Oilwell Varco

Porters Five Forces

• Threat of New Entrants• Minimal, only few minor niche players show any potential to compete

• Industry Rivalry• Heavy price competition, especially in National Oilwell Varco’s PS&S segment

• Bargaining Power of Buyers• “[National Oilwell Varco] equipment is on 90% of the world's rigs, and a rig

cannot be built in the Western world without using some components from National Oilwell Varco.” – Stephen Ellis, Morningstar

• Bargaining Power of Suppliers• Threat of Substitute Products or Services• NOV’s services are easily replaced by in-house teams, especially in large

multinational customers.

Financial Overview

• National Oilwell Varco’s financial condition is strong and stable:• Debt/Equity - .21 (after adjustment for Robbins & Myers acquisition)

• Highly capitalized despite aggressive acquisition and growth strategy• Regularly generating over $2B USD per year• Stable bottom line growth

Source: TD Ameritrade