Good morning ladies and gentlemen, thank you for standing by. Welcome to the National Oilwell Varco 2009 First Quarter Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday, April 23rd, 2009. Now I would like to turn the conference over to Mr. Loren Singletary. Please go ahead, sir.

Thank you, David. And welcome everyone to the National Oilwell Varco first quarter 2009 earnings conference call. With me today are Pete Miller, Chairman, President, and CEO, and Clay Williams, Chief Financial Officer. Before we begin this discussion of National Oilwell Varco's financial results for its first quarter ended March 31, 2009, please note that some of the statements we make during this call may contain forecasts, projections, estimates, including but not limited to comments about our outlook for the company's business. These are forward-looking statements within the meaning of the Federal Securities Laws, based upon limited information as of today, which is subject to change. They are subject to risk and uncertainties and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. I refer you to the latest Form 10-K, National Oilwell Varco has on file with the Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information regarding these as well as supplemental, financial and operating information maybe found within our press release, on our website at www.nov.com, or in our filings with the SEC. Later on this call, Pete Clay and I will answer your questions. We ask that you limit your questions to two, in order to permit more participation. Now, I’ll turn it over to Pete for his comments. Merrill "Pete" Miller, Jr.: Thanks Loren and I hope you are all on here. We just got some strange feedback on the call. So, I hope you’re able to listen to me. And again we appreciate you calling in here today. Earlier today, we reported net income of $470 million, or $1.13 a share on revenue of $3.48 billion. This compares to a net income of $1.40 a share on revenues of $3.8 billion in the fourth quarter of 2008 and net income of $1.11 a share on revenues of $2.7 billion in the first quarter of 2008. Additionally, we reported a quarter ending backlog of $9.6 billion after taking in a net $240 million of new orders during probably what is historically one of the most difficult economic times in the world economy. I will provide more color in a moment regarding our operations and backlog in this call. These are very challenging times economically throughout the world generally and in the oil and gas business specifically. However, with challenges cum opportunities, and at National Oilwell Varco we are positioned to take actions through these difficult times to become an even stronger company as we look to better times in the future. We will avail ourselves of opportunities and have a wonderful balance sheet that puts us in a position to be able to do things that are going to strengthen the company throughout this downturn. At this time, I would like to ask Clay to provide more color on our results.

Good, thanks Pete. National Oilwell Varco reported earnings of $1.13 per diluted share on $3.5 billion in revenue for the first quarter of 2009. Q1 earnings and revenues declined sequentially as rig counts and oil field activity fell in every major market around the globe as our customers retreated in the phase of increasingly bleat economic news. The company’s financial results for its first quarter of 2009 tail-to-tail of two businesses. Our backlog-driven Rig Technology segment continued to grow nicely up 5% sequentially with again exceptional execution at strong flow-through s. But our rig count-driven petroleum services and supplies and distribution services segments declined sharply, as the industry shared an average of 700 operating rigs from the fourth quarter levels, down about 21% worldwide. Overall revenues declined 9% at 48% decrementals from Q4 to Q1. Year-over-year pro forma comparisons are better, consolidated revenues increased 10% at 17% operating leverage, driving an 8% improvement in operating profit. On a GAAP basis, NOV’s quarterly earnings increased $0.02 per diluted share from the first quarter of 2008. Lately we’ve heard others talk of a Q2 bottoming in North American rig counts referencing incrementally less terrible news as marking a second derivative inflection point signaling that we are near the bottom that, but in our candor we do not know. What we do know is that a recovery, a return to prosperity is never a question of if, but when. We do know that a recovery is on the horizon perhaps as early as late this year, but we don’t know when it will happen. In the meantime, our customers are suffering and the industry is undergoing an extraordinarily breathtaking unwind of a steady five-year buildup in activity. It’s a cyclical business they can bite and right now it’s biting hard, but it never…

Thank you, sir. (Operator Instructions). Mr. Geoff Kieburtzof. Please respond with your company name followed by your question. Geoff Kieburtzof – Weeden : Merrill "Pete" Miller, Jr: Well, I think, when we talk about large, what we are really talking about is the viability of the financial community. I think some of the things, and also it's some amount of timing. What you have today in this environment is probably a more protracted negotiation timeframe. I know mentioned earlier that drillship that will sign up here eminently that we thought, we get in the first quarter, year ago, we would have hit through that pretty quickly but because of the protracted timeframe, making sure that everybody has got financing making sure that we in turn get, our down payment in-house, before we put anything into the backlog, that that those timing issues require a little bit of look just on the cut-off dates if you will. We cut-off everything on a 31 March and if something moves into the second or third of April than its well, gosh, we didn’t get in the first quarter, it moves into the second quarter. And I think also, it means that there has to be a little bit of financial viability out there and I think some of the governments are going to have to step-up to deploy with some of the assurances that they'll like peak in Norway and some of the other places that they will ensure and guarantee some of the financing that there. So that’s, that's really the type a lot. We don’t think, it's a lot that is unprecedented. It's just going to be moving a little bit more quickly that it appears, it is right now.

And there is less urgency relatively on the process, right now to Geoff, I mean, part of that is it, that as Pete, just mentioned a lot of our customers are pursuing government back financing on these projects and the agencies that he just referenced require a lot of documentation and things just tend to move a little more slowly so that, it just cranking at a more methodical price and it was, just as last year. Geoff Kieburtzof – Weeden: You, I think you have mentioned that you’ve been working particularly with the backlog that the customers that represent the backlog at risk. You’ve been working with them to help. You’ve arranged financing and help them more through their problems, have you been experienced, have you seem things getting better or is the system still kind of gummed up here? Merrill "Pete" Miller, Jr: Geoff, I would say we're seeing and getting a little better. I think that – I think there is a little bit more money that's available to folks today I mean, I think you, it just from what you look at in the financial community, if you try to finance anything in December, January, you were probably out of luck, but today you’re starting to see a few things for you and so, I think that I would say clearly from late December, January to today, things haven’t proved and I think the psychologies improved, and I also think the financial markets have improved a little. Geoff Kieburtzof – Weeden: In terms of the backlog that a risk now I guess you said $380 million. Can you characterize the composition of that in terms of, the way you talk about backlog say international, domestic, land offshore or possibly not even in drilling equipment itself? Merrill…

Thanks sir. And Mr. Jeff Spittel [Natixis Bleichroeder]. Please state you company name and followed by your question. Jeff Spittel – Natixis Bleichroeder: Sure, Jeff Spittel, Natixis Bleichroeder. Good morning, guys. First question, just I appreciate the comments about Brazil, if you could talk, I guess a little bit more we started to hear out of Petrobras and in the press a little bit about additional orders, for floaters, appreciate that things are little bit backed down in terms of financing for that initial wave of 12, but could you give us a general sense I guess in terms of timing and what the outlook is for the plans behind that initial package of 12 floaters. Merrill "Pete" Miller, Jr:

As a reminder to Jeff, we announced we won 3 of the 12 backlog in Q3 of last year and have a couple others that we’re still working hard with those customers to try to get financing on that. Jeff Spittel – Natixis Bleichroeder: Okay, and then if we could switch gears over the land market, principally in North America, could you talk about people are obviously getting to be cannibalizing drill piping, consumables, as the rig count is continuing to fall through Q2 here. Could you talk about comparing that process versus some of the prior downturns and what effect the proliferation of the shale plays has had on that process this time, if it’s different or if it’s not? Merrill "Pete" Miller, Jr: Yeah it’s a try to do practice when the business cycle down our customers are pretty energetic about pulling consumables and expendables off of rigs they go idle and it’s not just drill pipes, mud pump liners and centrifugal pumps and so whole mired of things. So we’re kind of seeing it across our business. I guess as you point out the difference this time there is a lot more horizontal drilling going on. And so we think that it makes the average rig running a little more drill pipe consumptive, because it – it now will be tend to be drilling a horizontal well which burns through drill pipe faster. Interestingly, here in the last quarter or two we’ve seen non-vertical drilling, directional plus horizontal rise above the 50% mark in the U.S. market. It’s now about 60% of horizontal wells or horizontal rigs are down only about 37% whereas vertical rigs are down more or like 60%. And so it's evident that the economics of these plays, the economics of drilling horizontally appear to be surviving the economic stress a lot better. And so, but in spite of all of that when the rig count plummets 51% from peak to where we are now, demand for drill pipe is going down and we certainly felt that in our businesses. Jeff Spittel – Natixis Bleichroeder: Okay, thanks guys. I will turn it back. Merrill "Pete" Miller, Jr: Thanks Jeff.

Thank you sir. Mr. Bill Herbert. Please state your company name followed by your question. William Herbert – Simmons & Company International : Thanks. Good morning guys. Merrill "Pete" Miller, Jr: Hi, Bill. William Herbert – Simmons & Company International: Pete getting back to the Q1 orders and attempting to bridge that with the guidance and lets just stick with the $3 billion kind of low end of the range. So, if the math is right here, you are going to have to average about $900 million a quarter going forward in order to meet the lower end of that range. Walk me through if you will, how much of that is contingent on Petrobras? And what is non sort of Petrobras related opportunities? Merrill "Pete" Miller, Jr: Well, I think Bill, I won’t get too specific in the sense of, given your numbers. William Herbert – Simmons & Company International: Okay Merrill "Pete" Miller, Jr: But clearly, we would expect a portion of that and a good portion of that to be in the deepwater rigs that would come out of Petrobras. And as you take a look at the first half $900 million a quarter is absolutely right, methodically, that’s just not the way at all it happens so you know, you could have the $500 million a quarter William Herbert – Simmons & Company International: Sure Merrill "Pete" Miller, Jr: And a $1.4 billion a quarter something like that. But if you take a look at some of these Petrobras rigs, you’re talking, lets say roughly speaking $2 to $250 million per and so as we look at the few of those, you can kind do the math, and think well if you picked up four five of those, what that would mean for you, there is a lot of land business that I mentioned earlier in the Middle East. Some of those lands rig there are much greater than you’ve have for instance you might sell a rig in the United States for $13 million, but by the time you do the things that you need to do for a dozen or the rigs are even north (inaudible) type rigs, you are up to $30 million to $35 million. And also, it’s not just Petrobras that’s looking at rigs. We mentioned Petrobras simply because that’s the one that’s out there and most of our shareholders are pretty cognizant of what’s going on there, but there will be others that will in fact order some new rigs be they floaters, semi-submersible drill ships and/or I think some jack ups believe that or not so. William Herbert – Simmons & Company International:

Merrill "Pete" Miller, Jr: That the fact of the matter is there is still a lot of stuff that’s out there that we’re working on. When you look at the tender offers that we have today, it’s still pretty substantial. It’s not, our folks are working very, very hard diligently getting a lot of quotations and bids out there. I think the reality of it just becomes one of timing. So, we are not disappointed at all about where this is going, and I think the nice thing is that with the $9 billion $9.6 billion backlog that we have today, we can withstand a quarter like we just had, and not really miss a beat in what we are doing in our Rig Technology Group. And when orders start coming in, I think you’ll see as the rig count goes down then at some point you’ll start to see the build of a one-to-one book-to-bill ratio. William Herbert – Simmons & Company International: Merrill "Pete" Miller, Jr: Yeah William Herbert – Simmons & Company International: So, if that drillship had in fact landed in Q1, you probably would have been tracking relatively closely to your original expectations, correct? Merrill "Pete" Miller, Jr: Yeah, much more closely, that's correct. William Herbert – Simmons & Company International: Okay. And is the drillship, is that a Petrobras related opportunity or is it something else? Merrill "Pete" Miller, Jr: It's a Petrobras related opportunity. William Herbert – Simmons & Company International: Okay, and then just generally speaking, you’ve have recently consummated the couple of acquisitions, I think you’ve been amongst the most sort of demonstrative about putting your balance sheet to work and investing in this part of the cycle which is absolutely the right thing to do. I am just curious you…

Thank you, sir. Mr. Brad Handler, please state your company name followed by your question. Brad Handler – Credit Suisse: Thanks, good morning. It’s Credit Suisse. Merrill "Pete" Miller, Jr: Hi Brad.

Hey. I guess I’ll stick with the order discussion as well as please. Although I think those just try to sort of put it into some perspective, but so is the message and I will move on. Is the message that, it’s not really a little bit of luck, but it’s the same guidance as what you have been trying to illustrate all year?

No let me be clear. We need or we are less than improve over the – what we’ve had the last couple of quarters. The rig count plummets 51% we don’t really view ourselves being particularly having good luck here lately so.

Yeah, right, that makes sense. I’ve gotten the sense that up until, fairly recently there was a little bit more conviction of what we heard in your prepared remarks and so on just trying to fill that out.

Oh, I wouldn’t parse the words too much because I mean – again we like what we see into the future. I think, when we talk about luck, luck is probably much more of a timing issue as opposed to we know there is a lot of things are going to be done, but it really is a question of just timing.

Okay. Well, that’s helpful. It sounds like if I’m (inaudible). Merrill "Pete" Miller, Jr: Yeah we are not going on to, David. I’m sorry. Go ahead Brad.

Maybe, we’re clear again. Okay, couple of elements within that please just to help us understand it. If I understood it right, maybe half of that outlook came from the upgrade and refurbishment process, perhaps by existing contracts drillers taking advantage of a little bit of downtime. There was obviously some element of that not happening in the first quarter maybe that’s not so surprising, but what’s the visibility on that part of your order book.

No it's actually Brad, it would be less than half. I mean, we need to have some big offshore rigs come our way to hit the guidance. Brad Handler – Credit Suisse: Okay. Merrill "Pete" Miller, Jr: But I mean the answer to your question, yeah we saw kind of a first quarter paralysis that we think is in the cannibalization process going on, but then only last for so long and Pete’s comments earlier were referencing the fact these guys are going to have to get back to buying. You are going to have rigs come into the shipyard to take advantage of that downturn and get they are going to refurbish equipment and upgrade components through that window. Brad Handler – Credit Suisse: Okay, very good. Just a couple for me if I can squeeze it and I apologize. I know it's something like. What implication does it have for you, if the Petrobras in fact with the 28 upcoming rigs kind of mandates in some sense and I am curious for your thought but mandates that it is sort of local production driven, if you will local manufacturing is it just a takeaway from some of the opportunities for you or is it not affects your outlook? Merrill "Pete" Miller, Jr: No it really doesn’t affect us too much at all. I think when you talk about the local, content of that, Brad what you are really talking about are the shipyards in holes and it's not there somewhere to what you see, when we go to Korea today, you have, the Koreans build the holes be it a drillship or a semi-submersible and we put on the drilling package. And you will see the same sort of thing that would happen in Brazil. I think it's…

Thank you sir. Mr. Jim Crandell, please state your company name followed by your question. James Crandell – Barclays Capital: Good morning Pete and Clay..

Good morning Jim. James Crandell – Barclays Capital: Pete Halliburton and Schlumberger are good customers of yours, if they were to do a lot of the IPM works in Iraq in your opinion would they need a lot of newer rigs or are older rigs sufficient to do a lot of the field development that will be required there?

I think it would be a combination Jim. It would totally be dependent upon what the particular field was, but I think what we’ve seen in Iraq today is there are some fields that you can probably use some existing rigs which I think each one of those companies would be able to come up. But there is other fields that are going to have a little bit more, I think the requirements are such that you would probably want to put a new rig that was more fit for purpose in there. So I think it will be a combination of factors. James Crandell – Barclays Capital: Okay. Second question Pete, can you give me an update on, let’s say potential projects that you are working on now that are not progressing because the customer isn’t paying you, have there been any additional ones since the last quarter? Is it pretty much the same situation?

Yeah, Jim, the $32 million, we relieved out of our backlog were projects we sort of gave up on and then we had another group of drilling equipment it was lose odds and ends that came into that bucket. So, it went from $364 million at the end of Q4 that we identified at risk to about $380 million this quarter that we have identified at risk James Crandell – Barclays Capital: Do you think those projects, Clay, project, your projects that involve new rigs, well that those are those or most of that would be continued by a major oil company and that they would not be canceled, they would just transfer ownership at a present time to renew more financially stronger company?

One of the offshore rigs has a customer out there and we are working to try to get that, find somebody to go ahead and complete that rig, the other is a little more speculative. James Crandell – Barclays Capital: Okay. Activity in Pete and Clay, certainly is flowing precipitously here in the last 6 months, but one or two companies are now saying that is bottomed and should start turning out. Do you see that reflected in your interest in new rigs in your business?

Probably, I’ve heard and I wouldn’t disagree with some of the folks that have said that they think it has bottomed and it’s moving up. There is one or two are the more, I think well financed company there that we continue to have some very, very fruitful conversations with and I think we will probably sell somethings under this year. I think it’s probably going to be more towards the latter part of the year before we’d see some meaningful improvement there. But as I kind of mentioned earlier, the nice thing about it is we’ve already had pretty in-depth discussions with a lot of our customers there and much of what’s going on there is shovel ready, it’s just a question of, I think financing and price of oil and whether or not the folks want to push forward. But I think when they do, decide they want to do it’ll be something that will happen fairly rapidly. James Crandell – Barclays Capital: Okay and last question, you are obviously very close to what’s is going on in Brazil. Do you think it’s possible if the deepwater rig market loosens up that a meaningful portion Brazil’s 42 rigs will be gotten from existing rigs that are already out there, but that are idle mean number new rigs could come down maybe even measurably come down from those 42?

I’m not too sure on that Jim. I mean, I think what you’ve got right there is, there is so many specific items about these rigs that are so much what’s the water depth and I think we have a tendency to look at deepwater rigs and kind of just all-in-one class one in fact a lot of them can do things quite differently and I think that the Brazilians are probably pretty intent on pushing ahead with a lot of the stuff that they have got in their plants right now to build. So, well some could be displaced. I’m not sure I’d say to be meaningful. James Crandell – Barclays Capital: Okay, thank you very much

Thanks Jim

Thank you sir. And ladies and gentlemen due to time constraints that is our final question. I would like to turn the call back over to management for any closing remarks. Merrill "Pete" Miller, Jr: Well, thank you very much for calling in and we look forward to talking to you at the end of our second quarter Thank you very much.

And ladies and gentlemen, this concludes the National Oilwell Varco 2009 first quarter earnings conference call. If you’d like a replay of today's conference, please dial 303-590-3000 and enter access number 11128066. ACT would like to thank you for your participation. You may now disconnect