Good morning ladies and gentlemen and welcome to the National Oilwell Varco second quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please not that this conference is being recorded. I will now turn the call over to Mr. Loren Singletary, Vice President Global Accounts and Investor Relations. Mr. Singletary, you may begin.

Thank you Christine and welcome everyone to the National Oilwell Varco second 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 second quarter ended June 30, 2009, please note that some of the statements we make during this call, may contain forecasts, projections, and 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 on 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 discussions 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.

Thanks Loren and good morning. As Loren said I’m Pete Miller CEO of National Oilwell Varco and welcome to our second-quarter 2009 earnings conference call. Earlier today, we announced earnings of $220 million or $0.53 a share on revenue of a little over $3 billion. Included in this result are some unusual charges of approximately $224 million pretax or $0.37 per share. In a moment, Clay will discuss these charges in detail. Additionally, we announced new capital orders of $615 million, an increase over the $270 million announced in the first quarter. Also, we announced discontinued orders of approximately $100 million to end the quarter with a solid backlog of $8.7 billion. We will also discuss this backlog in greater detail in just a moment. We continue to build on a strong balance sheet and position the company to withstand the current challenging times and prepare for the opportunities that the future will ultimately present. In a moment I will come back and talk a little bit about the operations and give you a worldwide overview of what we are seeing. But at this point I would like to turn it over to Clay to provide more background on our quarter.

Thanks Pete. As Pete mentioned National Oilwell Varco did earn $220 million or $0.53 per share on $3 billion in revenue in its second quarter ended June 30, 2009. Broadly, we saw excellent execution by our Rig Technology Group once again in the second quarter, posting sequentially higher margins on lower revenues. However our second-quarter results both petroleum services and supplies, and distribution services declined due to falling rig counts stand increasingly fierce pricing pressure in North America, partly offset by relative strength and stability in certain of our international markets. I would get into these market forces a little more in a moment, but first I would like to note that our second-quarter GAAP results do reflect a number of charges, which bear addressing. First, we recognized $147 million pretax or $0.23 per share after-tax impairment charge on our carrying value of trade names acquired in our Grant Prideco acquisition, which we closed in April of last year. This is a non-cash charge, which arises from our retesting of all of our goodwill and intangible assets during the quarter in view of the deterioration in the rig count. Second, we recognized $56 million in pretax charges related to acquisitions made in the quarter and the result of a voluntary retirement program offered to our long tenured employees. These total $0.09 per share after-tax. $10 million of the $56 million of this are transaction charges arising from legal due diligence and other costs associated with acquisitions that were previously capitalized under GAAP, but which now must be expensed under FAS141(R). The voluntary retirement program charge of $46 million of pretax is half in cash and half accrued retiree medical expenses and option expense. The voluntary retirement program was completed during the quarter and is expected to result in annual savings…

Thanks Clay. At this point I would like to make a few comments about our operations and then I will turn it back over to you guys for whatever questions you might have. I think that the overriding theme is going to be cost containment and cost control. We clearly understand what is going on in the marketplace today, I mean, as Clay pointed out we know what is happening in North America, and I would caution everybody that while we think we are at the bottom, the bottom does not mean going up. You know, I think you could very well be looking at fishing along the bottom for a period of time. I think the other thing that Clay pointed out is that pricing pressure remains. I think, we can mitigate the pricing pressure with the things we have done on cost containment, but I think that to believe the prices won’t go down any further is probably her shade not even [ph] at this point because that happens in this kind of environment. I mean, I hate to throw out the I’ve been in the business for 30 years card, but I'm going to throw out the I've been in the business for 30 years card and whenever we think pricing has hit the bottom, it continues to defy and go down even further. So, what we believe we are positioned well enough to take care of that. And there are some green shoots and I will talk about those green shoots in just a moment, but first I would just like to talk a little bit about what we're doing in our operations, you know in distribution, I think we continue to control our cost very well, but more importantly we for novel and new ways…

Thank you. (Operator instructions) Your first question comes from Roger Read from Natixis Bleichroeder. Please go ahead.

Hi, good morning gentlemen.

Good morning Roger.

Good morning.

I guess the Brazilian awards would be the most interesting thing to us, I mean we understand the story with the ones that are continuing to look for financing, but the sort of incremental 28 orders from Petrobras, give us an idea of exactly how involved, you know to the extent you can, you are in terms of negotiations with them financing opportunities, would that be strictly Brazilian built rigs or does this also include the greater rig owning public out there?

Yeah Roger, obviously a lot of effort going into that and just to fill in the rest of the picture about this time last year, Petrobras started off by saying they needed 40 rigs and sooner after issued letters of intent for 12 and so these are sort of the incremental 28. And everything that Petrobras has said and done since that point is indicated that they are -- I think are very serious and committed to putting those rigs in place. We have since then seen a big meltdown obviously in the credit markets, which has kind of gotten away a lot of peoples plan, but nevertheless have worked closely with that customer on developing technical specifications for those rigs. Along the way, I think they have been under some pressure to build many perhaps most of these rigs in country in Brazil and I think that candidly has probably slowed us both down a little bit in terms of actually winning awards for these and are still wrestling with that issue, it is clear to us that they want a significant amount of work done in Brazil by the shipyards. We as you know have a large operation in Brazil, we are close to 700 employees, but we don't manufacture and actually a lot of our drilling equipment there. We think that most of the in-country construction work that is going to be done, is going to be performed by the ship guards with regards to the holes, and so we are optimistic that tenders are going to start flowing later this year, and that hopefully some of these 28 drilling equipment packages show up in our backlog and that is certainly part of our booking plans and an important part of our achieving the $3 billion to $4 billion in orders that we think we are going to get this year.

Okay and then my unrelated follow-up, PS&S, obviously lot different pricing international versus North America, I know Pete you said it is tough to predict where pricing goes, but as you look in the international arena based on some of the things you talked about the IPM projects etcetera, you are under the impression that pricing is at least moderating its declines internationally, if not finding a bottom or that if let’s say oil stays in the level its been in may be we have seen all the pricing declines we will see there.

Yes, I think Roger that‘s a fair statement. I believe that we probably are moderating in the decline. The other thing is that we are also kind of catching up in the cross containment arena and so that the two kind of work together, so I am not sure that you will see it really a much of a decline in the actual margins that we see it. I think we are hopefully we will be pretty flattish at this point, but you will continue to see people put pressure on the pricing. I mean that pretty much goes without saying in this industry, but again when you first kind of go into a downturn, it takes you a little while to catch-up on the cost containment side. But once kind of catch-up in cost containment side, you can help to mitigate the issue. So I think we ought to be flattish on the margin side.

Yes, that’s the fact that lot of the work done in international markets too are done on longer term contracts and so they would get less pricing on spot generally, so I think that’s helped to mitigate the pricing pressures here in this downturn.

Okay. Thank you.

Thanks, Roger.

The next question comes from Bill Herbert from Simmons & Company International. Please go ahead. Bill Herbert – Simmons & Company International: Thanks. Good morning, guys.

Hey, Bill.

Good morning. Bill Herbert – Simmons & Company International: Hey, Pete, with regard to trying to get a grip on normalized orders, if you will, if there is such a thing in this environment, but as we are sort of kind of casketing here along the bottom as you referred to earlier, one drill ship package and then a series of additional opportunities and inbound orders yields call it something slightly north of $600 million. Is that how we should be thinking about normalized orders in this environment going forward? One big package coupled with the usual assortment of this, that and the other yields something along the lines of $600 million in orders per quarter.

I think first off, when you say normalized orders, I am just sitting here smiling because I am not sure I have ever figured out what normalized orders were, but as we take a look at this, Bill, and we kind of dissected internally. You know, if you look at this quarter, you had 600 plus with one fairly significant drill ship in there. Bill Herbert – Simmons & Company International: Yes.

That leaves you with about a 350, and that 350 probably is a reasonable normalization given kind of where we are today. That 350 just includes a bunch of stock, new ranges, new top drives, new pipe-handling and presuming that stop is kind of a go forward type deal. And then you start adding in couple of land rigs here and there that are project oriented and then you start looking at what we believe are going to be some of the floaters in different things that are coming out. That really does kind of push you to a little bit different number, say, you have got the 350 plus, plus, plus and that’s really what we are kind of banking on as we go through the remainder of the year. Bill Herbert – Simmons & Company International: Great. That’s helpful. Secondly, with regard to the order guidance of $3 billion to $4 billion, I am wondering it’s a better way to look at this as opposed to getting hung-up on $3 billion to $4 billion this year because so much is contingent upon timing, financing etcetera is really to think about Petrobras’ needs going forward and the fact that you guys seem to persistent thanking of that clearly is going to get done or have a higher level of confidence in doing so. And whether or not these orders manifests themselves within the next two quarters or the next three to four quarters, it doesn’t really matter ultimately the business is going to be there?

I, you know, Bill, I couldn’t have said it any better myself. I mean at the end of the day, we have to have an arbitrary cut off and we have talked about those a lot, and our backlog cuts off on 1st of July. Bill Herbert – Simmons & Company International: Right.

And cut off in the 1st of October. And if an order comes in anytime after that, while we love it, we have to report the cut off date here sort of reporting a backlog every day, which quite frankly we are not going to do, its impossible when you take a look at the timing. We are making our best guess and we are hoping like as these things fall in, but I think that the way you put it is very well done. The fact of the matter is this stuff is going to get done. Petrobras has to have these rigs whether they order them in the next three months or the next six months, in the long term isn’t going to impact us that greatly as we forward into 2010 and 2011, but it will impact the future very well. So we are going to continue to try to give you guidance as best we can when the orders will come in, but rest assure they will come in and rest assure they will be there in the future whether or not they make it by the 1st of October or the 1st of November or the 1st of December, we are pushing hard to get that done, but the fact is they will come. Bill Herbert – Simmons & Company International: Great. Thanks, guys.

Thanks, Bill.

Thanks, Bill.

The next question comes from Jim Crandell from Barclays. Please go ahead. Jim Crandell – Barclays Capital: Good morning, Pete and Clay.

Hey, Jim, how you are doing? Jim Crandell – Barclays Capital: Great. My first question to go back to Brazil, it struck me that during the quarter that announced that they had gotten financing for two of their rigs in Brazil and then one other of those rigs changed ownership during the quarter. With those rigs in your backlog before this quarter took place or those still hanging out there?

Yes, Jim, we are already quite deeper and talking about specific projects than either Pete or I are comfortable doing. So we have long tried to stay away from talking about specific projects and specific customers. I know it’s a big picture here and I appreciate your point that’s out is that there has been progress made on the financing front, a lot of hard work, it’s going into these things by these drilling contractors and our own people; good support efforts from the various trade export finance agencies around the world and so we are seeing some progress on that front. But we did as we mention win one large drill ship package in the quarter from one of those customers who was able to secure financing in Q2. Jim Crandell – Barclays Capital: Okay. So those were general question, can you see deepwater new build orders the balance of this calendar year ex-Brazil and if so, do you think that they will more likely come from India or China, other NOCs or IOCs.

Jim, you will see somewhere. I mean I think that quarterly we all take about Brazil an awful lot because that’s kind of the yellow point of the room, but fact of the matter is that we are talking to other folks today about things like Arctic rigs, we are talking about rigs for the West African area for Southeast Asia and we continue to do that, and it’s a combination of folks that do that. We are talking to regular international drilling contractors, we are talking to IOC’s and we are talking to NOC’s, it really is kind of across the board, you are talking to different shipyards whether you are talking to shipyards in China or some of the bigger shipyards in Korea, we are talking to shipyards in the Middle East about some of these things. So it really is a little bit more than just the Brazilian operation. I know that, again, we talk about Brazil a lot but I think we pretty much have to, but the fact is that there is a lot of excitement in other areas that may be won’t manifest themselves in the next quarter, but they will certainly come across over the next six to 12 months.

Yes, you know, everybody is kind of running into the same problem which rig had only roughly 70 rigs in the world that can hold 6,000 foot. These are very scarce resources and Petrobras with the Santos Basin discovery obviously has very large rig needs, but they are not the only ones, there is lot of frontier deepwater basins out there left to be explored and developed. And so that’s -- the fundamental driver here is very, very solid. Jim Crandell – Barclays Capital: Okay. There were some reputable drilling contractors out with generation rigs being constructed that are available going forward and so your discussions with IOC’s relative to potential new rig orders, are they more specific in this looking for more specialized rigs or they or why would they want a new build versus if they could get one that’s coming on that’s currently available let’s say in the first half of 2012?

A lot of them what you see out there, Jim, is very much project specific. But also what you have is a lot of people, they want a rig designed exactly to their specifications and there they are going to go out and they are going to push hard to get it, but lot of it is very much project specific. It might need a couple of things there that some of the existing rigs don’t have. I think kind of points out something and I will talk about for a long time, a rig is not necessarily a rig. People have a tendency to look at the brick rig and the aggregate, and in fact the rig capabilities on lot of these rigs differ very, very greatly. Even on the -- when some says, while I have got a 6000 foot water depth rig, they are not all quite the same, so that’s why you continue to see the interest in these very, very discrete projects. Jim Crandell – Barclays Capital: Okay. And one final question, Pete, if I could, to the expense that this globe charter design catches on with may be Novo [ph] and others in the customer base, how does that impact your potential for rig equipment orders on a per rig basis?

Well, I think, Jim, globe charters are rig that will put a lot of equipment on and we will be watching it very, very closely. I will tell you this, where -- we’ve been in the rig design business for a long time. We like what we offer our customers. I think the numbers pretty well indicate that our customers like what we offer our customers. There is always going to be new stuff out there and we watch it closely. We will participate with the best we can, but I don’t think it’s going to update the need for the type of rigs that we are building right now. Jim Crandell – Barclays Capital: Okay. Thank you.

The next question comes from Joe Gibney from Capital One Southcoast. Please go ahead. Joe Gibney – Capital One Southcoast: Thanks. Good morning.

Hi, Joe.

Hi, Joe. Joe Gibney – Capital One Southcoast: Just want to touch a little bit on the non-Petrobras side, your rig (inaudible) Pete you mentioned a little bit inherent strength there that 350 million figure, frame, top drives, can you comment a little bit what’s your incremental outlook on the jack up side assuming there are no jack up packages booked this quarter, but you referenced the age of jack up fleet moving into a reverb scenario, but can you just comment on incremental opportunities that you are seeing out there on the jack up side?

Yes, that is correct, Joe. We didn’t have jack up packages booked in Q2 quite worth noting, I think every quarter up until this year, we’ve had jack up packages even though much of the billed book that’s been underway for the past few years remains un-contracted. Since the quarter closed, we have had a little movement on the jack up front and we have a couple of other folks we that are talking to, so its not that out there – with regards to jack ups.

And then Joe, I continue to believe that the jack up business is one that while it may be a little oversupply at a point in time, I think what you are going to see is a replacement and then the type of jack up rigs that people are demanding. You are saying that they are continuing to find work for a lot of the newer jack ups and we have been on the jack up retooling period for quite sometime, and that’s not up and this is going to die anytime soon. I think there is clearly going to be something in the future that will be positive for us. Joe Gibney – Capital One Southcoast: Okay. And then in terms of your, on the (inaudible) side to walkup or some backlog revenues not out of backlog, Clay, you intimated there, you commented it maybe a little bit more softness on the aftermarket side or lower aftermarket mix sequentially. Broadly speaking, are we seeing some stabilization here in the sort of after market work over the next couple of quarters looking to 2010 and your strengths loosening in doing ancillary service work, is this sort of stabilizing? Do you see this bleeding a little bit further back half of the year?

Yes, I think so Joe and I kind of referenced this in my comments, but our sense is that when we got into the first quarter, you saw plummeting day rates in just a lot of very dark outlook for the global economy broadly and slowing down of economic activity. A lot of our drilling contractor customers put out stock spending OpEx, stock spending CapEx and that affected both our order book for new capital equipment orders along with spare parts and services, and other things that we sell which show up on their P&L as operating expenditures. As we move through the quarter, we think we are starting to see little bit of improvement there even though our outlook calls for aftermarket to be down a little bit in Q3, it has stabilized. I think our Q1 number, I don’t call a precise number, but it was down in the order of 18% or 20%, and this quarter was down about another 4%. We have gone for another little slide in Q3, but we think that we are finding it although at the bottom here. We also know more so on the PS&S side, but this probably extends to rig as well that a lot of these customers are getting very interject about pulling equipment offer stag rigs and redeploying it on rigs that are working in order to avoid expenditures during the short run, and that works along as rig count didn’t go up. Once it starts to move up before those rigs can go back to work, those drilling contractors have to spend money to re-outfit them with spare parts and consumables. So we think that’s kind of entering into the freight here as well. Joe Gibney – Capital One Southcoast: Okay, helpful. I appreciate it. I will turn it back.

Okay. Thanks, Joe.

Thanks, Joe.

The next question comes from Collin Gerry from Raymond James. Please go ahead. Collin Gerry – Raymond James: Hi, good morning guys.

Hey, Collin. Collin Gerry – Raymond James: Just kind of a bigger picture question, the latest REIT census, I think it showed about 3000 rigs in the US if my figures are correct, what’s your sense on what percent of those really don’t come back into the rig market when eventually the rig count does start moving up?

Well, you know, Collin, I did trouble with all my customers whatever I opine on this. So I would say this, I mean I think it’s pretty eminent out there today that the rigs that are continuing to work in the rig that the operators want or the best technological rigs. Take a look -- want are the, the highest rig counts and where they are going, and I think you will continue to see that the contractors are going to want to upgrade their rigs especially possibly can simply because that’s what the operator is demanding. We have always said that contractors don’t retire rigs operators do, and I think a lot of the rigs that are stacked out today won’t see the light of day again. Now, if one of my customers said, well, that’s wrong then I would agree with my customer. However, I kind of standby where I am right now. I think that it’s pretty clear that the industry wants credit rigs.

Yes, Collin, I will approach the question from the other angle which is how many of those are new AC powered electronic control quick move rigs and we think that number is about 450 that have been added over this latest build cycle. There is probably another 350 may be 400 rigs that are new, but they are older designs and don’t really incorporate the modern technology that makes those new rigs so much more efficient. Collin Gerry – Raymond James: Okay. That’s helpful. Another kind of bigger picture question, last quarter, we talked about a lot of projects being shave ready [ph], oils picked up here obviously. I guess do you get the sense of where the point where you start seeing a lot of the international work getting underway and I am thinking of it in the context, Schlumberger did a day were saying that its really going to hinge on where oil prices end the year and that 70 might be the right target to look at. I guess how do you see things plan out?

Well, I think that 70 would certainly be a right target. Here is the problem, Collin, I think that it’s not so much what the price is that are point in time. It’s what the expectation level is. And its not (inaudible) stocks, I mean you guys know a lot about how you pick stocks and its not about necessarily what’s you have in the last 20 minutes what you expect over the next year. I think that the determination on project go forward is really somebody sit back and saying, okay, I am looking at the economy, I think we are seeing some green sheets, I think the economy is going to improve. If the economy improves Airgo, you are going to need more energy. Airgo, the price of oil will probably go up. I think that’s got to be the calculation that you make as oppose to whether or not oil is $70 sort of day. I mean oil was 70 bucks a month ago and we are in the 60s now and it goes back up to 70. Clearer to that, that’s positive for projects but I think it really has to be what is your expectation on the go-forward and if your expectation is that the economy isn’t going to improve with the oil prices are going to go up, you probably going to be hesitant to forward with things. So that’s kind of the way we see it and tell there is some more clarity on that. You won’t see people pull the trigger quite as rapidly as they have in the past. Collin Gerry – Raymond James: Okay. That’s helpful. So it sounds like the underlying thing that might be stability in oil prices and the direction might be more independent then the spot, number where we are right now.

Absolutely. And if you could ever find stability in oil prices is a good job. Collin Gerry – Raymond James: All right. Last question for me on the technology front, it’s been a while since we, we got a status update on Teleserve. Maybe give us what’s the latest development to there and where in the stages we are in developing that product.

Yes, technically, Teleserve continuous to perform very, very well. its was actually down just a shade in Q2 from Q1 like everything else in the old field, its in projects that it, if we are queued up to run that technology on. Move out to the right and running those some delays, but technical performance remains very, very strong for anything not aware. And teleserve is the proprietary wired drill pipe that is effectively offers broadband from the rig down to the bottom of the hole and kind of is a real step chanechu in terms of data communications, with what’s happened in whole and we are very, very excited about. We are pleased that the early adopters of this technology which includes a handful major ICOs and NOCs are coming for lot of repeat business. Since our order book reflects satisfied customers, coming back and deploying on new projects and so. We feel pretty good about the outlook for the business. We did announce few months ago, we entered into an agreement with Schlumberger on a joint venture, they are going to buy into ownership position and in Teleserve. And we have not yet closed it, but we do expect to close that sometime in the next few weeks. Collin Gerry – Raymond James: Okay. Great. I will turn it back. Thanks guys.

Thanks.

Thanks, Collin.

There is time for one last question. The final question comes from Geoff Kieburtz from Weeden. Please go ahead. Geoff Kieburtz – Weeden & Co: Thanks very much. Pete, last quarter you said you thought that we would get $3 billion with orders this year with a little bit of luck. How would you characterize your opinion or probabilities on that outcome today?

Well, I think we are still there. I mean as Clay kind of pointed out in lot of this comments and I followed up on little bit later, Geoff, it’s more of a hockey stick but that’s to be expected. I think as you go into an environment like this, two years ago we were closing deals pretty quickly because everything was moved in so rapidly today. There is a lot more conversation on contracts, free pays, doubting the eyes and crossing the teas, and what might have come to flush and very quickly on the past has taken a little bit more time today. What are the things that’s nice for us is, we have great visibility into the market. We are talking to our customers, we know what’s the size project and what’s not. And the consequence of that is, we are pretty already. They are all real questions coming one of timing. How quickly can you get the deal closed as opposed to you have done in the past. So we are still optimistic about our projections on that Joe. Geoff Kieburtz – Weeden & Co: Okay. So if you had given us a probability three months ago, your number today would be unchanged?

Ai, yes, absolutely. Geoff Kieburtz – Weeden & Co: And you mentioned that the backlog we may see orders coming into the NOB backlog over the next few quarters that are not rigs. I think you mentioned FPSOs and some other stuff, how much of the current backlog is not rigs?

About three fourth of the backlog, Geoff, $6.5 billion are major new build rig projects. The remaining -- its actually relatively, I am not sure how to characterize it, because its not necessarily whole rigs, but it’s a lot of rig equipment. I think what you are driving towards this non-rig equipment? Geoff Kieburtz – Weeden & Co: Correct.

And that’s little bit of a gassier but may be on the order of $0.5 billion or so. Geoff Kieburtz – Weeden & Co: Okay. So it’s a very small number as a percentage right now.

Right.

Right. Geoff Kieburtz – Weeden & Co: Okay. And I guess just last question, so I just have the opportunity, how do you expect your pricing on new orders over the say the next 18 months or may be more importantly how do you expect margins on orders that you take in the next 18 months to compare with what you are producing today.

Yes. We are also as we mentioned on our prior comments, were using this opportunity to reduce our cost and to become more efficient, we have also been helped out by a stronger US dollar than where we saw the dollar to much of ’07 and ’08, so that gives him a little more latitude on that front too. Geoff Kieburtz – Weeden & Co: Right. Great. Thanks very much.

Thanks.

Okay. Thank you.

This concludes the Q&A portion of today’s conference. I will now turn it over to Peter Miller for additional comments.

Thanks, Christine and thank you all for listening in today and we look forward to talking to you at the end of the third quarter. Thank you very much.

A replay of today's conference is available by calling 888-843-8996 and enter the pass code 24794996. You may also access the webcast recording at www.nov.com. Thank you for participating in the National Oilwell Varco second quarter 2009 earnings conference call. This concludes today’s conference.