Good morning, ladies and gentlemen, and welcome to the National Oilwell Varco fourth 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 note that conference is being recorded. I will now turn the call over to Mr. Loren Singletary, Vice President, Global Accounts and Investor Relations. Mr. Singletary, please go ahead.

Thank you, Christine, and welcome everyone to the National Oilwell Varco fourth quarter and full year 2009 earnings conference call. With me today is Pete Miller, Chairman, CEO, and President of National Oilwell Varco, and Clay Williams, Chief Financial Officer. Before we begin this discussion of National Oilwell Varco’s financial results for its fourth quarter and fiscal year ended December 31, 2009, please note that some of the statements we make during this call may contain forecast 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 can assume that these forward-looking statements remain valid later in the quarter or later in the year. I refer you to the latest forms 10-K and 10-Q National Oilwell Varco has on file with the Securities and Exchange Commission for more detailed discussion of the major risk factors affecting our business. Further information regarding these, as well as supplemental financial and operating information may be found within our press release or on our website at www.nov.com or in our filings with the SEC. Later on this call, we will answer your questions which we ask you to limit to two in order to permit more participation. Now I will turn the call over to Pete for his opening comments.

Thanks, Loren, and good morning. Earlier today we announced fourth quarter 2009 earnings of $394 million, or $0.94 a share on revenue of $3.13 billion. We also announced full year earnings of about $1.5 billion, or $3.52 a share on revenues of $12.7 billion. Given the challenges faced by the world-wide economy in the past eighteen months, these are very solid results. We greatly appreciate the loyalty, dedication, and efforts of all of our employees throughout the world that created these results. Additionally, we announced year-ending backlog of $6.4 billion, with an order intake of $624 million during the fourth quarter. Clay will expand further on these results and backlog in a moment. Then I will finish with some comments about the market and our operations, and then we will answer any questions that you might have. Clay?

Thanks, Pete. National Oilwell Varco posted good results in the fourth quarter, earning $394 million, or $0.94 per fully diluted share on $3.1 billion in revenue. Excluding $14 million in pre-tax transaction charges, earnings were $0.96 per diluted share, up a cent from third quarter and down $0.48, or 33% from the fourth quarter 2008 earnings, excluding transaction and restructuring charges from all periods. Fourth quarter operating margin of 19.8% was down slightly from 20% in the third quarter, and sequential operating flow through our leverage was 9% on the 2% increase in sales. Compared to the fourth quarter of 2008, operating margins declined 320 basis points, and the company posted decremental operating leverage of 38% on a year over year sales decline of 18% excluding transaction and restructuring charges from all quarters. On the full year 2009 the company earned $1.5 billion or $3.52 per diluted share, compared to $2 billion or $4.90 per diluted share in 2008. Revenues were $12.7 billion in 2009 compared to $13.4 billion in 2008 on a GAAP basis. Excluding transaction impairment, voluntary early retirement program and restructuring charges, 2009 full year earnings were $3.89 per diluted share. Adding in the ProForma effect of the Grant Prideco acquisition which closed in April 2008, sales for 2009 declined 9% for the year owing to a much softer level of drilling activity throughout the year as compared to 2008. 2009 ProForma operating profit of $2.5 billion declined 19% from $3.1 billion in ProForma operating profit generated in 2008. All in all a good result for a challenging year. It saw precipitous fall in rig activity in a year over year worldwide rig count that was down 31%. Turning back to the fourth quarter results, the company benefited from a nice recovery in both our petroleum services…

Thanks, Clay. What I want to do at this time is just make a few brief comments about what I think some of the overriding themes are going to be as we look at this industry over the next couple of years. And I'm going to reiterate some of the things that Clay pointed out, but fundamentally there's about six things that we think are really going to be driving the business, and number one is the inventory replacement. Just like the economy in general, inventories in our industry have been driven down as people became more efficient. Those inventories have to be replaced on the rigs both in our distribution and our PS&S business we're positioned wonderfully to take advantage of that. Technology is still going to rule. I think what you have to have are environmentally sound, safe, and efficient equipment out there, and this isn't just in a drilling rig, but this is almost everything that we manufacture and it's also very discrete items. As Clay pointed out, we're putting a lot of top drives on rigs today, new top drives. We're putting a lot of new iron roughnecks on rigs. Our new bits like our DuraForce bits, our new bore holes — I mean, these things are all very, very important and I think the technology that you're going to have is going to rule. Also, technology is on a little bit shorter lifespan today, much like computers. It's expanding and changing very rapidly and so things that in the '70s we made that were going to last for 30 years today may be replaced in about 10 years. The shales, obviously you're going to hear an awful lot about shales from everybody in the service industry. Shales take a lot of high tech equipment, they…

Thank you. (Operator's Instructions) The first question comes from Jim Crandell from Barclays Capital. Jim Crandell – Barclays Capital: Good morning, guys. Another great quarter, congratulations. Pete, I'm not going to ask about rig equipment this morning, but first of all on your Ambar acquisition from Patterson and Fluids, I assume you're not buying Ambar to rename a US focused niche mud company. Can you talk at all about the opportunity in that business and your strategy?

Jim, I think that you're obviously right. I mean, as we've talked about acquisition in the past we've said that anything we buy really has to fit into our international template and we feel that way with Ambar. We buy a lot of US-based companies and we'll continue to obviously operate in the US, but we also want to be able to develop those products and put them into the international arena, and we think there's an opportunity here. We've been in this business for a long time. When you take a look at our branch operations, we've had those and they've been part of the legacy Varco and Tuboscope companies and then of course when we merged in 2005 they became part of NOV, but we've had mud up in the Rockies for quite some time and we've partnered up around the world with a lot of other mud companies because really it's kind of a defining factor and a lot of this is the solace controlled equipment. So about a year ago when we bought Spirit Mud we also became a big producer of barite and so we're a cruncher and producer and we actually sell that to a lot of the other companies, but we believe there's an opportunity international and actually a very good opportunity to be able to expand this business because look we've already got the infrastructure in place in most of the big major oil fields around the world and as you take that we can just kind of put a lot of the different operations in those facilities and be able to, we think, compete very favorably with some people that do that today. Jim Crandell – Barclays Capital: Okay, thanks. And my second question is, I know in the past Grant Prideco has had some exceptional leverage from a bounce in North America, can you comment on where inventories of drill pipe may be in North America today, what you're seeing from domestic land drilling contractors in terms of pipe buying today both for let's say applications for horizontal wells and for conventional type wells?

Yeah, Jim. There's obviously a lot of pipe on the ground kind of on a global basis across North America as rig counts have dropped from 2,000 and now it is around 1,250 or so. So there's a lot of idle rigs and idle strings of pipe, but that pipe is mostly commodity type pipe, API connections, NC50 4, 4.5, 5 inch conventional pipe strings. What the industry's finding across North America is that as they push out these long laterals and long horizontals they're really driving up the torque and the stress on the pipe tremendously and so a lot of the new shale place areas like the Marcellus in the northeast are moving more towards high torque connections and so that's really helping us from a mixed perspective. So the overall kind of supply/demand situation is out of balance given all the commodity pipe on the ground, but we've been able to kind of put up good numbers here quarter by quarter through the downturn largely because we've seen such a favorable mix shift towards the premium pipe for those kind of programs plus all the offshore rigs that are flowing into the market now, they generally tend to buy much more premium landing strings and drill pipe strings which are better margins for us. Jim Crandell – Barclays Capital: Okay and just a quick follow-on, Clay or Pete, could you characterize the upturn in demand you're seeing for new rig orders in the US land rig market to do this unconventional drilling today? Are you just starting to see the early signs and with the horizontal rig count back up now to peak levels and continued interests in drilling here, do you expect a real surge in new rig orders in the US?

Jim, we are in the infancy of it. There's no question. I think we're in the first inning there, but one of the things that we've experienced over the past four or five years is that land rig business really can change on a dime and we do anticipate — we're seeing an awful lot of quoting today, a lot of interest with our customers on these new rigs because really that is the name of the game. I mean, if you're going to go into these areas you have to have an environmentally friendly efficient highly technical rig and I would expect that as we go throughout the year we'll see a continuing momentum of land rig orders, land rig tendering for US based customers. Thank you, Jim.

The next question comes from Marshall Adkins from Raymond James. Please go ahead.

I want to understand margins better here, you're PS&S business revenues were about half of Rig Tech last year in one of the ugliest rig count environments we've seen in a while. Margins bounced up in the quarter, ex the Venezuelan stuff, how should we look at PS&S margins going forward? Is it going to be pricing driven or (inaudible)? You've talked a little bit about that Clay, can you give us a little more detail on the PS&S margins? In a second I'll come back and ask you about Rig Tech margins.

You bet, Marshall. I think let's set drill pipe aside because I think drill pipes going to continue to be challenging through 2010, I think most of the other products that we sell through PS&S are going to see steady volume improvements quarter by quarter at least for the next couple of quarters without a lot of pricing help. I think pricing help in times past when we've gone through up-cycles you sort of got to reconsolidate and get settled in, and start to see that modest growth and demand and after supply demand starts to get tied and utilizations arise above whatever thresholds value is needed. Suddenly, our customers get to be more concerned about the timing of these consumables and stuff showing up or the service crew showing up out on the rig and less concerned about pricing. And that's where pricing leverage flows in, I think that's still at least a few quarters away, what we'll see in those businesses is sort of steady volume increase with rising activity levels and modest quarter-by-quarter improvements until pricing leverage kicks in. What's going to probably swamp the equation here though for the next couple of quarters is the drill pipe fixture, we do foresee that business to continue to move down in revenue we still have booked a builder below one and we're working through our backlogs. So PS&S in particular, would be the sum of those two groups.

So just to follow up on that exact point it sounds like PS&S, which historically has been a chunk of your business was not last year, will become a big part of your business but probably 2011 of that not quite as much in early 2010 of that.

We do foresee improvement, obviously we're entering this years with a lot brighter outlook for rig count and so I think year-over-year is going to be in terms of the really big contributions to earnings and operating profit that typically come hand-in-hand with pricing leverage, which is going to be a little later in the game.

And on the rig tech margins, pricing of going forward we assume maybe down a little bit, but your efficiencies in your cost cutting and all that stuff seems to have all said that, should we model deteriorating margins there or can we hold them here where they are?

They are going to go down I think I said in my comments, you know next quarter we're looking for mid-20's we've been very pleasantly, positively surprised the last couple of quarters that the margins have beat our internal expectations. Though looking at the schedule, things in the backlog and how they are flowing out, the group is doing a fantastic job managing for efficiency in driving cost down and you've seen that in the numbers, but the volume begins to present a little more absorption issues and that also comes in on top of lower pricing issues, as you pointed out we have been quoting a little lower prices lately.

Great job, guys, thanks.

The next question comes from Bill Herbert from Simmons & Company. Please go ahead. Bill Herbert - Simmons & Company International: Thanks, good morning. Clay, just want to probe a little bit with regards to your sensibly restrained guidance for PS&S, all the variables that you talked about with regard to lead or flat quarters sequentially, essentially persisted in the fourth quarter, yet revenues were up 6% and if you look quarter on quarter thus far, we averaged 12 rigs per week increasing in the third quarter, nine rigs per week in the fourth this is M-I SWACO land, we're up 36 rigs per week in the first quarter. Land oil remains extremely vigorous as does gas, I'm just curious as to why we shouldn't see a 5% - 10% uptake again in the first quarter in a typical volumetric incremental that we see in the recovery period of close to 40% as evidenced in the fourth quarter?

Again Bill, one of the big swings in the quarter vis-à-vis on account of our forecasts was drill pipe had a really solid year uptake that drove a lot of the OP in particular. Bill Herbert - Simmons & Company International: And why isn't that going to repeat in the first quarter given all the trends that you talked about regard to increasing demands?

A lot of it was lumpy tied to the delivery of new offshore rigs this quarter. Bill Herbert - Simmons & Company International: Offshore rigs, got it. Alright, that makes sense, second line of inquiry here is with regard to the rig tech orders fourth quarter, back out the floater what were the orders?

Bill, I'd prefer not to disclose specifically what we want on any particular package Bill Herbert - Simmons & Company International: We've been running normalized non-floater order rate of about $350 million per quarter, with the uptake with regard to the rig count in North America and essentially premium rigs being sold out and thus as Pete mentioned an incipient increase with regard to drilling packages for North American rigs. What should we expect at normalized non-floater quarterly order run rate to be going forward?

I think and we talked about this in the past it's really difficult for us and I think dangerous for us to try to characterize orders for capital equipment as normalized and I'm always reluctant to do that because this is inherently a little bit lumpy. What I would say the fourth quarter was characterized by was very broad based ordering. We saw complete North American land rigs, we saw components for North American land rigs to upgrade existing rigs, we saw international rigs, we saw offshore equipment that's really fairly broad based in a quarter. Bill Herbert - Simmons & Company International: Okay, it just seems that ex the significant lumpiness with regard to the floaters it seems that we're seeing an uptake on several different fronts, which I think is reasonably encouraging for you guys, that's all I have. Thanks.

Thanks, Phil.

The next question comes from Ole Slorer from Morgan Stanley. Ole Slorer – Morgan Stanley: Thank you. To begin, a really good quarter here. I want to just dig in to what's going on the floater's side right now outside of the 20 rigs in Brazil that the market seems to be excessively focused on. Are you seeing anything from Brazil, for example, outside these 20 rigs? There's been some other contracts as of late that went to Acker though we seem to be hearing increasing rumblings from US players about exploring in building a series of rigs.

This is Loren and I will tell you that in our discussions with the customers there are a lot of things going on outside of Brazil. The operators are actually going to the drilling contractors now and asking for very specific types of rigs for specific locations around the world whether it is the Arctic, West Africa, and so we're working with these drilling contractors every day to put together packages that makes sense. Now again, most of the drilling contractors are being very disciplined in their approach and that they want to have a contract with these operators before they pull the trigger and actually buy these rigs. Ole Slorer – Morgan Stanley: Your timing, can you talk a little bit about projects and tenders you are working on now compared to half a year ago or some kind of pre-backlog type of activity measure?

I'd really rather not talk about that at this point.

We've never disclosed the number of projects, but I will tell you it's been what I would characterize as steady and very indicative I think of a lot of seriousness by the drilling contractors who are looking hard at these projects. I mentioned in my opening comments though, they are requiring term contracts from operators and the banks are generally requiring term contracts from the operators. So, I think a lot of this falls on the operators to sign those contracts before these things turn into orders. There are a lot of very broad-based serious discussions out there going on about new, as Pete mentioned, the Middle East incremental demand over sand.

I'd also have to emphasize, there's not a project done that we don't get a chance to look at, it doesn't matter if the other guys are going to get it. You're going to come to us because if nothing else and I've said this a million times, you're going to use us as your stalking horse. We've got a good sense of what's out there, we think we probably have the best sense in the industry of what's out there, and quite frankly that's kind of proprietary. Ole Slorer – Morgan Stanley: Hello, Pete. I'm very happy about you not filling up the order backlog with its first wave, let me make that very clear.

Your call back in 2005 we told you the same thing. We'll take the later stuff. Ole Slorer – Morgan Stanley: My follow up question is if you look at the peak of construction prices out of Korea, for example, in the previous cycle I think the numbers are $750 million. Certainly, the rig brokers that we've talked to seem to suggest that you can now order relative similar rigs in the count of $500-$550 million brackets. Could you talk a little bit about how much of that has been a reduction in the price of the drilling package, relative to the yards having become more efficient and generally yards taking it on the chin, given the terrible state of the global ship building market?

I think you characterized it accurately, the yards are facing a little tougher head winds and they've seen their backlogs decline as they worked through their L&G vessels and freighters and tankers and things and so they're very aggressive going after some of these things. FX and steel have helped as well but NOV's not unscathed in this equation, we're pricing down as I mentioned, so we're contributing to that but I think proportionately not nearly as much as the larger pricing down. Ole Slorer – Morgan Stanley: Thank you very much.

The next question comes from Robert Shoemaker from Citigroup. Please go ahead.

Good morning. Could you clarify, last time Clay on the call you talked about several categories of rigs that Petrobras intended for and one category was rigs that we purchased and owned by Petrobras seven drill shifts two semis that would be built in Brazil. That was my first question, what is the status of that to the extent that you're aware of?

That tender has been issued to a number of ship yards around Brazil and again, I think the bids are due back the first week of March on that package of nine.

Okay. And then with respect to the tenders that were distributed to drilling contractors for additional rigs predominantly to be constructed in Brazil where does that stand? And also the issue of the rigs that were ordered in 2008 and which were awarded term contracts in 2008 but had faced financing challenges?

Robin, first the 19 additional rings I think can be awarded in groups of up to four to individual drilling contractors and there's a lot of folks working on those tenders and they are on a similar sort of timeframe that are due back to Petrobras, I believe in the first week in March. Again I'll stress, so far the tender process has not been officially delayed but worth noting there have been a number of clarifications coming out of Petrobras and it's a complicated situation and so it wouldn't be unusual for these tenders to be delayed a little bit. We're working hard to make sure that we can comply with local content requirements on those programs. The group of seven for Petrobras ownership is illustrative of the local content requirement for the drilling equipment package, it has raised from 20% for the first couple up to 50% for the last few, and the similar or other local content requirements across the other 19.

With regards to the 12 floaters that Petrobras issued letters of intent for, I think it was in May of 2008, there remains a handful out there that have not secured financing. We have not booked those into our backlog and won't do so until they secure financing and make down payments. So nothing really new to report here, but a couple of those operators continued to be challenged by financing so that's the situation there.

So you're understanding is that the 28, there is not deviation from the requirement that the actual vessel haul be built in a Brazilian ship yard.

We believe that Petrobras is very serious about local content requirements and continues to require a very high level of local content both the hauls and the drilling equipment packages.

Okay, thank you.

Thank you, Robin.

There's time for one last question, today's final question comes from Kurt Hallead from RBC Capital Markets. Please go ahead. Kurt Hallead – RBC Capital Markets: Good morning. So I want to ask on the pricing, you said that it is a few quarters out, can you state at this point that pricing has stabilized across all your product lines? And is there any pricing power yet in any of your product lines?

I would say it’s a mixed picture, Kurt. Most product lines I think we are seeing stable pricing some exceptions would be the commodity drill pipe that I was talking about earlier that it still under a lot of pressure. Certain regions and distribution continue to see pricing pressure with regards to pricing going up I'd say it's a little more regional I think the emerging shale plays in the Haynesville and the Marcellus have probably seen the best pricing environment so right now kind of a mixed picture, but in broad brush strokes I would characterize it as stable right now. Kurt Hallead – RBC Capital Markets: Okay thanks. That's it.

Gentleman, that concludes the Question and Answer Session for today. Please go ahead with any closing comments

Thanks, Christine. And I thank you all for listening in and I look forward to talking to you again at the end of the first quarter 2010. Thank you very much.