Welcome to the First Quarter Financial Results Earnings Call. My name is Adriana, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over to Mr. Loren Singletary, Vice President of Investor and Industry Relations. Mr. Singletary, you may begin.

Thank you, Adriana, and welcome everyone to the National Oilwell Varco first quarter 2014 earnings conference call. With me today is Clay Williams, President and Chief Executive Officer of National Oilwell Varco; and Jeremy Thigpen, Senior Vice President and Chief Financial Officer. Before we begin this discussion of National Oilwell Varco’s financial results for its first quarter ended March 31, 2014, 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 on limited information as of today, which is subject to change. They are subject to risks 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 Forms 10-K and 10-Q 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, we will answer your questions, which we ask you to limit to two in order to permit more participation. Now, let me turn the call over to Clay.

Thank you, Loren, and good morning, everyone. Earlier today, National Oilwell Varco announced that it earned $1.37 for fully diluted share and excluding transaction related charges, $1.40 for fully diluted share for its first quarter of 2014. Earnings improved 9% from the first quarter of 2013, but declined 10% sequentially from our strong fourth quarter results in 2013, excluding charges from all quarters. Revenues were $5.8 billion in the quarter, but 9% from the prior year, and down 6% sequentially. Generally, our largest two segments saw a surge in product shipments late last year which did not repeat in the first quarter leading to slightly lower sequential results as we expected. Overall, the company made steady progress on several fronts through the first quarter, including moving closer to the spin out of our distribution services group, which we will speak to more in a moment. We are very pleased with another strong quarter for orders for drilling capital equipment. Rig Technology posted over $2.3 billion in orders, which exceeded our revenue out of backlog by about 5%. This led to a record $16.3 billion backlog for Rig technology. Offshore demand remained very strong. We won drilling equipment packages for three floaters and 17 jackup newbuilds during the first quarter. Land demand also increased materially, mostly internationally, and we are encouraged by rising demand for drilling, workover, and well stimulation equipment for the resurgence U.S. land market. Our $2.3 billion of first quarter orders for Rig Technology were comprised of $1.2 billion, or 52% for packages for newbuild offshore rigs. We expect the second quarter to continue to be strong for offshore newbuild demand as well. But we expect demand for new offshore rigs to slow during the second half of the year as offshore day rates have come under pressure.…

Thanks, Clay. As Clay already mentioned, National Oilwell Varco generated earnings $1.37 for fully diluted share in its first quarter of 2014, on $5.8 billion in revenues. Excluding $19 million in pretax transaction charges, first quarter 2014 earnings were $1.40 per fully diluted share, down $0.16 per share, or 10% from the fourth quarter of 2013, but up $0.11 per share, or 9% from the first quarter of 2013. Sales of $5.8 billion declined 6% sequentially, but on a year-over-year basis, revenues were up 9% despite the fact that the worldwide rig count only increased 2% over the same time period. Excluding transaction charges from all periods, operating profit for the quarter was $880 million, down 10% sequentially, but up 8% from the first quarter of last year. Operating margins on this basis were 15.2% for the first quarter of 2014 compared to 15.8% for the fourth quarter of 2013 and 15.4% for the first quarter of last year. Sequentially, decremental leverage on the 6% decline in revenues was 24%. On a year-over-year basis, operating profit flowed through our leverage was 14% on the 9% increase in revenue. Now, let’s turn to our segment operating results. The Rig Technology segment generated revenues of $3 billion in the first quarter, down 9% sequentially with as expected, almost the entire shortfall being driven by reductions in revenues from our land rig and well stimulation equipment businesses, which both benefited from large project shipments in the fourth quarter that did not recur in the first quarter. Compared to the first quarter of 2013, rig tech revenues were up almost 15%, as capacity additions enabled us to convert 12% more revenue out of backlog as our ever growing installed based coupled with our recent investments in our aftermarket infrastructure enabled us to generate 25%…

Thank you, Jeremy. Before we open it up our questions, I want to say thank you to all our employees out there, we have a lot of terrific employees around the globe who have been work very, very hard to affect the spin of our distribution services business, which we are very excited about, as well is take care of all of our good customers around the globe and just I just want to say, once again, how grateful Jeremy, Loren and I are for the hard work that you do. That completes the e prepared remarks this morning, so at this point, we are prepared to open up for questions. Adriana?

Thank you. (Operator Instructions) And our first question comes from Kurt Hallead from RBC Capital Market. Go ahead sir. Kurt Hallead – RBC Capital Markets LLC: Thank you, hey good morning.

Good morning, Kurt Kurt Hallead – RBC Capital Markets LLC: Thanks for all that color and detail. Much appreciated. One follow-up I would have, or point of clarity I would ask for, would the your views on backlog ending the year. Your comment, I think, was in the low teens and, once again, just wanted to understand the semantics or definition of low teens. The way I would think about low teens would be $12 billion or $13 billion. $1 billion, that would appear to me to be way too slow, predicated on the other commentary about slightly declining order book as the year goes on. If you provide a little more clarity on that, that would be very, very helpful. Thanks?

First, as you well know, our visibility to position around orders is always limited, Pert. Looking out into the second half of the year, we’re coming off at March 31, balance of $60.3 billion dollars. If we fall sort of the one-to-one book-to-bill for Q3 and Q4 a little bit. It certainly would be expected to drift down a little bit we were the low teens anything sells of 15. And right now that’s kind of our outlook. I’ll stress though, that we’re very encourage to see land orders picking up, stimulation equipment picking up. We are encouraged for improvement in our FPSO orders later in the year and so there is a lot of moving pieces here, but we are just trying to provide a little more color, I think 12 or 13 would will be lower than we would expected at this point. I think you’re probably looking at something in $14 billion, $15 billion range. Kurt Hallead – RBC Capital Markets LLC: Okay, Great. Thanks. Appreciate that. The follow-up I would have would be -- what’s your take on the situation in Russia? There were sanctions, obviously, announced this morning. Might be a little bit too early for you to make that assessment, but it looks like Rosneft was one of the companies that was -- that sanctions were put on. I know you have a facility that’s being manufactured in Russia. Just trying to get a handle on how to risk assess that from that standpoint?

I think we do. We’ve been investing in Russia and are building a facility to actually rig up plant rigs in that country. And that’s obviously quickly evolving situations there. So we’ve been watching it very, very closely. We have lots of customers in Russia, including Western companies that operate there. So, we will to see what the sanction, specifics around the sanctions in terms of the impact on our business. But, we’ve been a supplier of equipment into the Russian market for many, many years and have a pretty diverse customer base there. Kurt Hallead – RBC Capital Markets LLC: Okay, thanks. Appreciate that.

Yes. Thank you.

And our next question comes from Jim Crandell from Cowen. Go ahead Clar Jim D. Crandell – Cowen & Co. LLC: Good morning guys.

Good morning

Good morning, Jim. Jim D. Crandell – Cowen & Co. LLC: First, I would just like to second your comments, Clay, that you made about Pete and the outstanding job he’s done over the past dozen or so years as CEO. I have questions about the order outlook for three distinct areas, Clay, and I will just lay them out here and let you answer. One is, FPSOs and if you expect a better order picture there and how quickly you see that segment improving. Secondly is Russia, particularly in light of you building this new plant, we might see in terms of an improvement in land rig orders there. Then thirdly, well stimulation. If you could answer well stimulation in the context of how big was that last time, and how meaningful could that be to Nation in the next cycle?

You bet, Jim. Last year, with regards to FPSOs, we ahead over $1 billion an FPSO related orders primarily turret mooring systems for vessels, along with flexible pipe that flex into those turret mooring systems. And in addition to those two major products, we also sell a lot of composite piping systems into FPSO vessels. Very strong year for orders and improving P&L results coming out of those orders so we’re very encouraged. As I mentioned in my prepared comments, Q1 orders for FPSOs dipped down a little bit, but we do think that’s just a function of timing, we think both for flexible pipe as well as for vessels, our Q2 and Q3 are looking much better, and so we’re encouraged by that. With regards to Russia as I just mentioned, we are investing in another facility there. We have manufacturing operations for many years in Belarus, which primarily supplies for Russian market. A couple of years ago, we opened another facility in Nizhnevartovsk. And so it’s a market that has a lot of potential. There are something on the order of 800 rigs operating in Russia and most of those are older technology and there is a growing recognition, I think most Russian oil companies for the need for new technology, much like their counterparts in North America and elsewhere around the globe. And so, our idea is to expand our footprint in Russia, and in particular our aftermarket support of that fleet. Under our current plans, that particular facility was slated to open up and start producing revenue probably the second quarter of 2015, and very encouraged about the progress on the plant, sanctions notwithstanding, obviously we’re keeping a close eye on that as I just mentioned. Finally, the well intervention and stimulation business as we mentioned, we are very encouraged there. We saw orders slow way down. Through 2013, we continued to deliver our backlog, and so the P&L for that business has been coming down. But last quarter, our Q4 2013 and then Q1 the quarter we just finished, we saw orders begin to pickup and are really encouraged for new capital equipment and also a lot of consumables that we see in that business. So that’s kind of what we are seeing across those landscapes here. Jim D. Crandell – Cowen & Co. LLC: Okay. And Clay just there a brief follow-up, on your FPSO answer, are you seeing any progress with the customers in order willingness to try to order a standardized package?

I would prefer to use the term configurable package Jim. What we’re trying to do standardized interfaces between modules and make the vessels overall more configurable. And yes, what we are running into at the senior level amongst many of our customers is this recognition that their prior projects haven’t gone particularly well economically. And it’s a combination of vessels running over their original AFP amounts plus the late first oil because of late delivery of those projects. And arguably I think the project can be challenged, and so we are gaining an audience at the highest levels of a couple of the oil companies and are encouraged with a couple of specific two in particular specific projects that we’re bidding this concept into, and we think there will be more to come. So it’s very early days, and we know from our drilling rig, transformation, experience, changing the status quo in this industry is a long-term effort to generate success. But we do think we have a better way and we actually think the recent concern that world companies are expressing publicly about their economic returns on these projects provides a good backdrop to go in and have those kind of conversations. Jim D. Crandell – Cowen & Co. LLC: Okay, great. Thank you, Clay.

Thanks, Jim.

And our next question comes from Marshall Adkins from Raymond James. Please go ahead, sir. Marshall Adkins – Raymond James & Associates: Good morning, gentlemen.

Good morning.

Good morning, Marshall. Marshall Adkins – Raymond James & Associates: Clay, you guys have a more than a pristine balance sheet and you’ve got a pretty substantial free cash flow. So I will go ahead and ask the question I’ve been getting on, any – what’s your latest in terms of thoughts about what we do with that cash here in the next year or two?

Well, Marshall, historically we paid the dividend and we began paying a dividend in 2009, both a special on a regular. We doubled that dividend last year. So I would tell you in the past, our preferred method of returning cash to shareholders and I think that’s what you’re talking to, has been around the dividend, we agree we have a very strong level of cash flow. And in our meetings with our board upcoming in May, we plan on discussing a level of dividend with them and as well as other alternatives, including share buybacks or some other use of cash. And so we’ll see how that color turns out. But I would say that we’re looking hard at meaningful increase in the dividend again in that.

But the other thing I would add to that Marshall, we intentionally took a pause from acquisitions following the Robbins & Myers acquisition in February of last year. We had – we consummated about 20 deals and about a 16 months, 17 months span, and needed some time to digest what we’d require. I said we’ve done that now. We gone through the integration of work, we’re just about done with the spin, which is consuming a lot of resources, but I think you’ll see us get a little more active in that market again. And deals are looking pretty good right now. I would say we got a pretty full pipeline most of them are smaller in nature. Most of them are internationally based, which is good, 88% of our cash at the end of the quarter is overseas. So we will continue to look there as well and we still have a couple of fairly significant CapEx projects, including the Russian facility, we’re doing some work in Saudi, certainly some more work in Latin America primarily Brazil that will consumes some cash. Marshall Adkins – Raymond James & Associates: All right. And the follow-up there, Jeremy, you mentioned you’re putting in an ERP system and SAP. A lot of times that creates some short-term disruption as it’s going in. Tell me how that’s progressing and where you stand on all that?

Yes. We don’t have a common ERP platform across all of NOV. The Distribution & Transmission segment functioned on SAP prior to the acquisitions of Wilson and D Franklin. So they’re just going to the conversion process now to upgrade their SAP platform and then bring over the Wilson and Franklin businesses, that’s going extremely well. Obviously these are always somewhat disruptive, but we’ve had SAP in our business since 2000, I believe maybe it was 1999. So, we’ve got some strong subject matter exports around the world in that area. In some of our PS&S segments – current PS&S segments, it’s not that we are implementing a common ERP across that whole segment, it’s each individual business within that segment who are kind of converting over to something – something a little more robust now that we are far more global and much larger and more complex. So I don’t expect any major disruption Marshall, certainly they’re going to be some little hiccups here, and but I don’t think it’s going to be anything material. Marshall Adkins – Raymond James & Associates: It sounds good guys. Thank you.

Thank you.

And your next question comes from Brad Handler from Jefferies. Please go ahead. Brad Handler – Jefferies & Co.: Thanks. Good morning.

Good morning, Brad. Brad Handler – Jefferies & Co.: So I think you’ve outlined in some previous calls that your pace of delivery of offshore rigs is running right around the 50 plus mark, I guess it did last year, it is this year. It is into 2015, if I recall correctly?

That is correct. Brad Handler – Jefferies & Co.: That’s correct? Okay, good. Can you – what you have done so far, what you are in the process of tying together in terms of workforce addition, capacity addition from a plant standpoint, is that enough or should we expect continued initiatives along that vein as you kind of live with what choices you’ve made?

I think we are building up to a level of capacity that’s fits kind of that level. If you look, back, Brad, over the last couple of years, orders began flowing in, in earnest late 2011, 2012, we rebuilt our backlog up to new record levels here more recently. We began to experience supply chain challenges in the first components that go into rigs, which are typically mud pumps. And the as we can’t work through those again those we get better of that, the next kind of way that we saw was rig floor equipments, derricks, finally BOPs last year with the source of some challenges. And then more lately it’s been IMC. And so what you’ve seen is that as that – as the pigs kind of move through the snake, it’s tracked the equipment that has had to be delivered into this extraordinarily high-level of rigs that we are delivering. And why we are so confident, we know where is going to get a lot better, is that piece by piece is successfully challenged our supply chain issues and work through those short term challenges as we ramped up our capacity. We are addressing that, and we are fell like we are kind of in the last phases of it, a record level of installation commissioning work going on in shipyards right to accommodate a level of rig deliveries, which is effectively doubled our prior peak cut back in 2008 and 2009 and dealing with shorter deliver times and the like and we are making a little progress on a quarter-by-quarter. So that’s the progression of things, which regards that last piece of the fabrication puzzle, the installation and commissioning. We now have six technical colleges around the globe, and are going to eight shortly to train our service technicians who both perform installation commissioning work on new build rigs as well as repair older rigs. It’s a virtual skill set, when we look out over the next four or five year we see a tremendous number of offshore rigs having to comeback in for their five year surveys. And so this is a workforce that we are training to handle the IMC work on new orders and we foresee a few years out then a portion of those will be redeployed into kind of next pressing challenge, which is to handle lot of rigs coming back into the shipyards to be sea overhauls and upgrades of the equipments that’s on those rigs. This is a workforce that we see a lot even pretty busy for the next several years. Brad Handler – Jefferies & Co.: Make sense. Sure

One thing to add to that would just be as you look at the capacity additions on a go forward what I think you might see is more regionally specific capacity edition, where you see places really strong in growing markets, Saudi Arabia where they push for more and more local content requirement. This is also obviously happened in Brazil and having in Russia you’ve seen in Argentina, it would be in Mexico. So I think if you see capacity additions on a go forward they will be smaller scale that nearly requiring same level of CapEx and far less disruptive, but it will be to capture new end growing markets. In that market support Brad Handler – Jefferies & Co.: Makes sense, makes sense. So really to follow-up, and maybe it is going to be certainly broader than just that part of rig tech or the legacy rig tech. But in general, what you’ve just described is sort of leveraging what you have put into place, appreciating some smaller editions. Obviously, you have a lot of optimism around some improving mix over the course of time as some of the well stimulation equipment comes back. You get a little bit better pricing in backlog, as you described. All things are sort of pointing to what you have described for us in the past, as an improving trend. But I guess is there any change to that thought, if we start to think about margins in rig tech over the course of the next couple of years, is there any acceleration to getting back to that mid-20s level, for example? Do see any signs that, that might, maybe because of the U.S. land market, that, that might happen a little bit more quickly than you have suggested to us in the past? Do you see any signs of that might – because of the U.S.-led market that that might happen a little bit more quickly than you have suggested to us in the past?

That’s certainly encouraging as we see other parts of Rig Tech business pickup and that will help us on that front. the main driver here though is just it’s continuing to gain experience on these new rig floor layouts we talked in previous calls without new class specifications for the crop of deepwater rigs that have been ordered recently before rig floor layouts. so we’ve again negated some of the learning curve effects from the 2008 cycle and we know from history across all of our businesses, once we’re making the second copy and the fifth copy and the tenth copy of something, we always get better at it, costs always come down and we’re moving into that phase for this new crop of rigs, too. so I would say that’s the main engine and the other improvements in other parts of our business are additive to that. Brad Handler – Jefferies & Co.: Great. Okay, got it. thanks guys, appreciate that color.

This will be our last question in our Q&A session. Our last question comes from Michael LaMotte from Guggenheim. Please go ahead. Michael Kirk Lamotte – Guggenheim Securities LLC: Hey, guys.

Hi, Michael. Michael Kirk Lamotte – Guggenheim Securities LLC: Clay, did I hear the words share repurchases come from your – come forth from those lips?

Michael, to be fair, we’ve always considered the share repurchases along with dividends and we’ll continue to look that, and so yes, and I’ll also do as a reminder, at Varco, prior to the merger, we had a share repurchase program. So we were pretty familiar with the math and the concept. Michael Kirk Lamotte – Guggenheim Securities LLC: Yes.

But to be fair, we have a track record in our paying dividend, and I think our recent thinking around the subject with our boards counsel has been more along the lines of dividends. Michael Kirk Lamotte – Guggenheim Securities LLC: Got it, understood. Just wanted to make sure, there wasn’t a change there. I’m struck by looking at the Rig Tech business and thinking about how, in an up cycle, you are focused on making sure that your pricing is running ahead of your inflationary pressures, so that you can grow margin. And when you are sort of on the downside of working the rat through the snake, you are really focused on efficiency and delivery as the emphasis on margin. I’m wondering, as the volume scales back from 50 floaters a year delivery to something less than that, how do you manage the absorption issue, in terms of potential margin pressure?

Thank you. That’s a great question. first point of clarification, 50 rigs as a year, that’s jackups plus floaters. Michael Kirk Lamotte – Guggenheim Securities LLC: Right.

But certainly cyclicality in our business is not news to us. and historically, this business has been up and down. And so we, I think are very, very good at managing both the ups and downs. the good news, for us, again is the fact that the five-year SPS cycle for these rigs kicks in, in earnest. and in fact in the year 2016, 2017 really ramps hard. So even if the new build infrastructure slows down, we’re going to be very busy in the shipyards with rigs coming in a lot, and by the way, to provide further clarification around this, the vessels have to come in for whole inspections, for insurance, for Coast Guard certificate purposes and the like, every five years. And as part of that downtime in a shipyard, they will do a lot of work on the drilling equipment packages at the same time, because of the opportunity cost of being out of service for a month or two is so high. So that drives a lot of work for us in surveying those rigs and repairing that equipment, and replacing and frequently upgrading equipment as part of those rigs. and so we see that our install based driving very bright prospects over the next few years. And so that will do a lot to help keep our folks very busy. So I think the aftermarket portion of our business, there is a lot to bring stability to – and otherwise work cyclical business.

: : Michael Kirk Lamotte – Guggenheim Securities LLC: Yes.

in : Michael Kirk Lamotte – Guggenheim Securities LLC: Okay, great. So really two – if I can summarize, just two real sources of leverage. One, the efficiency, Jeremy, and two, utilization doesn’t fall off necessarily with the volume, because of aftermarket coming back in.

That’s right. Michael Kirk Lamotte – Guggenheim Securities LLC: Great, thanks guys.

Michael. Michael Kirk Lamotte – Guggenheim Securities LLC: Yes.

: Michael Kirk Lamotte – Guggenheim Securities LLC: Okay, great. thanks, Clay.

Yes. thanks, Michael.

I want to thank all of you for joining us this morning. we look forward to speaking you about our second quarter results in July, when, is another reminder, we will be reporting along our new segment reporting lines. so thanks very much and have a great week.