The Wall Street Transcript Exclusive Interview With The Chairman, President And CEO: National Oilwell Varco (NOV) - Merrill A. Miller Jr.

Wall Street Transcript

67 WALL STREET, New York - March 6, 2012 - The Wall Street Transcript has just published its Oil & Gas: Drilling Equipment and Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Strong Demand for Higher-Specification Rigs - Drilling Shift From Gas to Liquids - Offshore Deepwater Oil Discoveries - Shale Drilling Dynamics

Companies include: Aker Kvaerner (AKSO.OL); Cameron International (CAM); Anadarko (APC); BP (BP); Baker Hughes and Weatherford (WFT); and many more.

In the following brief excerpt from the Oil & Gas: Drilling Equipment and Services, expert analysts discuss the outlook for the sector and for investors.

MERRILL A. MILLER JR. is Chairman, President and Chief Executive Officer of National Oilwell Varcoand has been a Director of the company since May 2001. He served as Chairman of the board since July 22, 2005, and previously served as Chairman from May 2002 through March 11, 2005. He served as the company's Chief Operating Officer from November 2000 through March 11, 2005. He has served as President since November 2000 and as Chief Executive Officer since May 2001. He has served in various senior executive positions with National Oilwell since February 1996.

TWST: Would you begin with a brief historical sketch of the company and a picture of the things you are doing at the present time?

Mr. Miller: The company dates to the mid-1800s. The Oil Well Supply side of the business was founded in 1862 when Colonel Drake discovered oil in Pennsylvania. The National Supply part of the company was founded in 1896, and then the Varco part was a machinery shop founded in California about 1907. The historical track of the company is that U.S. and Armco steel companies owned it, and in 1996 a group of management here took it private, and then about nine months later took it public, in October of 1996. At the time, we had a very small market cap and about 1,200 employees. Subsequent to that, we've made a slew of acquisitions and grown the company. Today, we have a market cap of about $33 billion, and we've got 50,000 employees around the world.

TWST: How would you describe the outlook for the industry in general and for your company in particular right now?

Mr. Miller: It's good. Obviously, oil being close to $100 a barrel is very positive for the industry in general. The price of natural gas is very low in the United States, and I think that makes for some concern, but the rig count has actually stayed fairly steady. When people stop drilling for natural gas, they are moving those rigs and drilling for shale oil in places like the Bakken and the Eagle Ford. Worldwide, the demand for oil is there, and I think you will continue to see an expansion of the business in the international arena.

TWST: You reported a 30% gain in the fourth-quarter earnings this morning along with full-year results. What was the message you were hoping to deliver on that call?

Mr. Miller: I think it's twofold for us. Number one is the basic health of the industry; customers continue to need new products and services, and we can provide those. The industry itself is strong. Number two, and I think more importantly, it's our position in the industry. The fact of the matter is that we are doing quite well because we have a group of employees that execute well, that develop great products and take good care of our customers. Often when people look at companies, they have a tendency to lump us all together and say, "Well, they are in the oil service business." In fact, there are good companies and there are companies that aren't quite so good. I think we are right at the very top, and I think that's the message that we want people to see. We know how to execute. When you look at our operating margins in drilling rig equipment, they are 26%. I would defy you to show me 26% operating margins for manufactured products in almost any industry. Our guys do very, very well.

TWST: Was there anything in what you had to say or report that you feel might get overlooked or missed by a lot of people?

Mr. Miller: I think not. For the most part, we hit our three general themes. The first one is deepwater: There continues to be a demand for deepwater equipment and rigs. The second one is, obviously, the shale plays. The shales really play to almost every strength that we have, and I think people need to realize that the shales are not just in the United States. I like to tell people, "God didn't just put shales in the U.S.: He put them all over the world." We're positioned for that market, worldwide. And the third thing is technology. Between the deepwater, the shales and technology, it really creates a position for us in the business to do quite well.

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