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National Oilwell shares fall after RBC downgrade

NEW YORK (AP) -- Shares of National Oilwell Varco Inc. fell Tuesday after an RBC Capital Markets analyst cut his rating for the company, predicting a drop in industry offshore rig equipment orders for 2013.

THE SPARK: Kurt Hallead downgraded the company, which makes products for oil and gas drilling, to "Sector Perform" from "Outperform" and reduced his price target by $8 to $80.

THE BIG PICTURE: Since Houston-based National Oilwell Varco designs, makes and sells systems and parts used in the oil and gas industry, a drop in oil rig construction could reduce demand for its products and services.

THE ANALYSIS: Hallead expects industry offshore rig equipment orders will probably fall about 25 percent to $8 billion in 2013 on lower demand for both offshore and land rigs.

"While we expect the industry to continue to demand newbuild rigs going forward, we believe a near-to-intermediate term lull in orders may begin in 2013 as the industry digests the influx of equipment ordered in recent quarters," Hallead wrote in a note to investors.

The analyst also noted that National Oilwell's share price is heavily tied to rig equipment orders.

THE SHARES: Down $2.03, or 2.8 percent, to $69.32 in afternoon trading, after dropping as low as $69.13 earlier in the day. Over the past 52 weeks, the stock has traded between $59.07 and $89.95.

Despite some significant fluctuations during 2012, the stock ended the year nearly unchanged.