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Wilson Now Part of National Oilwell

Zacks Equity Research

Close on the heels of the announcement of National Oilwell Varco’s (NOV) plan to take over CE Franklin Ltd. (:CFK), the former completed the acquisition of the Wilson distribution business segment from Schlumberger Limited (SLB).

None of the companies disclosed the financial terms of the deal, which was first announced in early April.

Schlumberger had purchased Wilson’s distribution business in 2010 as part of the Smith International takeover. This unit manufactures pipe, valves, fittings, mill, tool, safety products, along with related services to the oil and gas industry worldwide.

National Oilwell management remains confident about this acquisition and believes that with Wilson on board, the company will be able to cater to a larger number of customers with excellent service and products.

Houston, Texas-based National Oilwell is a world leader in the design, manufacture, and sale of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide.

We maintain our long-term Neutral recommendation on the stock. National Oilwell currently retains a Zacks #3 Rank (Hold rating) for the short run.

We believe that the company’s competitive position has received a boost from the recent acquisitions as well as the impending ones, which will solidify its geographical footprint, as well as service & product offering and raise its earnings visibility.

National Oilwell also boasts of a strong balance sheet (long-term debt of just $510 million and a growing cash balance of $3.4 billion at the end of first quarter 2012, representing a debt to capitalization ration of 2.7%), an impressive business model and leading market position.

However, we remain somewhat cautious about the company’s performance in the coming months, considering its sensitivity to the gas/oil price volatility, as well as exploration and production spending patterns, costs, international business risks and failure to adapt to technological changes.

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