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Team3 national oilwell_varco_final
1. National Oilwell Varco
A closer look at the company’s strategic initiatives
through Return Driven Strategy Framework.
Arakelian, Victoria Team 3
Mashuk, Abdullah
Gurumurthy, Jayaram
Moraes, Ricardo
Hoffman, Aaron
Mathur, Pankaj Rabello, Vitoria
2. NOV ranked No. 1 in 2008 in Houston
Chronicle’s list of 100 companies.
“Self-styled Wal-Mart of the
oil patch”
3. Last 10 years performance resulted in
superior ROI compared to the industry.
100%
80%
60%
40%
21%
ROI' 40%
25%
33% 29% 27% 26%
23%
20% 13% 11% 12%
19% Average ROI
8% 9%
0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LFY+1 LFY+2Mkt Imp
200%
130%
IC'
100%
20% 15%
62%
11% 9%
24%
0% 4% 6% 3% 0%
Growth 0%
Average Invested Capital Growth
-7%
-100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD 5Yr
CAGR
4.0
Relative 3X
2.0
TSR
Average Total Shareholder Return
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LFY+1
4. NOV achieved many milestones since its
inception over 150 years ago.
1862 – 1987: 1997: begins series
NOV of acquisitions 2005: National
operated as 1999: The Oilwell and
separate acquisition of Hitec Varco merged to
companies ASA of Norway become NOV
1996: 2001: The first 2008: Merge
Incorporation of completely with Grant
National Oilwell, automated oil Prideco (mkt.
Inc. and IPO drilling cap $32B)
equipment
5. Industry: the price of oil and competitive
environment can impact performance.
4000 100 International
80
3000 1089 US
952 1017
60
2000
40 Canada
1720 1790 1868
1000 20
440 438 West Texas
356
0 0 International Price
2006 2007 2008
NOV VS. REVENUE
MAIN COMPETITORS 2009 (M$) Clearly the leader among
NOV 12, 710 industry peers
FCM TECHNOLOGIES 4,410 Only company that provide
CAMERON CORPORATION 5,220 complete solution
BAKER HUGES 9,660 Operates globally
SMITH INTERNATIONAL 8,220
6. Current success is linked to their strategic
initiatives.
Constant Growth through mergers &
acquisitions “snowball effect”
International expansion through mergers &
acquisitions
All in One House
7. Constant Growth through Mergers &
Acquisitions Deals
Mergers & Acquisitions
• 2005 National Oil buys Varco
for $2.4B which let’s the
acquisitions of more than
150(!) companies in 4 years
8. International expansion through mergers &
acquisitions Reason to expand:
• Industry is violent:
International expansion: politics, economics,
• 2008 Grant Prideco legislation, etc.
buyout starts strategy of • Mideast Crisis led to write
international expansion downs, Company still was
from 30% To 70% in 5 profitable
years
8
10. All in One House Rig From Rig to petroleum &
distribution:
Unique rig technology:
• Allows to install the drilling • Acquisitions has led the
point in 3 months, as company to have all set of
compared to 1 year services and solutions
• Consists of 95% changeable
parts, which are produced in
house.
• Allows to address the
customers’ issues faster
10
11. National Oilwell Varco meets all the tenets
of the Return Driven Strategy.
Wealth-creation
that benefits all
stakeholders
Complete solution Big companies in
for oilfield the oilfield
industry industry
Strive to new All-in-one-stop- Individual basis
products and shop solution branding
solutions
Acquisitions of Big vigilant of Each brand with “Umbrella-Brand”
Next Generation
companies with customer own decision for all products
Program
synergy processes process and services
Global Presence, Rig Technology, in-house R&D
Regulatory compliance, Globalization awareness
Constant Growth in Market Cap, Steady CFROI, internal control
18. Appendix 5: Additional Information
Historically, drilling companies have ordered customized rigs that can take a year or more to design and build. Many
still take that long, but land drilling is so hot today, especially in North America, that National Oilwell Varco is turning
out its trademarked Ideal Rig system in as little as three months.
The Ideal Rig has thousands of parts, and National Oilwell Varco makes 95 percent of them — everything but the
engines and air compressors. National Oilwell Varco's business is split between overseas and North American
operations, which include the U.S. and Canada. That's about to change, thanks to the Grant Prideco addition.
Miller said he expects international operations to account for 70 percent of business in five years as overseas drilling
continues to expand and the Grant Prideco merger takes the company into new territory.Some of the hottest contracts
National Oilwell Varco is working on now involve rigs for major natural gas plays, including drilling in the Algerian
desert and in Russia, where the company recently signed a $400 million deal to build two floating rigs for the
Shtokman field in the Barents Sea.
Clay Williams, the company's chief financial officer, said snapping up smaller rivals doesn't just take National Oilwell
Varco into new markets. It can mean striking technological pay dirt. The Natixis Bleichroeder report points to one gem
of the Grant Prideco acquisition — the IntelliServ Network. Analyst Jeff Spittel calls it "a potentially game-changing
technology" with great promise for future profits. IntelliServ embeds a fiber-optic measuring system in drill pipe that
tells operators on the drill floor exactly what is going on thousands of feet below at the drill bit. The instantaneous data
feeds should mean more precise drilling and could prevent blowouts.
19. Been dedicated to provide highest quality
oilfield products and services since 1841
700 worldwide manufacturing, sales, and service centers
Customer-focused solutions that meet the quality, productivity, and
environmental requirements
Worldwide leader in providing major mechanical components for land
and offshore drilling rigs
Provides Oil & Gas supply chain services through its network of
distribution service cents
19
20. The incorporation in 1996 and subsequent
IPO allowed the company to grow faster.
IPO SNAPSHOT OPPORTUNITY
EXCHANGE: NYSE Construction of new drilling rigs and equipment as well
SHARES OFFERED: 4 million as the upgrade and refurbishment of existing drilling rigs
POST-OFFERING SHARES: 17.7 and equipment.
million Increasing Demand for Higher Horsepower Drilling
PROPOSED OFFER PRICE: $ 17.0 - Machinery
$ 15.0
ACTUAL OFFER PRICE: $ 17.0 TRENDS
FIRST-DAY CLOSING PRICE: $ 20.1 90% offshore mobile drilling rig utilization and increased
OFFERING AMOUNT: $ 68.0 million land rig utilization
Alliance/outsourcing trends among oil & gas companies
COMPETENCIES
Large and geographically diverse network of distribution
service centers
Purchasing leverage due to the volume of products sold
Breadth of available product lines
Information systems that offer customers enhanced
online and onsite services.
21. Multiple acquisition allowed NOV to
become one stop shop.
Opportunities:
NOV wants to become a one stop shop for oil and drilling equipments
Their main offerings : Rig Technology, Petroleum Services & Supplies
and Distribution Services
Trends
NOV started from the year 1998 to 2006 have acquired approximately
150 companies to diversify their portfolio. Growth as seen in CFROI
They develop complete solutions for the oil and drilling companies for
their rigs.
NOV is contemplating of venturing into alternative energy sources
Core Competencies
In a rig manufactured by NOV, 95% parts are from its companies
which it acquired.
Their main strategy is acquiring and making deals with companies to
offer different solutions to the oil and drilling companies.
22. National OilWell and Varco merger (2005)
expanded product and services.
MERGER SNAPSHOT Opportunities
$2.5 billion value of the merger Merger employed together both of the company
offered 170 million shares.
genuine assets and help NOV to become a
NOI get 51% and Varco get 49% dominant market leader .
of the Merger
$40-50 million pretax cost saving
after the merger Value Proposition
12% ROI and 130% IC growth New Merger Provided unparallel level of quality in
achieved in 2005 after the merger capital equipment, expandable product and
services
Competencies
Merger offered excellent opportunities for the
stockholders, employees and customers of both
companies and positioned better to compete
effectively in global market place.
23. Grant Prideco Merger (2008)is the catalyst
for international expansion.
MERGER SNAPSHOT Opportunities
$7.5 billion value of cash and Merger build a model of synergy for NOV-- a one-stop
stock merger with Houston based shop for all a driller's needs, from derricks to drill bits
Grad Prideco
Combined Market Cap of $32
billion
Value Proposition
New Merger advances NOV strategic goal of providing
86% of Merger to NOV and 14% more products and services to Oil Machinery sector.
to Grant Pridecco
5% increase in EPS in 2008
Competencies
$60 million of Pretax Cost saving
Merger benefited the stakeholders by creating a larger,
more diversified company that is better positioned to
compete in the global marketplace