Filed Pursuant to Rule 424(b)(3)

Registration No. 333-149609

PROSPECTUS

 

 

Exchange Offer and Consent Solicitation

 

Offer to Exchange
National Oilwell Varco 61/8% Senior Notes due 2015
For All Outstanding
Grant Prideco 61/8% Senior Notes due 2015

 

Exchange Offer Expiration: April 21, 2008, unless extended
Consent Payment Deadline: April 3, 2008, unless extended

 

We are making this exchange offer and consent solicitation in connection with, and subject to the consummation of, the planned acquisition of Grant Prideco, Inc. by National Oilwell Varco, Inc. pursuant to the agreement and plan of merger referred to below.

 

We are offering to exchange all properly tendered and accepted 61/8% Senior Notes due 2015 that were issued by Grant Prideco. In exchange for each Grant Prideco note that is properly tendered and accepted, holders will receive a new National Oilwell Varco note in a principal amount equal to the exchange price of such tendered Grant Prideco note. However, the principal amount of each new National Oilwell Varco note will be rounded down, if necessary, to the nearest whole multiple of $1,000, and we will pay cash equal to the remaining portion, if any, of the exchange price of such Grant Prideco note. The exchange price for each Grant Prideco note will be 100% of its principal amount if it is properly tendered prior to 5:00 p.m., New York City time, on April 3, 2008, and 95% of its principal amount if it is properly tendered after such time and prior to the expiration of the exchange offer. Each new National Oilwell Varco note issued in exchange for a Grant Prideco note will have the same interest rate, interest payment dates, redemption terms and maturity as the Grant Prideco note, and will accrue interest from the most recent interest payment date of the Grant Prideco note. The exchange offer will expire immediately following 9:00 a.m., New York City time, on April 21, 2008, unless extended. You may withdraw tendered notes at any time prior to the expiration of the exchange offer. As of the date of this prospectus, there was $174,585,000 principal amount of Grant Prideco notes outstanding. The CUSIP No. for the Grant Prideco notes is 38821GAH4.

 

We are also soliciting consents to amend the indenture governing the Grant Prideco notes. In order to give your consent to the proposed amendments, you must validly tender your Grant Prideco notes in the exchange offer. Grant Prideco will pay $2.50 per $1,000 principal amount of Grant Prideco notes to each holder of Grant Prideco notes only if the holder has delivered and not revoked a valid consent by the consent payment deadline and we accept such consent. The consent payment deadline for the consent solicitation will be 5:00 p.m., New York City time, on April 3, 2008, unless extended. You may revoke your consent at any time prior to the consent payment deadline, but you may not do so after that deadline. A holder validly tendering Grant Prideco notes for exchange will, by tendering those notes, consent to the amendments to the indenture under which those notes were issued as described under “The Proposed Amendments”.

 

Our obligations to complete the exchange offer and to cause Grant Prideco to make the consent payments are conditioned upon, among other things, consummation of the merger referred to below and receipt of valid consents sufficient to effect all of the proposed amendments to the Grant Prideco indenture.

 

On December 16, 2007, National Oilwell Varco and Grant Prideco entered into an Agreement and Plan of Merger pursuant to which National Oilwell Varco will acquire all of the issued and outstanding shares of common stock of Grant Prideco. Pursuant to the merger agreement, Grant Prideco will merge with and into NOV Sub, Inc., a wholly owned subsidiary of National Oilwell Varco, and NOV Sub will be the surviving company in the merger. In the merger, each stockholder of Grant Prideco will receive 0.4498 of a share of common stock of National Oilwell Varco and $23.20 in cash for each share of common stock of Grant Prideco that the stockholder owns, plus cash in lieu of fractional shares. Stockholders of National Oilwell Varco will continue to own their existing shares, which will not be affected by the merger. Based on the number of outstanding shares of common stock of Grant Prideco and the number of outstanding shares of common stock of National Oilwell Varco on March 14, 2008, we anticipate that stockholders of Grant Prideco will own approximately 14% of the outstanding shares of common stock of National Oilwell Varco immediately following the merger.

 

In order to consummate the merger, the merger agreement must be adopted by the stockholders of Grant Prideco. The obligations of National Oilwell Varco and Grant Prideco to complete the merger are also subject to the satisfaction or waiver of several other conditions to the merger, including receiving approvals from regulatory agencies. If the merger agreement is terminated for any reason, National Oilwell Varco intends promptly to terminate the exchange offer and the consent solicitation.

 

We plan to issue new National Oilwell Varco notes as soon as practicable after the exchange offer expiration and the consummation of the merger (in exchange for Grant Prideco notes that are properly tendered before the expiration of the exchange offer).

 

The National Oilwell Varco notes will not be listed on any securities exchange.

 

This investment involves risks. See the section entitled “Risk Factors” that begins on page 11 for a discussion of the risks that you should consider in connection with your investment in the notes.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

None of National Oilwell Varco, Grant Prideco, the exchange agent, the information agent, the trustee under the Grant Prideco indenture, the trustee under the National Oilwell Varco indenture or the dealer manager makes any recommendation as to whether holders of Grant Prideco notes should exchange their notes in the exchange offer or consent to the proposed amendments to the Grant Prideco indenture.

 

 

 

 

The dealer manager for the exchange offer and consent solicitation is:

 

Goldman, Sachs & Co.

 

 

 

 

The date of this prospectus is March 20, 2008

 

TABLE OF CONTENTS

 

 

The information contained in this prospectus is not complete and may be changed. You should rely only on the information provided in or incorporated by reference in this prospectus, any prospectus supplement, or documents to which we otherwise refer you. We have not authorized anyone else to provide you with different information. We are not making an offer of any securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus, any prospectus supplement or any document incorporated by reference is accurate as of any date other than the date of the document in which such information is contained or such other date referred to in such document, regardless of the time of any sale or issuance of a security.

 

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission, or SEC. You should read this prospectus and any prospectus supplement together with the registration statement, the exhibits thereto and the additional information described under the heading “Where You Can Find More Information”.

 

This prospectus and the documents incorporated by reference contain various forward-looking statements and information that are based on the beliefs of National Oilwell Varco, as well as assumptions made by National Oilwell Varco and information currently available to us. When used in this prospectus, words such as “anticipate”, “project”, “expect”, “plan”, “goal”, “forecast”, “intend”, “could”, “believe”, “may”, and similar expressions and statements regarding our plans and objectives for future operations, are intended to identify forward-looking statements. Forward-looking statements in this prospectus also include:

 

 

 

These forward-looking statements are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, including those discussed in the “Risk Factors” section of this prospectus, could cause actual results to differ materially from those described in the forward-looking statements:

 

 

Except for its ongoing obligations to disclose material information as required by the federal securities laws, National Oilwell Varco has no intention or obligation to update these forward-looking statements after it distributes this prospectus.

 

National Oilwell Varco has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 that registers the issuance of National Oilwell Varco notes in exchange for Grant Prideco notes. That registration statement, including the attached exhibits and schedules, contains additional relevant information about National Oilwell Varco. The rules and regulations of the Securities and Exchange Commission allow us to omit some of the information included in the registration statement from this prospectus.

 

In addition, National Oilwell Varco and Grant Prideco file reports, proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934. You may read and copy that information at the Securities and Exchange Commission’s public reference room at the following location:

 

Public Reference Room

450 Fifth Street, N.W.

Washington, D.C. 20549

1-800-732-0330

 

You may also obtain copies of this information by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.

 

The Securities and Exchange Commission also maintains an Internet world wide website that contains reports, proxy statements and other information about issuers, including National Oilwell Varco and Grant Prideco, that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.

 

The Securities and Exchange Commission allows National Oilwell Varco to “incorporate by reference” information into this prospectus. This means that National Oilwell Varco can disclose important information by referring you to another document filed separately with the Securities and Exchange Commission. The information incorporated by reference is considered to be part of this prospectus, except for any information that is superseded by information that is included directly in this prospectus.

 

This prospectus incorporates by reference the documents listed below that National Oilwell Varco and Grant Prideco have previously filed with the Commission, excluding any information furnished, pursuant to Item 2.02 or Item 7.01 in a Current Report on Form 8-K or other applicable rules of the Commission, rather than filed.

 

National Oilwell Varco’s Filings (File No. 001-12317)

 

 

You may request a copy of National Oilwell Varco’s filings at no cost by making written or telephone requests for copies to: National Oilwell Varco, Inc., 7909 Parkwood Circle Drive, Houston, Texas 77036, (713) 375-3700, Attention: Investor Relations.

 

National Oilwell Varco also makes available free of charge on its Internet website at http://www.nov.com its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Commission. Information contained on the web site of National Oilwell Varco is not part of this prospectus.

 

Grant Prideco’s Filings (File No. 001-15423)

 

 

You may request a copy of Grant Prideco’s filings at no cost by making written or telephone requests for copies to Grant Prideco, Inc., 400 N. Sam Houston Parkway East, Suite 900, Houston, Texas 77060, Telephone: (281) 878-8000, Attention: Investor Relations.

Grant Prideco also makes available free of charge on its Internet website at http://www.grantprideco.com its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Commission. Information contained on the web site of Grant Prideco is not part of this prospectus.

 

We also incorporate by reference additional documents that either company may file with the Securities and Exchange Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the expiration of the exchange offer. Those documents include periodic reports such as an Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.

 

You can obtain any of the documents incorporated by reference into this prospectus through National Oilwell Varco or from the Securities and Exchange Commission’s website at http://www.sec.gov. Documents incorporated by reference are available from National Oilwell Varco without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into this prospectus.

 

We have not authorized anyone to give any information or make any representation about the merger, the exchange offer, the consent solicitation, National Oilwell Varco or Grant Prideco, that is different from, or in addition to, the information contained in this prospectus or in any of the materials that have been incorporated into this prospectus by reference. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this prospectus is unlawful, then the offer presented in this prospectus does not extend to you. The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies.

Q:		Why is National Oilwell Varco making the exchange offer and the consent solicitation?
A:		As a result of the merger of Grant Prideco with Nov Sub, Grant Prideco will become a wholly-owned subsidiary of National Oilwell Varco. The exchange offer and the proposed amendments are intended to provide us with greater operational and financial flexibility, including greater flexibility in our integration efforts, and to allow us to structure our operations and the operations of our subsidiaries in a more efficient manner and allow for potential savings. If the proposed amendments are adopted, certain provisions in the Grant Prideco indenture that differ from the National Oilwell Varco indenture will be eliminated.
Q:		What will I receive if I tender my Grant Prideco notes in the exchange offer and consent solicitation?
		In the exchange offer, we are offering in exchange for a holder’s outstanding tendered 61/8% Senior Notes due August 15, 2015 of Grant Prideco, 61/8% Senior Notes due 2015 of National Oilwell Varco having a principal amount that is equal to the exchange price of such Grant Prideco notes.

		The exchange price for the tendered Grant Prideco notes will be 100% of their aggregate principal amount if such notes are properly tendered prior to 5:00 p.m., New York City time on April 3, 2008, and 95% of their aggregate principal amount if such notes are properly tendered after such time and prior to the expiration of the exchange offer.

		Notwithstanding the foregoing, the National Oilwell Varco notes will be issued only in denominations of $1,000 and whole multiples of $1,000. See “Description of the National Oilwell Varco Notes — General Terms”. If National Oilwell Varco would otherwise be required to issue a National Oilwell Varco note in a denomination other than $1,000 or a whole multiple of $1,000, National Oilwell Varco will, in lieu of such issuance:
		• issue a National Oilwell Varco note in a principal amount that has been rounded down to the nearest lesser whole multiple of $1,000; and
		• pay cash, which we refer to as cash exchange consideration, in an amount equal to:

		• the difference between (i) the principal amount yielded by such formula and (ii) the principal amount of the National Oilwell Varco note actually issued in accordance with this paragraph; plus
		• accrued and unpaid interest on the principal amount representing such difference to the date of the exchange.

		The National Oilwell Varco notes will be issued under and governed by the terms of the National Oilwell Varco indenture described below under “The Exchange offer”. Except as otherwise set forth above, instead of receiving a payment for accrued interest on Grant Prideco notes you exchange, the National Oilwell Varco notes you receive in exchange for those Grant Prideco notes will accrue interest from the most recent date to which interest has been paid on those Grant Prideco notes.

		In addition, Grant Prideco will pay an amount in cash equal to $2.50 per $1,000 principal amount outstanding of Grant Prideco notes to each holder of Grant Prideco notes only if the holder has delivered and not revoked a valid consent prior to the consent payment deadline and we accept such consent. The consent payment deadline for the exchange offer (that is, the time by which a holder must have delivered and not revoked a valid consent in order to be eligible to receive the consent payment) will be 5:00 p.m., New York City time, on April 3, 2008, unless extended.

		As a holder of Grant Prideco notes, you may give your consent to the proposed amendments to the Grant Prideco indenture only by tendering your Grant Prideco notes in the exchange offer. By tendering your Grant Prideco notes for exchange, you will be deemed to have given a consent with respect to the notes.
Q:		What are the consequences of not consenting in the consent solicitation prior to the consent payment deadline?
A:		If the proposed amendments to the Grant Prideco indenture are adopted, holders that failed to deliver valid and unrevoked consents prior to the consent payment deadline will not receive the consent payment, even though the proposed amendments will become effective with respect to their Grant Prideco notes.
Q:		What are the consequences of not tendering in the exchange offer?
A:		If the proposed amendments to the Grant Prideco indenture have been adopted, the amendments will apply to all Grant Prideco notes not acquired in the exchange offer. Thereafter, all such Grant Prideco notes will be governed by the Grant Prideco indenture as amended by the proposed amendments, which will have less restrictive terms and afford reduced protections to the holders of such securities compared to those currently in the Grant Prideco indenture. See “Risk Factors — Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes — The proposed amendments to the Grant Prideco indenture will afford reduced protection to remaining holders of Grant Prideco notes”.
Q:		How do the Grant Prideco notes differ from the National Oilwell Varco notes to be issued in the exchange offer?
A:		The Grant Prideco notes are the obligations solely of Grant Prideco and are governed by the Grant Prideco indenture, while the National Oilwell Varco notes will be the obligations solely of National Oilwell Varco and will be governed by the National Oilwell Varco indenture. The Grant Prideco indenture and the National Oilwell Varco indenture differ in certain respects, including as follows:
		• The provisions of the Grant Prideco indenture that limit the ability of Grant Prideco and its subsidiaries to incur liens or engage in sale and leaseback transactions are more restrictive than the corresponding provisions of the National Oilwell Varco indenture.
		• The Grant Prideco indenture restricts Grant Prideco’s ability to merge or consolidate with, or sell substantially all of its assets to, entities other than corporations organized and existing under the laws of the United States or any state thereof or the District of Columbia.
		• The Grant Prideco indenture contains events of default that are inconsistent with those set forth in the National Oilwell Varco indenture, including events of default resulting from specified judgments.
		However, if the proposed amendments are adopted, these provisions will be eliminated from the Grant Prideco indenture or modified. Certain covenants in the Grant Prideco indenture would no longer apply once the Grant Prideco notes have an investment grade credit rating, which National Oilwell Varco anticipates may occur after consummation of the merger; however, there can be no assurance that the Grant Prideco notes will have such a credit rating.
		See “Description of the Differences Between Grant Prideco Notes and National Oilwell Varco Notes”, “The Exchange offer”, “The Proposed Amendments” and “Description of the National Oilwell Varco Notes”.

		The National Oilwell Varco notes offered in the exchange offer will be the general unsecured obligations of National Oilwell Varco. The National Oilwell Varco notes will not be guaranteed by any of our subsidiaries and, accordingly, will be structurally subordinated to all of the debt and other liabilities of our subsidiaries, which, after giving effect to the merger, will include Grant Prideco and its subsidiaries. Accordingly, the National Oilwell Varco notes will be structurally subordinated to any of the Grant Prideco notes that remain outstanding following the exchange offer and any other obligations of Grant Prideco. As of December 31, 2007, our subsidiaries had approximately $5,390.7 million of total balance sheet liabilities, whereas pro forma Grant Prideco had approximately $595.6 million of total balance sheet liabilities (including the Grant Prideco notes). See “Risk Factors — Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes — As a holding company, we will depend on our subsidiaries for funds to meet our payment obligations under the National Oilwell Varco notes”, “Risk Factors — Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes — The National Oilwell Varco notes will be unsecured general obligations of National Oilwell Varco. As such, the National Oilwell Varco notes will be effectively junior to any secured debt we may have to the extent of the value of the security and to the existing and future debt and other liabilities of our subsidiaries” and “Description of the National Oilwell Varco Notes — Ranking”.
Q:		What are the U.S. federal income tax consequences to holders of Grant Prideco notes in connection with the exchange offer and the consent solicitation?
A:		Holders should consider certain United States federal income tax consequences of the exchange offer and consent solicitation. See “United States Federal Income Tax Consequences”.
Q:		What consents are required to effect the proposed amendments to the Grant Prideco indenture and consummate the exchange offer?
A:		Consents from holders of record of a majority of the total principal amount of Grant Prideco notes outstanding under the Grant Prideco indenture as of the close of business on April 3, 2008 must be received in order to amend the Grant Prideco indenture.
		Our obligations to complete the exchange offer and cause Grant Prideco to make the consent payment relating to the exchange offer are conditioned upon, among other things, (i) receipt of valid consents sufficient to effect the amendments with respect to the Grant Prideco notes and (ii) the consummation of the merger with Grant Prideco, although we may, at our option, waive this or any other condition with respect to the exchange offer. For information about other conditions to our obligations to complete the exchange offer and cause Grant Prideco to make the consent payment, see “The Exchange Offer — Conditions to the Exchange Offer and Consent Solicitation”.
Q:		Will National Oilwell Varco accept all tenders of Grant Prideco notes?
A:		Subject to the satisfaction or waiver of the conditions to the exchange offer, we will accept for exchange any and all Grant Prideco notes that (i) have been properly tendered in the exchange offer on or before the expiration date of the exchange offer and (ii) have not been validly withdrawn before the expiration of the exchange offer.
Q:		When will National Oilwell Varco cause consent payments to be made, issue new notes and pay cash exchange consideration (as applicable)?
A:		Assuming the required consents are obtained and the other conditions to the making of the consent payments are satisfied or waived, we will cause Grant Prideco to make the consent payments upon the first acceptance of the Grant Prideco notes for exchange, which is anticipated to occur concurrently with the consummation of the merger.
		Assuming the conditions to the exchange offer are satisfied or waived, we will issue new National Oilwell Varco notes in book-entry form and pay cash exchange consideration (as applicable) as soon as practicable after the expiration date of the exchange offer and consummation of the merger (in exchange for Grant Prideco notes that are properly tendered (and not validly withdrawn) before the expiration of the exchange offer and accepted for exchange).
Q:		When will the proposed amendments to the Grant Prideco indenture become effective?
A:		If we receive the requisite consents by the consent payment deadline, the proposed amendments to the Grant Prideco indentures will become effective concurrently with the consummation of the merger.

		If the proposed amendments are adopted:
		• National Oilwell Varco expects to cause Grant Prideco to pay one or more cash dividends to National Oilwell Varco, which may occur as early as immediately after the merger; a dividend could not be declared at such time if the covenants on restricted payments in the Grant Prideco indenture were still effective; and
		• the holders of Grant Prideco notes will no longer have the right to cause Grant Prideco to make an offer to holders of the Grant Prideco notes to repurchase all or any part of such holders’ Grant Prideco notes at an offer price in cash equal to 101% of the aggregate principal amount of notes repurchased, plus accrued and unpaid interest, as would otherwise be required by the Grant Prideco indenture as a result of the consummation of the merger.
Q:		When do I need to deliver my consent to be eligible to receive the consent payment?

A:		The consent payment deadline for the exchange offer is 5:00 p.m., New York City time on April 3, 2008, unless extended. The consent payment deadline is the latest date and time on which you may deliver a valid and unrevoked consent and receive the consent payment.

Q:		When does the exchange offer expire?

A:		The exchange offer will expire immediately following 9:00 a.m., New York City time, on April 21, 2008, unless we, in our sole discretion, extend the exchange offer, in which case the expiration date will be the latest date and time to which the exchange offer is extended. See “The Exchange Offer — Consent Payment Deadline; Expiration Date; Extensions; Amendments”.

Q:		What are my rights if I change my mind after I tender my Grant Prideco notes and deliver my consent?
A:		You may withdraw your tendered notes at any time before the expiration of the exchange offer. You may revoke your consent at any time before the consent payment deadline. You may not revoke your consent at any time after the consent payment deadline. A valid withdrawal of tendered Grant Prideco notes prior to the consent payment deadline will constitute the revocation of the related consent to the proposed amendments to the Grant Prideco indenture. You may only revoke your consent by validly withdrawing the Grant Prideco notes prior to the consent payment deadline. If you validly withdraw your Grant Prideco notes following the consent payment deadline, but before the expiration of the exchange offer, your consent will be counted, but you will not receive the consent payment. See “The Exchange offer — Withdrawal of Tenders and Revocation of Corresponding Consents”.
Q:		How do I exchange my Grant Prideco notes if I am a beneficial owner of Grant Prideco notes held of record by a custodian bank, depositary, broker, trust company or other nominee? Will the record holder exchange my Grant Prideco notes for me?
A:		If your Grant Prideco notes are held by a custodian bank, depositary, broker, trust company or other nominee and you wish to tender the securities in the exchange offer, you should contact that institution promptly and instruct the institution to tender on your behalf. The record holder will tender your notes on your behalf, but only if you instruct the record holder to do so. See “The Exchange offer — Procedures for Consenting and Tendering — Grant Prideco Notes Held through a Nominee”.
Q:		Do I have the right to dissent from the exchange offer or the consent solicitation or seek appraisal of the Grant Prideco notes I hold?
A:		Holders of Grant Prideco notes do not have any appraisal or dissenters’ rights under New York law, the law governing the Grant Prideco indenture, or under the terms of the Grant Prideco indenture in connection with the exchange offer and consent solicitation.
Q:		Will the National Oilwell Varco notes be eligible for trading on an exchange?
A:		We expect that the National Oilwell Varco notes will be eligible for trading on the OTC Bulletin Board. However, there can be no assurance as to the development or liquidity of any market for the National Oilwell Varco notes. See “Risk Factors — Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes — Your ability to transfer the National Oilwell Varco notes may be limited by the absence of a trading market.”

Q:		To whom should I direct any questions?
A:		Questions concerning the terms of the exchange offer or the consent solicitation should be directed to the dealer manager; contact information for the dealer manager is set forth on the back cover of this prospectus. Questions concerning tender procedures and requests for additional copies of this prospectus statement should be directed to the information agent. The addresses and telephone numbers of the dealer manager and the information agent are set forth on the back cover page of this prospectus.
		We may be required to amend or supplement this prospectus at any time to add, update or change the information contained in this prospectus. You should read this prospectus and any amendment or supplement hereto, together with the documents incorporated by reference herein and the additional information described under “Where You Can Find More Information”.

		Year Ended December 31,
		2007				2006				2005(1)				2004				2003
		(In millions, except per share data)
Operation Data:
Revenue		$	9,789.0			$	7,025.8			$	4,644.5			$	2,318.1			$	2,004.9
Operating Profit			2,044.4				1,111.1				476.8				176.0				164.1
Income before Taxes and Minority Interest			2,028.9				1,049.2				430.0				138.9				121.8
Net income		$	1,337.1			$	684.0			$	286.9			$	115.2			$	79.7
Net income per Share(2):
Basic		$	3.77			$	1.95			$	0.92				0.67			$	0.47
Diluted		$	3.76			$	1.93			$	0.91			$	0.67			$	0.47
Balance Sheet Data (at end of period):
Total Assets		$	12,114.9			$	9,019.3			$	6,678.5			$	2,576.5			$	2,213.1
Long-term debt, less Current Maturities			737.9				834.7				835.6				350.0				594.0
Stockholders’ Equity			6,661.4				5,023.5				4,194.2				1,270.2				1,059.2

(1)		Financial results of Varco International, Inc. (“Varco”) have been included in National Oilwell Varco’s consolidated financial statements beginning March 11, 2005, the date the Varco merger was completed and Varco’s common shares were exchanged for shares of National Oilwell Varco’s common stock. Financial information for prior periods and dates may not be comparable with 2005 due to the impact of this business combination on National Oilwell Varco’s financial position and results of operation. See Note 3 of the Notes to National Oilwell Varco’s Consolidated Financial Statements (incorporated herein by reference to National Oilwell Varco’s annual report on Form 10-K for the year ended December 31, 2006) for a description of the Varco merger and related adjusted financial information. Results for the year ended December 31, 2005 include integration costs associated with the Varco merger of $31.7 million and stock-based compensation costs of $15.6 million related to the amortization expense of options assumed in the Varco merger.
(2)		All periods reflect a two-for-one stock split effected as a stock dividend in September 2007.

		Year Ended December 31,
		2007(1)				2006(1)(2)				2005(3)				2004(4)				2003(5)
		(In millions, except per share data)
Operation Data:
Revenue		$	1,908.6			$	1,530.3			$	1,089.3			$	767.6			$	628.5
Operating Income			580.7				470.7				233.9				121.3				36.2
Income (Loss) from Continuing Operations			478.2				404.1				139.6				50.8				(3.4	)
Net income			519.2				464.6				189.0				55.3				5.2
Income (Loss) Per Share:
Income (Loss) from Continuing Operations:
Basic			3.73				3.10				1.10				0.41				(0.03	)
Diluted			3.69				3.05				1.07				0.40				(0.03	)
Net Income:
Basic			4.05				3.56				1.49				0.45				0.04
Diluted			4.01				3.50				1.45				0.44				0.04
Balance Sheet Data (At End of Period):
Total Assets		$	2,350.7			$	2,022.1			$	1,540.3			$	1,344.5			$	1,262.1
Long-Term Debt			176.1				237.2				217.5				377.8				426.9
Stockholders’ Equity			1,709.8				1,362.9				996.2				705.5				606.1

(1)		See discussion of other operating items related to 2007 and 2006 in Note 6 in Grant Prideco’s consolidated financial statements for the year ended December 31, 2007 that are incorporated by reference to Grant Prideco’s annual report on Form 10-K for the year ended December 31, 2007.
(2)		Includes a license and royalty payment in 2006 of $20.0 million that Grant Prideco received in exchange for the use of ReedHycalog’s patented technology for the shallow leaching of PDC cutters (see Note 5 in Grant Prideco’s consolidated financial statements for the year ended December 31, 2007 that are incorporated by reference to Grant Prideco’s annual report on Form 10-K for the year ended December 31, 2007).
(3)		Includes total refinancing charges of $57.1 million in 2005, which includes $35.4 million related to replacing Grant Prideco’s previous $190 million credit facility with a new $350 million credit facility, and an early redemption of Grant Prideco’s $200 million 95/8% Senior Notes due 2007 and $21.7 million related to the repurchase of substantially all of Grant Prideco’s 9% Senior Notes.
(4)		Includes $9.0 million of charges in 2004, which include $3.8 million related to the relocation of Grant Prideco’s corporate offices, $2.0 million due to lease termination, severance and other exit costs related to the Drilling Products rationalization program and $3.2 million of severance costs related to the former Tubular Technology and Services organizational restructuring.
(5)		Includes $37.8 million of charges in 2003, which includes $24.9 million related to fixed asset write-downs, $6.4 million related to inventory reserves for exited product lines, $6.4 million related to asset impairments, $1.5 million related to stock-based compensation expense offset by a benefit of $1.4 million related to the settlement of a contingent liability.

		Year Ended
		December 31,
		2007
		(In millions, except
		per share data)
Statement of Operations Data:
Revenues		$	11,646.3
Operating Profit			2,433.9
Income from Continuing Operations			1,629.9
Income from Continuing Operations per Share:
Basic		$	3.97
Diluted		$	3.95

		December 31,
		2007
		(In millions)
Balance Sheet Data (at end of period):
Cash and Cash Equivalents		$	1,000.0
Total Assets			19,437.0
Long-term Debt			2,408.4
Total Stockholders’ Equity			10,860.7

		For the Year Ended December 31,
		2007				2006				2005				2004				2003
Ratio of earnings to fixed charges			22.3x				13.8x				6.8x				4.0x				3.6x

	•	the sum of: pre-tax income from continuing operations before adjustments for minority interests in consolidated subsidiaries or income or loss from equity investees; fixed charges; amortization of capitalized interest; distributed income of equity investees; and our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges;
	•	less: interest capitalized; preference security dividend requirements of consolidated subsidiaries; and minority interest in pre-tax income of subsidiaries that have not incurred fixed charges.

	•	interest expensed and capitalized;
	•	amortized premiums, discounts and capitalized expenses related to indebtedness;
	•	estimate of interest within rental expense; and
	•	preference security dividend requirements of consolidated subsidiaries.

 

In addition to the other information included in this prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements”, you should carefully consider the following risks before deciding whether to participate in the exchange offer and consent solicitation. In addition, you should read and consider the risks associated with each of the businesses of National Oilwell Varco and Grant Prideco because these risks will also affect the combined company. These risks can be found in National Oilwell Varco’s and Grant Prideco’s respective Annual Reports on Form 10-K for the year ended December 31, 2007, which reports are filed with the SEC and incorporated by reference into this prospectus.

 

Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes

 

You will have little protection under the terms of the National Oilwell Varco notes in the event of a highly leveraged transaction or change of control.

 

The National Oilwell Varco notes do not contain provisions that will afford you protection in the event of a highly leveraged transaction or change in control, including a takeover, other mergers, recapitalization or similar restructuring, a sale of substantially all of our assets or similar transactions. These types of transactions may adversely affect our financial and operating condition, our creditworthiness and the investment quality of our securities. Consequently, your investment in the National Oilwell Varco notes may be materially adversely affected.

 

As a holding company, we will depend on our subsidiaries for funds to meet our payment obligations under the National Oilwell Varco notes.

 

The National Oilwell Varco notes are exclusively our obligations and not obligations of our subsidiaries. As a holding company, we conduct substantially all of our operations exclusively through our subsidiaries and our only significant assets are our investments in these subsidiaries. This means that we are dependent on dividends, other distributions, loans or other payments of funds from our subsidiaries to meet our debt service and other obligations, including our obligations relating to the National Oilwell Varco notes.

 

Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due under the National Oilwell Varco notes or to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. In addition, any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to statutory or contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries’ earnings and business considerations.

 

The indenture governing the National Oilwell Varco notes, subject to certain restrictions, permits us to incur additional secured indebtedness and permits our subsidiaries to incur additional secured and unsecured indebtedness, all of which would in effect be senior to the National Oilwell Varco notes. The indenture also permits certain of our subsidiaries to pledge assets in order to secure our indebtedness and to agree with lenders under any secured indebtedness to restrictions or repurchase of the National Oilwell Varco notes and on the ability of those subsidiaries to make distributions, loans, other payments or asset transfers to us. As of December 31, 2007, our subsidiaries had approximately $5,390.7 million of total balance sheet liabilities, whereas pro forma Grant Prideco had approximately $595.6 million of total balance sheet liabilities, including the Grant Prideco notes for which we are making the exchange offer.

 

The National Oilwell Varco notes will be unsecured general obligations of National Oilwell Varco. As such, the National Oilwell Varco notes will be effectively junior to any secured debt we may have to the extent of the value of the security and to the existing and future debt and other liabilities of our subsidiaries.

 

The National Oilwell Varco notes will be unsecured debt and will rank equally in right of payment with all of our other existing and future unsubordinated debt. The National Oilwell Varco notes will be effectively junior to all our secured debt and to the debt and other liabilities of our subsidiaries, which, after giving effect to the merger, will include Grant Prideco and its subsidiaries. Because our subsidiaries are separate and distinct legal entities, our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of the National Oilwell Varco notes to participate in those assets, will be effectively junior to the claims of that subsidiary’s creditors, including trade creditors. In addition, even if we were a creditor of any of our

subsidiaries, our rights as a creditor would be junior to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us. As of December 31, 2007, our subsidiaries had approximately $5,390.7 million of total balance sheet liabilities, whereas pro forma Grant Prideco had approximately $595.6 million of total balance sheet liabilities (including the Grant Prideco notes).

 

The proposed amendments to the Grant Prideco indenture will afford reduced protection to remaining holders of Grant Prideco notes.

 

If the proposed amendments to the Grant Prideco indenture are adopted, the covenants and some other terms of the Grant Prideco notes will be materially less restrictive and will afford significantly reduced protection to holders of such securities compared to the covenants and other provisions currently contained in the Grant Prideco indenture. The proposed amendments to the Grant Prideco indenture would, among other things:

 

If the proposed amendments are adopted with respect to the Grant Prideco notes, each non-exchanging holder of Grant Prideco notes will be bound by the proposed amendments even if that holder did not consent to the proposed amendments. The elimination or modification of the covenants and other provisions in the Grant Prideco indenture contemplated by the proposed amendments would, among other things, permit National Oilwell Varco, Grant Prideco and their respective subsidiaries to take actions that could increase the credit risk with respect to Grant Prideco, and might adversely affect the liquidity, market price and price volatility of the Grant Prideco notes or otherwise be adverse to the interests of the holders of the Grant Prideco notes. See “The Proposed Amendments”.

 

The liquidity of the Grant Prideco notes that are not exchanged will be reduced.

 

The current trading market for the Grant Prideco notes is limited. The trading market for unexchanged Grant Prideco notes will become more limited and could cease to exist due to the reduction in the amount of the Grant Prideco notes outstanding upon consummation of the exchange offer. A more limited trading market might adversely affect the liquidity, market price and price volatility of these securities. If a market for unexchanged Grant Prideco notes exists or develops, these securities may trade at a discount to the price at which the securities would trade if the amount outstanding were not reduced, depending on prevailing interest rates, the market for similar securities and other factors. However, there can be no assurance that an active market in the unexchanged Grant Prideco notes will exist, develop or be maintained or as to the prices at which the unexchanged Grant Prideco notes may be traded.

 

Your ability to transfer the National Oilwell Varco notes may be limited by the absence of a trading market.

 

The National Oilwell Varco notes will be new securities for which currently there is no established trading market. We do not currently intend to apply for listing of the National Oilwell Varco notes on any securities exchange. We expect that the National Oilwell Varco notes will be eligible for trading on the OTC Bulletin Board; however, the liquidity of any market for the National Oilwell Varco notes will depend on the number of holders of the National Oilwell Varco notes, our performance, the market for similar securities, the interest of securities dealers in making a market for the National Oilwell Varco notes, prevailing interest rates and other factors. Accordingly, we can provide no assurance as to the development or liquidity of any market for the National Oilwell Varco notes.

 

The exchange offer and consent solicitation may be cancelled or delayed.

 

We are not obligated to complete the exchange offer and consent solicitation unless and until we receive valid and unrevoked tenders and consents representing a majority in aggregate principal amount of the Grant Prideco notes outstanding under the Grant Prideco indenture. If the merger agreement is terminated for any reason, National Oilwell Varco intends promptly to terminate the exchange offer and the consent solicitation. Even if the exchange offer and consent solicitation is completed, it may not be completed on the schedule described in this prospectus. Accordingly, holders participating in the exchange offer and consent solicitation may have to wait longer than expected to receive their National Oilwell Varco notes and cash exchange consideration, if any, during which time those holders of Grant Prideco notes will not be able to effect transfers of their Grant Prideco notes tendered for exchange.

 

Risks Related to the Merger and the Related Transactions

 

We may not be able to successfully integrate the operations of the two companies and realize the anticipated benefits of the merger.

 

Achieving the benefits we expect from the merger will depend in large part on integrating our technology, operations and personnel in a timely and efficient manner to minimize the impact on customers, employees and management. Integration of the two previously independent companies will be a complex, time consuming and costly process. Failure to timely and successfully integrate these companies may have a material adverse effect on

the combined company’s business, financial condition and results of operations. The difficulties of combining the companies will present challenges to the combined company’s management, including:

 

 

The combined company will also be exposed to other risks that are commonly associated with transactions similar to the merger, such as unanticipated liabilities and costs, some of which may be material, and diversion of management’s attention. As a result, we cannot assure you that we will realize any of the anticipated benefits of the merger, including anticipated cost savings, and failure to do so could adversely affect the business of the combined company after the merger.

 

The costs of the merger could adversely affect combined financial results.

 

We expect the total merger-related costs, including executive severance but exclusive of other employee benefit costs, to be approximately $110 million, consisting primarily of executive severance, financial advisory, legal and accounting fees, financial printing costs and other related charges. The amount of these expenses is a preliminary estimate and is subject to change. In addition, the combined company will incur certain integration costs, including, but not limited to, costs associated with consolidating administrative and operational functions and the closure of certain facilities. If the benefits of the merger do not exceed the costs associated with the merger, including any dilution to the stockholders of both companies resulting from the issuance of shares in connection with the merger, the combined company’s financial results, including earnings per share, could be adversely affected.

 

Whether or not the merger is completed, the pendency of the transaction could cause disruptions in the businesses of National Oilwell Varco and Grant Prideco, which could have an adverse effect on their businesses and financial results.

 

In response to the announcement of the merger, National Oilwell Varco’s or Grant Prideco’s customers may delay or defer purchasing decisions. Any delay or deferral of purchasing decisions by customers could negatively affect the business and results of operations of National Oilwell Varco and Grant Prideco, regardless of whether the merger is ultimately completed. Similarly, current and prospective employees of National Oilwell Varco and Grant Prideco may experience uncertainty about their future roles with the companies until after the merger is completed or if the merger is not completed. This may adversely affect the ability of National Oilwell Varco and Grant Prideco to attract and retain key management, marketing and technical personnel. In addition, the diversion of the attention of the companies’ respective management teams away from the day-to-day operations during the pendency of the transaction could have an adverse effect on the financial condition and operating results of either company.

 

National Oilwell Varco and Grant Prideco could be required to divest, hold separate or license assets to complete the merger.

 

We cannot complete the merger until the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any other applicable waiting period has expired or is otherwise terminated. On February 6, 2008, National Oilwell Varco and Grant Prideco refiled antitrust documents relating to the merger with the FTC and the

DOJ. On March 6, 2008, the parties received early termination of the waiting period from the FTC and the DOJ. National Oilwell Varco and Grant Prideco have also made, or are in the process of making, the required filings relating to the merger with various government authorities in a number of foreign jurisdictions in which one or both companies have sufficient market presence to require filings. We continue to work with these various governmental agencies to obtain regulatory clearance to complete the merger. As a prerequisite to obtaining the expiration or termination of this waiting period, or to avoid an injunction by a governmental entity, whether foreign or domestic, National Oilwell Varco, Grant Prideco or both companies may be required to divest, hold separate or license certain assets. Although each of National Oilwell Varco and Grant Prideco have agreed to use their reasonable best efforts to obtain the expiration or termination of this waiting period and to obtain any other governmental clearance or approvals under federal, state or foreign antitrust laws, neither National Oilwell Varco nor Grant Prideco is required to divest, hold separate or license any of their respective businesses, product lines or assets, take or agree to take any other action or agree to any limitation, that would reasonably be expected to have a material adverse effect on the financial condition, results of operations or prospects of National Oilwell Varco or Grant Prideco or that is not conditioned upon completion of the merger.

 

Divestitures or licensing of assets can be time consuming and may delay or prevent completion of the proposed merger. Because there may be a limited number of potential buyers or licensees for the assets subject to divestiture or license and because potential buyers will likely be aware of the circumstances of the sale or license, these assets could be sold or licensed at prices or rates lower than their fair market values or the prices National Oilwell Varco or Grant Prideco paid for these assets. Asset divestitures or licenses of National Oilwell Varco’s or Grant Prideco’s assets could also significantly reduce the value of the combined company, eliminate potential cost savings opportunities or lessen the anticipated benefits of the merger.

 

If National Oilwell Varco or Grant Prideco fails to obtain all required consents and waivers, third parties may terminate or alter existing contracts.

 

Certain agreements with suppliers, customers, licensors or other business partners may require National Oilwell Varco or Grant Prideco to obtain the approval or waiver of these other parties in connection with the merger. National Oilwell Varco and Grant Prideco have agreed to use reasonable efforts to secure the necessary approvals and waivers. However, we cannot assure you that National Oilwell Varco and/or Grant Prideco will be able to obtain all of the necessary approvals and waivers, and failure to do so could have a material adverse effect on the business of the combined company after the merger.

 

Certain litigation against Grant Prideco, its directors and National Oilwell Varco has been instituted. This litigation could delay or prevent the merger. Similar litigation could also be instituted in the future.

 

As of the date of this prospectus, National Oilwell Varco and Grant Prideco are aware of five lawsuits that have been filed in connection with the proposed merger. All five cases were filed in the district court of Harris County, Texas.

 

The plaintiffs in these lawsuits are stockholders of Grant Prideco. They allege, among other things, breaches of fiduciary duties of the directors of Grant Prideco owed to the stockholders of Grant Prideco in connection with the proposed merger. In one of the complaints, the plaintiffs also allege aiding and abetting by National Oilwell Varco of the alleged breaches. The plaintiffs seek to enjoin the merger and ask for other legal and equitable relief. National Oilwell Varco and Grant Prideco believe that these lawsuits are without merit and intend to defend against them. This litigation could, however, delay or prevent the proposed merger. It is also possible that additional suits seeking to enjoin the proposed merger could be filed. Any such suit could delay or prevent the proposed merger.

 

Risks Related to the Combined Company’s Business

 

National Oilwell Varco and Grant Prideco are dependent upon the oil and gas industry, which may be volatile.

 

The oil and gas industry in which National Oilwell Varco and Grant Prideco participate historically has experienced significant volatility. Demand for our services and products depends primarily upon the number of oil rigs in operation, the number of oil and gas wells being drilled, the depth and drilling conditions of these wells, the

volume of production, the number of well completions, capital expenditures of other oilfield service companies and the level of workover activity. Drilling and workover activity can fluctuate significantly in a short period of time, particularly in the United States and Canada. The willingness of oil and gas operators to make capital expenditures to explore for and produce oil and natural gas and the willingness of oilfield service companies to invest in capital equipment will continue to be influenced by numerous factors over which we have no control, including:

 

 

If there is a significant reduction in demand for drilling services, in cash flows of drilling contractors, well servicing companies or production companies or in drilling or well servicing rig utilization rates, then demand for the products and services of the combined company after the merger will decline, and could lead to cancellations of orders placed with the combined company and a reduction of its backlog.

 

Volatile oil and gas prices affect demand for our products.

 

Oil and gas prices have been volatile since 1990. In general, oil prices approximated $18-22 per barrel from 1991 through 1997, experienced a decline into the low teens in 1998 and 1999, and have generally ranged between $25-100 per barrel since 2000. Spot gas prices generally ranged between $1.80-2.60 per mmbtu of gas from 1991 through 1999, then experienced severe spikes into the $10 range in 2001 and 2003. Absent occasional spikes and dips due to imbalances in supply and demand, prices have generally ranged between $5.00-10.00 per mmbtu during the last two years.

 

Expectations for future oil and gas prices cause many shifts in the strategies and expenditure levels of oil and gas companies and drilling contractors, particularly with respect to decisions to purchase major capital equipment of the type we manufacture. Oil and gas prices, which are determined by the marketplace, may fall below a range that is acceptable to our customers, which could reduce demand for our products.

 

Competition in our industry could ultimately lead to lower revenues and earnings.

 

The oilfield products and services industry is highly competitive. National Oilwell Varco and Grant Prideco both compete with regional, national and foreign competitors in each of their current major product lines. These competitors may have greater financial, technical, manufacturing and marketing resources than National Oilwell Varco or Grant Prideco, even on a combined basis, and may be in a better competitive position. The following competitive actions can each affect our revenues and earnings:

 

 

In addition, certain foreign jurisdictions and government-owned petroleum companies located in some of the countries in which National Oilwell Varco and Grant Prideco operate have adopted policies or regulations that may give local nationals in these countries competitive advantages over National Oilwell Varco and Grant Prideco and that could impact the operations of the combined company after the merger.

We cannot assure you that the competitive environment in which National Oilwell Varco and Grant Prideco operate will not have an adverse effect on the combined company after the merger. Competition in our industry could lead to lower revenues and earnings.

 

Increases in the prices of our raw materials could affect our results of operations.

 

The combined company of National Oilwell Varco and Grant Prideco is likely to use large amounts of steel and alloy tubulars and bars in the manufacturing of its drilling products. The price of steel and these alloy raw materials has a significant impact on the cost of production. If the combined company is unable to pass future raw material price increases on to customers, its margins and results of operations, stockholders’ equity, cash flows and financial condition could be adversely affected.

 

Steel and alloy prices have increased significantly during the past several years, caused primarily by significant increases in the prices paid by suppliers for scrap and coke and alloys utilized in their operations.

 

In addition, rising alloy and steel costs also have the potential to delay increases in demand for Grant Prideco’s drill stem components. As drill stem products are not consumables, Grant Prideco’s customers could elect to defer purchases until such time as they determine that steel prices have stabilized or returned to more normalized conditions. Grant Prideco’s forward-looking statements do not assume that there will be any reduced demand for drill stem products as a result of increased prices caused by the current shortages being experienced in the worldwide steel and alloy markets. Reduced demand could adversely affect the results of operations, stockholders’ equity, cash flows and financial condition of the combined company.

 

Interruptions in the supply of raw materials could materially adversely affect our results of operations.

 

The combined company of National Oilwell Varco and Grant Prideco will rely on various suppliers to supply the components utilized to manufacture drilling products. The availability of the raw materials is not only a function of the availability of steel, but also the alloy materials utilized by suppliers in manufacturing component parts that meet the combined company’s proprietary requirements. If material disruptions to the availability of raw materials occurs, it could adversely affect the results of operations, stockholders’ equity, cash flows and financial condition of the combined company, as well as its ability to increase manufacturing operations to help meet its revenue targets.

 

In this regard, Grant Prideco is party to a green-tube supply agreement with voestalpine Tubulars GmbH & Co. KG, or VAT, a company in which Grant Prideco beneficially owns a 50.01% interest, the term of which expires March 31, 2009. If the combined company is unsuccessful in renewing this agreement with VAT in the future, the pricing terms of the existing agreement result in a material increase in the combined company’s green-tube costs or the combined company or VAT fail to perform under the terms of the contract, it could have an adverse affect on the company’s results of operations, stockholders’ equity, cash flows and financial condition and the company’s ability to increase its manufacturing operations to meet the increased revenues upon which its forward-looking statements are based.

 

National Oilwell Varco and Grant Prideco have each aggressively expanded their businesses, and the combined company intends to maintain an aggressive growth strategy after the merger.

 

National Oilwell Varco and Grant Prideco have aggressively expanded and grown their businesses during the past several years, primarily through acquisitions. We anticipate that National Oilwell Varco will continue to pursue an aggressive growth strategy following the merger; however, we cannot assure you that attractive acquisitions will be available after the merger, at reasonable prices or at all. In addition, we cannot assure you that we will successfully integrate the operations and assets of any acquired business with our own or that our management will be able to manage effectively the increased size of the combined company or operate any new lines of business. Any inability on the part of management to integrate and manage acquired businesses and their assumed liabilities could adversely affect our business and financial performance. In addition, after the merger, we may need to incur substantial indebtedness to finance future acquisitions. We cannot assure you that we will be able to obtain this financing on terms acceptable to us or at all. Future acquisitions may result in increased depreciation and amortization expense, increased interest expense, increased financial leverage or decreased operating income for the combined company, any of which could cause our business to suffer.

Both National Oilwell Varco’s and Grant Prideco’s operating results have fluctuated during recent years and these fluctuations may continue for the combined company after the merger.

 

Both National Oilwell Varco and Grant Prideco have experienced in the past, and the combined company may experience in the future, fluctuations in quarterly operating results. We cannot assure you that the combined company will realize expected earnings growth or that earnings in any particular quarter will not fall short of either a prior fiscal quarter or investors’ expectations. The following factors, in addition to others not listed, may affect the combined company’s quarterly operating results in the future:

 

 

In connection with their business operations, National Oilwell Varco and Grant Prideco could be subject to substantial liability claims that adversely affect their results of operations.

 

Both National Oilwell Varco and Grant Prideco manufacture complex products and equipment and the failure of these products and equipment to operate properly or to meet specifications may greatly increase customers’ costs of drilling a well. In addition, many of these products are used in hazardous drilling and production applications where an accident or product failure can cause personal injury or loss of life, damage to property, equipment or the environment, regulatory investigations and penalties, and the suspension of the end-user’s operations. If National Oilwell Varco’s or Grant Prideco’s products or services fail to meet specifications or are involved in accidents or failures, the combined company could face warranty, contract or other litigation claims for which we may be held responsible and our reputation for providing quality products may suffer.

 

The insurance carried by National Oilwell Varco and Grant Prideco may not be adequate in risk coverage or policy limits to cover all losses or liabilities that we may incur or for which we may be responsible. Moreover, in the future we may not be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate or at premiums that are reasonable for us, particularly in the recent environment of significant insurance premium increases. Further, any claims made under our policies will likely cause our premiums to increase.

 

Any future damages deemed to be caused by the products or services of National Oilwell Varco or Grant Prideco that are assessed against us and that are not covered by insurance, or that are in excess of policy limits or subject to substantial deductibles, could have a material adverse effect on our results of operations and financial condition. Litigation and claims for which we are not insured can occur, including employee claims, intellectual property claims, breach of contract claims and warranty claims. Any forward-looking statements of National Oilwell Varco and Grant Prideco assume that such uninsured claims or issues will not occur. If the combined company accounts for warranty reserves on a specific identification basis, a significant unexpected warranty issue during a particular quarter or year could cause a material reduction in the results of operations, stockholders’ equity, cash flows and financial condition of the combined company in the quarter or year in which the reserve for such warranty is made.

The results of operations for National Oilwell Varco or Grant Prideco could be adversely affected by actions under U.S. trade laws and new foreign entrants into U.S. markets.

 

Although National Oilwell Varco and Grant Prideco are U.S.-based manufacturing companies, each owns and operates international manufacturing operations that support the U.S.-based businesses. If actions under U.S. trade laws were instituted that limited access to these products, the combined company’s ability to meet customer specifications and delivery requirements would be reduced. Any adverse effects on the ability to import products from foreign subsidiaries could have a material adverse effect on the results of operations, stockholders’ equity, cash flows and financial condition of the combined company.

 

There are risks associated with National Oilwell Varco and Grant Prideco’s presence in international markets, including political or economic instability and currency restrictions.

 

Approximately 59% of National Oilwell Varco’s revenues and 42% of Grant Prideco’s revenues in 2007 were derived from operations outside the United States (based on revenue recognition for National Oilwell Varco and based on origination for Grant Prideco). National Oilwell Varco’s foreign operations include significant operations in Canada, Europe, the Middle East, Africa, Southeast Asia, South America and other international markets. Grant Prideco has significant foreign operations in Europe, Canada, Latin America, Southeast Asia and other international markets. Both companies’ revenues and operations are subject to the risks normally associated with conducting business in foreign countries, including uncertain political and economic environments, which may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. Government-owned petroleum companies located in some of the countries in which National Oilwell Varco or Grant Prideco operates have adopted policies, or are subject to governmental policies, giving preference to the purchase of goods and services from companies that are majority-owned by local nationals. As a result of these policies, National Oilwell Varco and Grant Prideco rely on joint ventures, license arrangements and other business combinations with local nationals in these countries. In addition, political considerations may disrupt the commercial relationships between National Oilwell Varco and Grant Prideco and government-owned petroleum companies.

 

Under broad powers granted to the President of Venezuela by the National Assembly on January 31, 2007, the Venezuelan government began asserting closer government control over its oil and gas reserves. National Oilwell Varco generated revenue of $69.6 million from its Venezuelan operations in 2007, and as of December 31, 2007 had a net equity investment in Venezuela of $53.7 million. These political events could adversely affect the combined company’s operations in Venezuela and financial results in the future.

 

The results of our operations are subject to market risk from changes in foreign currency exchange rates.

 

National Oilwell Varco and Grant Prideco earn revenues, pay expenses and incur liabilities in countries using currencies other than the U.S. dollar, including the Canadian dollar, the Euro, the British Pound and the Norwegian Kroner. Approximately 59% of National Oilwell Varco’s 2007 revenue and 42% of Grant Prideco’s 2007 revenue was derived from sales outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Thus, increases or decreases in the value of the U.S. dollar against other currencies in which our operations are conducted will affect our revenues and operating income. Because of the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time. We also use derivative financial instruments to further reduce our net exposure to currency exchange fluctuations. National Oilwell Varco had forward contracts with a notional amount of $4,104.1 million (with a fair value of $103.0 million) as of December 31, 2007 to reduce the impact of foreign currency exchange rate movements, but is also subject to risks that the counterparties to these contracts fail to meet the terms of National Oilwell Varco’s foreign currency contracts. We cannot assure you that fluctuations in foreign currency exchange rates would not affect our financial results.

An impairment of goodwill or indefinite-lived intangibles could reduce the combined company’s earnings.

 

National Oilwell Varco had recorded approximately $2,445.1 million of goodwill on its consolidated balance sheet as of December 31, 2007. National Oilwell Varco currently expects to record approximately $2,670.7 million of goodwill and $752.0 million for the Reed Hycalog and Grant Prideco tradenames which are considered indefinite lived upon completion of the merger, but that estimate is subject to change based upon the final number of shares of common stock of National Oilwell Varco issued at the time of closing of the merger and the final valuation of the identified assets and liabilities of Grant Prideco. Consequently, following the merger, we expect that approximately $5,867.8 million, representing approximately 30.2% of the combined company’s consolidated assets on a pro forma as adjusted basis, may be recorded as goodwill and indefinite-lived intangibles. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets. Generally accepted accounting principles will require the combined company to test goodwill and indefinite-lived intangibles for impairment on an annual basis or when events or circumstances occur indicating that an impairment might exist. If the combined company were to determine that any of its remaining balance of goodwill or indefinite-lived tradenames were impaired, it would record an immediate charge to earnings with a corresponding reduction in stockholders’ equity and increase in balance sheet leverage as measured by debt to total capitalization.

 

We could be adversely affected if we fail to comply with any of the numerous federal, state and local laws, regulations and policies that govern environmental protection, zoning and other matters applicable to our businesses.

 

The businesses of National Oilwell Varco and Grant Prideco are subject to numerous federal, state and local laws, regulations and policies governing environmental protection, zoning and other matters. These laws and regulations have changed frequently in the past and it is reasonable to expect additional changes in the future. If existing regulatory requirements change, we may be required to make significant unanticipated capital and operating expenditures. We cannot assure you that our operations will continue to comply with future laws and regulations. Governmental authorities may seek to impose fines and penalties on us or to revoke or deny the issuance or renewal of operating permits for failure to comply with applicable laws and regulations. Under these circumstances, we might be required to reduce or cease operations or conduct site remediation or other corrective action which could adversely impact our operations and financial condition.

 

Our businesses expose us to potential environmental liability.

 

Our businesses expose us to the risk that harmful substances may escape into the environment, which could result in:

 

 

Our current and past activities, as well as the activities of our former divisions and subsidiaries, could result in our facing substantial environmental, regulatory and other liabilities. These could include the costs of cleanup of contaminated sites and site closure obligations. These liabilities could also be imposed on the basis of one or more of the following theories:

 

We may not have adequate insurance for potential environmental liabilities.

 

While National Oilwell Varco and Grant Prideco maintain liability insurance, this insurance is subject to coverage limits. In addition, certain policies do not provide coverage for damages resulting from environmental contamination. We face the following risks with respect to our insurance coverage:

 

 

Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our consolidated financial statements.

 

There are risks associated with certain contracts for our drilling equipment.

 

As of December 31, 2007, National Oilwell Varco had a backlog of approximately $9 billion of drilling equipment to be manufactured, assembled, tested and delivered by its Rig Technology group. The following factors, in addition to others not listed, could reduce our margins on these contracts, adversely affect our position in the market and subject us to contractual penalties:

 

 

Such developments could have a material adverse effect on our consolidated financial statements.

 

We will not receive any cash proceeds from the issuance of the National Oilwell Varco notes in connection with the exchange offer. In exchange for issuing the National Oilwell Varco notes and paying the cash exchange consideration (as applicable), we will receive Grant Prideco notes in an aggregate principal amount equal to (i) the aggregate principal amount of such National Oilwell Varco notes plus (ii) the aggregate amount of such cash exchange consideration. The Grant Prideco notes surrendered in connection with the exchange offer will be retired and cancelled and will not be reissued.

 

National Oilwell Varco’s Business

 

This section summarizes information from National Oilwell Varco’s Annual Report on Form 10-K for the year ended December 31, 2007. For a more detailed discussion of National Oilwell Varco’s business, please read National Oilwell Varco’s Annual Report on Form 10-K for the year ended December 31, 2007 and its other filings incorporated into this prospectus by reference.

 

Business Segments

 

National Oilwell Varco’s business has three reportable operating segments:

 

 

Rig Technology

 

National Oilwell Varco’s Rig Technology segment designs, manufactures, sells and services complete systems for the drilling, completion, and servicing of oil and gas wells. The segment offers a comprehensive line of highly-engineered equipment that automates complex well construction and management operations, such as offshore and onshore drilling rigs; derricks; pipe lifting, racking, rotating and assembly systems; coiled tubing equipment and pressure pumping units; well workover rigs; wireline winches; and cranes. Demand for Rig Technology products is primarily dependent on capital spending plans by drilling contractors, oilfield service companies, and oil and gas companies, and secondarily on the overall level of oilfield drilling activity, which drives demand for spare parts for the segment’s large installed base of equipment. National Oilwell Varco has made strategic acquisitions and other investments during the past several years in an effort to expand its product offering and its global manufacturing capabilities, including adding additional operations in the United States, Canada, Norway, the United Kingdom, China, India and Belarus.

 

Petroleum Services & Supplies

 

National Oilwell Varco’s Petroleum Services & Supplies segment provides a variety of consumable goods and services used to drill, complete, remediate and workover oil and gas wells and service pipelines, flowlines and other oilfield tubular goods. The segment manufactures, rents and sells a variety of products and equipment used to perform drilling operations, including transfer pumps, solids control systems, drilling motors and other downhole tools, rig instrumentation systems, and mud pump consumables. Demand for these services and supplies is determined principally by the level of oilfield drilling and workover activity by drilling contractors, major and independent oil and gas companies, and national oil companies. Oilfield tubular services include the provision of inspection and internal coating services and equipment for drillpipe, linepipe, tubing, casing and pipelines; and the design, manufacture and sale of coiled tubing pipe and advanced composite pipe for application in highly corrosive environments. The segment sells its tubular goods and services to oil and gas companies; drilling contractors; pipe distributors, processors and manufacturers; and pipeline operators. This segment has benefited from several strategic acquisitions and other investments completed during the past few years, including adding additional operations in the United States, Canada, the United Kingdom, China, the United Arab Emirates, Kazakhstan, Mexico, Russia, Argentina, India, Bolivia, the Netherlands, Singapore, Malaysia and Vietnam.

 

Distribution Services

 

National Oilwell Varco’s Distribution Services segment provides maintenance, repair and operating supplies and spare parts to drill site and production locations worldwide. In addition to its comprehensive network of field locations supporting land drilling operations throughout North America, the segment supports major offshore drilling contractors through locations in Mexico, the Middle East, Europe, Southeast Asia and South America. Using its advanced information technology platforms and processes, the Distribution Services segment can provide

complete procurement, inventory management, and logistics services to its customers. Demand for the segment’s services are determined primarily by the level of drilling, servicing and oil and gas production activities.

 

Grant Prideco’s Business

 

This section summarizes information from Grant Prideco’s Annual Report on Form 10-K for the year ended December 31, 2007. For a more detailed discussion of Grant Prideco’s business, please read Grant Prideco’s Annual Report on Form 10-K for the year ended December 31, 2007 and its other filings incorporated into this prospectus by reference.

 

Business Segments

 

Grant Prideco’s business activities are segregated into four distinct segments:

 

 

For information relating to revenues from external customers, operating income and total assets of each segment, please read the financial statements incorporated by reference into this prospectus.

 

Drilling Products and Services

 

Grant Prideco’s Drilling Products and Services segment manufactures and sells a variety of drill stem products used for the drilling of oil and gas wells. The principal products sold by this segment are: (1) drill pipe products, (2) drill collars and heavyweight drill pipe and (3) drill stem accessories. Demand for the segment’s drill stem products is impacted primarily by changes in drilling activity and worldwide rig activity, but also by the level of inventory held by customers and their perceptions as to future activity and the near-term need for new drill stem products. With the increased complexity of drilling activity, demand for the segment’s proprietary line of eXtreme^® drilling and other premium drilling products has remained strong. The segment’s premium drilling products are specifically designed for extreme drilling conditions such as extended reach, directional, horizontal, deep gas, offshore and ultra-deepwater drilling, as well as high-temperature, high-pressure and corrosive well conditions. The segment’s drill stem products are sold to a variety of customers, including oil and gas drilling contractors, rental tool companies and major, independent and state-owned oil and gas companies. The principal competitors for our drill stem products include Smith International Inc., Texas Steel Conversion, Vallourec and Mannesmann and various smaller local manufacturers in the U.S. and worldwide.

 

ReedHycalog

 

Grant Prideco’s ReedHycalog segment is a leading global designer, manufacturer and distributor of drill bits, hole-opening or hole enlarging tools, coring services and other related technology to the oil and gas industry. This segment services its customer base through a technical sales and marketing network in virtually every significant oil and gas-producing region in the world. All of the products and services are generally sold directly to the upstream oil and gas operators and, to a lesser extent, drilling contractors on turnkey and footage contracts. Competition is based on technical performance, price and service. ReedHycalog manufactures and sells both fixed-cutter bits and roller-cone bits on a global basis. The primary market driver for these bits is worldwide drilling activity or, more specifically, total footage drilled, as well as a function of well depth and complexity; demand for fixed-cutter bits is tied more strongly to offshore, directional or horizontal drilling. This segment provides a complete series of drill bits incorporating advanced materials technology and a range of performance-enhancing features. In addition, the segment provides drill bit selection, well-planning services and vibration monitoring and control through its field sales and engineering organization. Grant Prideco’s principal competitors are Hughes Christensen (a division of Baker Hughes Inc.), Smith Bits (a division of Smith International Inc.), and Security DBS (a division of Halliburton Company) as well as numerous smaller competitors throughout the world.

Other Segment

 

Grant Prideco’s Other segment primarily includes the operations of IntelliServ, Inc. (Intelliserv) and XL Systems. In September 2005, Grant Prideco acquired full ownership of IntelliServ, a company focused on the provision of well-site data transmission services. IntelliServ’s core product, “The IntelliServ^® Network”, was commercialized in 2006 and incorporates various proprietary mechanical and electrical components into its premium drilling tubulars to allow bi-directional data transfer via the drill string. This network functions at speeds several orders of magnitude higher than current mud pulse and electromagnetic transmission systems and will potentially deliver significant improvements in drilling efficiency and well placement. IntelliServ began its commercial operations in the last quarter of 2006 and offers its products and services on a rental basis to oil and gas operators. XL Systems provides integrated packages of large-bore tubular products and services for offshore wells, including a proprietary line of wedge thread marine connections on large-bore tubulars and related engineering and design services. XL Systems provides its product line for drive pipe, jet strings and conductor casing and also offers weld-on connections and service personnel in connection with the installation of these products. In early 2007, XL Systems completed development of its new high-strength Viper^tm weld-on connector which Grant Prideco believes will permit it to penetrate traditional markets that do not require the enhanced performance of XL Systems’ proprietary wedge-thread system.

 

Corporate Segment

 

Grant Prideco’s Corporate segment includes its general corporate overhead expenses.

 

The following summary describes certain provisions of the merger agreement. While the discussion below summarizes many of the material provisions of the merger agreement, it may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement in its entirety for a more complete description of the terms and conditions of the merger.

 

General

 

The merger agreement provides that Grant Prideco will be merged with and into NOV Sub, Inc., a wholly- owned subsidiary of National Oilwell Varco, at the effective time of the merger. NOV Sub will continue as the surviving corporation in accordance with the Delaware General Corporation Law, or DGCL, and will remain as a wholly owned subsidiary of National Oilwell Varco. Based on the number of outstanding shares of common stock of Grant Prideco and the number of outstanding shares of common stock of National Oilwell Varco on March 14, 2008, we anticipate that stockholders of Grant Prideco will own approximately 14% of the outstanding shares of common stock of National Oilwell Varco following the merger. At the effective time of the merger, all the property, rights, privileges, powers and franchises of Grant Prideco and NOV Sub before the merger will vest in the surviving corporation, and all debts, liabilities and duties of Grant Prideco and NOV Sub before the merger will become the debts, liabilities and duties of the surviving corporation.

 

The merger will be completed after all conditions in the merger agreement are met or waived and National Oilwell Varco and Grant Prideco file a certificate of merger with the Secretary of State of the State of Delaware. The merger agreement provides that the closing of the merger will take place at 10:00 a.m., Houston time, on a date specified by National Oilwell Varco and Grant Prideco but not later than the second business day after satisfaction or waiver of the conditions to the merger unless the companies otherwise agree.

 

Conversion of Shares

 

The merger agreement provides that each issued and outstanding share of the common stock of Grant Prideco, other than shares owned by Grant Prideco, National Oilwell Varco or NOV Sub, and other than shares held by stockholders effecting their appraisal rights, will be converted into the right to receive 0.4498 of a share of National Oilwell Varco’s common stock, which we refer to as the exchange ratio, and $23.20 of cash consideration. However, if prior to the merger, the outstanding shares of the common stocks of Grant Prideco or National Oilwell Varco are changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the exchange ratio and cash consideration will be adjusted accordingly.

 

Each share of the outstanding common stock of National Oilwell Varco will be unaffected by the merger and will remain outstanding.

 

No fractional shares of the common stock of National Oilwell Varco will be issued in the merger. Each holder of common stock of Grant Prideco who would have otherwise been entitled to receive a fraction of a share of the common stock of National Oilwell Varco will receive cash in lieu of a fractional share of the common stock of National Oilwell Varco. The amount of cash will be equal to the relevant fraction times the average of the last reported sales price of the common stock of National Oilwell Varco on the New York Stock Exchange Composite Transactions Tape on each of the ten consecutive trading days immediately preceding the date of the effective time of the merger.

 

Conditions to the Merger

 

Joint Conditions to the Merger

 

The merger agreement provides that the obligations of National Oilwell Varco and Grant Prideco to effect the merger are subject to the satisfaction or waiver of the following conditions:

 

 

National Oilwell Varco and NOV Sub’s Conditions to the Merger

 

In addition, the merger agreement provides that National Oilwell Varco’s and NOV Sub’s obligations to effect the merger are subject to the satisfaction or waiver of the following conditions:

 

 

Grant Prideco’s Conditions to the Merger

 

In addition, the merger agreement provides that Grant Prideco’s obligation to effect the merger is subject to the satisfaction or waiver of the following conditions:

 

 

Material Adverse Effect Definition

 

Certain representations and warranties of National Oilwell Varco and Grant Prideco, and certain other provisions in the merger agreement, are qualified by references to a “material adverse effect”. For purposes of the merger agreement, a “material adverse effect” on a person means a material adverse effect on (i) the business, assets, liabilities or obligations, financial condition or results of operations of such person and its subsidiaries, taken as a whole, (ii) the ability of such person to perform its obligations under the merger agreement or (iii) the ability of such person to consummate the merger. However, a “material adverse effect” does not include changes or conditions relating to:

 

Termination; Termination Fees and Expenses

 

Termination of the Merger Agreement

 

The merger agreement may be terminated at any time prior to the completion of the merger, before or after adoption of the merger agreement by the stockholders of Grant Prideco:

 

 

(a) the merger is not consummated on or before August 31, 2008;

 

(b) the stockholder approval of Grant Prideco has not been obtained at a meeting of such stockholders at which the merger agreement is voted upon; or

 

(c) a court or other governmental entity has issued an order, decree or ruling that cannot be appealed and that prohibits the completion of the merger;

 

 

(a) the Grant Prideco board of directors withdraws or modifies its recommendation of the merger;

 

(b) the Grant Prideco board of directors recommends an acquisition transaction other than the merger to stockholders of Grant Prideco; or

 

(c) Grant Prideco has breached a representation, warranty, covenant or agreement contained in the merger agreement, which has not been cured within 10 business days after receiving written notice of the breach.

 

 

(a) National Oilwell Varco has breached a representation, warranty, covenant or agreement contained in the merger agreement, which has not been cured within 10 business days after receiving written notice of the breach; or

 

(b) prior to the receipt of approval of stockholders of Grant Prideco, Grant Prideco receives a superior proposal, its board of directors determines to approve and enter into an agreement relating to such superior proposal, Grant Prideco gives National Oilwell Varco four business days’ prior written notice of its intention to terminate the merger agreement, such acquisition proposal continues to constitute a superior proposal after taking into account any revised proposal made by National Oilwell Varco during such period of time and Grant Prideco’s board of directors determines in good faith, following receipt of advice of its outside legal counsel, that the failure to accept such superior proposal would be inconsistent with its fiduciary duties under applicable law; provided, however, that such termination will not be effective until such time as payment of the termination fee shall have been made by Grant Prideco; provided, further, that Grant Prideco’s right to terminate the merger agreement shall not be available if it breached the no solicitation provision of the merger agreement in any material respect in connection with such superior proposal.

 

“Superior proposal” means any bona fide written proposal made by a third party to acquire substantially all the equity securities or assets of Grant Prideco (including substantially all of the assets of Grant Prideco’s subsidiaries), pursuant to a tender or exchange offer, a merger, a consolidation, a liquidation or dissolution, a recapitalization, a sale of all or substantially all of its and its subsidiaries’ assets or otherwise, on terms which the board of directors of Grant Prideco determines in good faith, after consultation with Grant Prideco’s outside legal counsel and financial advisors and after taking into account all material legal, financial, strategic, regulatory and other aspects of such proposal and the party making such proposal, (i) to be more favorable from a financial point of view to the holders of Grant Prideco’s common stock than the merger agreement, taking into account all the terms and conditions of the merger agreement (including any proposal by National Oilwell Varco to amend the terms of the merger or the merger agreement) and (ii) is reasonably likely to he consummated.

If the merger agreement is terminated by either National Oilwell Varco or Grant Prideco as provided above, the merger agreement will become void and National Oilwell Varco, Grant Prideco and NOV Sub will not have any continuing liabilities or obligations under the merger agreement, except for:

 

 

Amendment and Waiver

 

The merger agreement may be amended at any time by action taken by the boards of directors of National Oilwell Varco, NOV Sub and Grant Prideco, before or after adoption of the merger agreement by Grant Prideco’s stockholders. However, once the merger agreement is so adopted by the stockholders, no change can be made where further stockholder approval is required by law. National Oilwell Varco and Grant Prideco also may extend the time for performance of the obligations or other acts of the other, may waive inaccuracies in the representations or warranties contained in the merger agreement and may waive compliance with any agreements or conditions contained in the merger agreement.

 

Purpose of the Exchange Offer

 

The exchange offer and the proposed amendments to the Grant Prideco indenture are intended to provide us with greater operational and financial flexibility, including greater flexibility in our efforts to integrate Grant Prideco, and to allow us to structure our operations and the operations of our subsidiaries in a more efficient manner and allow for potential savings. See “The Proposed Amendments”.

 

Terms of the Exchange Offer and Consent Solicitation

 

In the exchange offer, we are offering in exchange for a holder’s outstanding tendered 61/8% Senior Notes due August 15, 2015 of Grant Prideco, 61/8% Senior Notes due 2015 of National Oilwell Varco having a principal amount that is equal to the exchange price of such Grant Prideco notes.

 

The exchange price for the tendered Grant Prideco notes will be 100% of their aggregate principal amount if such notes are properly tendered prior to 5:00 p.m., New York City time, on April 3, 2008, and 95% of their aggregate principal amount if such notes are properly tendered after such time and prior to the expiration of the exchange offer.

 

Notwithstanding the foregoing, the National Oilwell Varco notes will be issued only in denominations of $1,000 and whole multiples of $1,000. See “Description of the National Oilwell Varco Notes — General Terms”. If National Oilwell Varco would otherwise be required to issue an National Oilwell Varco note in a denomination other than $1,000 or a whole multiple of $1,000, National Oilwell Varco will, in lieu of such issuance:

 

 

 

The interest rate, redemption terms and payment and maturity dates of the National Oilwell Varco notes offered in the exchange offer are the same as those of the Grant Prideco notes. The National Oilwell Varco notes you receive in exchange for Grant Prideco notes will accrue interest from the most recent date to which interest has been paid on those Grant Prideco notes. Except as otherwise set forth above, you will not receive a payment for accrued interest on Grant Prideco notes you exchange at the time of the exchange.

 

For the purposes of this prospectus, “National Oilwell Varco indenture” means the indenture governing senior debt securities between National Oilwell Varco and The Bank of New York Trust Company, N.A., to be dated as of the first date on which we exchange National Oilwell Varco notes for Grant Prideco notes pursuant to the exchange offer.

 

We are also soliciting consents from the holders of the Grant Prideco notes to effect a number of amendments to the Grant Prideco indenture under which those notes were issued. For a description of the proposed amendments, see “The Proposed Amendments”. Our obligations to complete the exchange offer and cause Grant Prideco to make the consent payments are conditioned on, among other things, receipt of valid and unrevoked consents to the amendments from the holders of a majority in principal amount of the Grant Prideco notes outstanding under the Grant Prideco indenture (which we refer to as the required consents), although we may, at our option, waive this or any other condition with respect the exchange offer.

 

A holder validly tendering Grant Prideco notes for exchange will, by tendering those notes, be deemed to be consenting to the proposed amendments to the Grant Prideco indenture.

 

In addition to the National Oilwell Varco notes that we will issue, and the cash exchange consideration (as applicable) that we will pay, in exchange for Grant Prideco notes, Grant Prideco will pay an amount in cash equal to $2.50 per $1,000 principal amount outstanding of Grant Prideco notes to each holder of Grant Prideco notes only if the holder has delivered and not revoked a valid consent prior to the consent payment deadline. The consent payment deadline for the consent solicitation (that is, the time by which holders must have delivered and not revoked a valid consent in order to be eligible to receive the consent payment) will be 5:00 p.m., New York City time, on April 3, 2008, unless extended.

 

As a holder of Grant Prideco notes, you may give your consent to the proposed amendments to the Grant Prideco indenture only by tendering your Grant Prideco notes in the exchange offer. By tendering your Grant Prideco notes for exchange, you will be deemed to have given a consent with respect to the notes.

 

If the required consents are received and accepted with respect to the Grant Prideco notes, then Grant Prideco and the trustee under the Grant Prideco indenture will execute a supplemental indenture setting forth the proposed amendments in respect of the notes. Under the terms of the supplemental indenture, the amendments will become operative with respect to the Grant Prideco notes concurrently with the consummation of the merger, irrespective of whether the exchange offer with respect to the Grant Prideco notes is consummated. Each non-consenting holder of Grant Prideco notes will be bound by the supplemental indenture.

 

Conditions to the Exchange Offer and Consent Solicitation

 

Our obligations to complete the exchange offer and cause Grant Prideco to make the consent payments relating to the exchange offer are subject to the satisfaction or waiver (by us) of the following conditions: (a) the receipt of the required consents described above under “Terms of the Exchange Offer and Consent Solicitation”, (b) the valid tender (and no valid withdrawal) of a majority in principal amount held by nonaffiliates of Grant Prideco of the Grant Prideco notes as of the expiration date of the exchange offer, as may be extended, (c) the merger has been consummated and (d) the following statements being true:

 

(1) In our reasonable judgment, no action or event has occurred or been threatened (including a default under an agreement, indenture or other instrument or obligation to which we or one of our affiliates is a party or by which we or one of our affiliates is bound), no action is pending, no action has been taken, and no statute, rule, regulation, judgment, order, stay, decree or injunction has been promulgated, enacted, entered, enforced or deemed applicable to the exchange offer, the exchange of Grant Prideco notes under the exchange offer, the consent solicitation or the proposed amendments, by or before any court or governmental, regulatory or administrative agency, authority or tribunal, which either:

 

 

(2) None of the following has occurred:

 

 

 

(3) The trustee under the Grant Prideco indenture has executed and delivered a supplemental indenture relating to the proposed amendments and has not objected in any respect to, or taken any action that could in our reasonable judgment adversely affect the consummation of, any of the exchange offer, the exchange of Grant Prideco notes under the exchange offer, the consent solicitation or our ability to effect the proposed amendments, nor has such trustee taken any action that challenges the validity or effectiveness of the procedures used by us in soliciting consents (including the form thereof) or in making the exchange offer, the exchange of the Grant Prideco notes under the exchange offer or the consent solicitation.

 

All of these conditions are for our sole benefit and may be waived by us, in whole or in part, and with respect to the exchange offer or consent solicitation for the Grant Prideco notes, in our sole discretion. Any determination made by us concerning these events, developments or circumstances shall be conclusive and binding.

 

If any of these conditions are not satisfied with respect to the Grant Prideco notes, we may, at any time before the consummation of the exchange offer or consent solicitation:

 

(1) terminate the exchange offer or the consent solicitation and return all tendered Grant Prideco notes to the holders thereof (whether or not we terminate the exchange offer or consent solicitation);

 

(2) modify, extend or otherwise amend the exchange offer or consent solicitation and retain all tendered Grant Prideco notes and consents until the expiration date, as extended, of the exchange offer or consent solicitation, subject, however, to the withdrawal rights of holders (See “The Exchange offer — Withdrawal of Tenders and Revocation of Corresponding Consents” and “— Consent Payment Deadline; Expiration Date; Extensions; Amendments”); or

 

(3) waive the unsatisfied conditions with respect to the exchange offer or consent solicitation and accept all Grant Prideco notes tendered and not previously validly withdrawn.

 

If the merger agreement is terminated for any reason, National Oilwell Varco intends promptly to terminate the exchange offer and the consent solicitation.

 

Consent Payment Deadline; Expiration Date; Extensions; Amendments

 

For purposes of the consent solicitation, the term “consent payment deadline” means 5:00 p.m., New York City time, on April 3, 2008, subject to our right to extend that date and time in our sole discretion, in which case the consent payment deadline shall be the latest date and time to which that consent payment deadline is extended.

 

For purposes of the exchange offer, the term “expiration date” means the time immediately following 9:00 a.m., New York City time, on April 21, 2008, subject to our right to extend that date and time for the exchange offer in our sole discretion, in which case the expiration date shall be the latest date and time to which the exchange offer is extended.

 

We reserve the right, in our sole discretion, to (1) delay accepting any validly tendered Grant Prideco notes, (2) extend the exchange offer, or (3) terminate or amend the exchange offer, by giving oral or written notice of such delay, extension, termination or amendment to the exchange agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof which, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

We also reserve the right, in our sole discretion, to provide a subsequent offering period of between three and 20 business days for the exchange offer. If a subsequent offering period is provided, all Grant Prideco notes that (i) have been validly tendered prior to the expiration date of the initial offering period and (ii) have not been validly withdrawn prior to the expiration of the exchange offer will be accepted and exchanged for National Oilwell Varco notes and, as applicable, cash exchange consideration, and we will make a public announcement of the subsequent offering period no later than 9:00 a.m., New York City time, on the next business day after the expiration date of the initial offering period. Unless otherwise provided in the announcement of the subsequent offering period, all Grant Prideco notes validly tendered during the subsequent offering period will be promptly accepted and exchanged for the National Oilwell Varco notes and, as applicable, cash exchange consideration, as they are tendered. Unless otherwise provided in the announcement of the subsequent offering period, holders of Grant Prideco notes will not have the right to withdraw notes tendered during the subsequent offering period and no consent payment will be made with respect to notes tendered during the subsequent offering period.

 

If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment by means of a supplement to this prospectus that will be distributed to holders of Grant Prideco notes and we will extend the exchange offer to a date five to ten business days after disclosing the amendment, depending upon the significance of the amendment and the manner of disclosure to the holders, if the exchange offer would otherwise have expired during such five to ten business day period.

 

Without limiting the manner in which we may choose to make a public announcement of any delay, extension, amendment or termination of the exchange offer and consent solicitation, we will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a timely release to any appropriate news agency, including the Dow Jones News Service.

 

Effect of Tender

 

Any tender by a holder of Grant Prideco notes prior to the expiration date of the exchange offer that is not validly withdrawn prior to the expiration of the exchange offer will constitute a binding agreement between that holder and National Oilwell Varco and (if not withdrawn prior to the consent payment deadline) a consent to the proposed amendments, upon the terms and subject to the conditions of the exchange offer and the letter of transmittal and consent. The acceptance of the exchange offer by a tendering holder of Grant Prideco notes will constitute the agreement by that holder to deliver good and marketable title to the tendered Grant Prideco notes, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind.

 

Absence of Dissenters’ Rights

 

Holders of the Grant Prideco notes do not have any appraisal or dissenters’ rights under New York law, the law governing the Grant Prideco indenture and the Grant Prideco notes, or under the terms of the Grant Prideco indenture in connection with the exchange offer and consent solicitation.

 

Accounting Treatment of the Exchange Offer

 

The exchange offer will be accounted for by National Oilwell Varco as an exchange of debt under United States generally accepted accounting principles. The National Oilwell Varco notes to be issued in the exchange offer will be recorded at the same carrying value as the Grant Prideco notes. Accordingly, National Oilwell Varco will not recognize significant gain or loss for accounting purposes upon the consummation of the exchange offer. The consent payments will be capitalized and amortized over the term of the National Oilwell Varco notes issued in the exchange offer. The direct costs incurred with third parties will be expensed.

 

Acceptance of Grant Prideco Notes for Exchange; Delivery of Consent Payments, National Oilwell Varco Notes and Cash Exchange Consideration; Effectiveness of Proposed Amendments

 

Assuming the required consents are obtained and the other conditions to the making of the consent payments are satisfied or waived, after acceptance thereof, we will cause Grant Prideco to make the consent payments upon the first acceptance of the Grant Prideco Notes for exchange, which is anticipated to occur concurrently with the consummation of the merger.

Assuming the conditions to the exchange offer are satisfied or waived, we will issue new National Oilwell Varco notes in book-entry form and pay any cash exchange consideration (as applicable) in connection with the exchange offer as soon as practicable after the expiration date of the exchange offer and consummation of the merger (in exchange for Grant Prideco notes that are properly tendered (and not validly withdrawn) before the expiration of the exchange offer and accepted for exchange).

 

We refer to each date on which we exchange National Oilwell Varco notes for Grant Prideco notes pursuant to the exchange offer as an “exchange date”.

 

We will be deemed to have accepted validly tendered Grant Prideco notes (and will be deemed to have accepted validly delivered consents to the proposed amendments) when, and if, we have given oral or written notice thereof to the exchange agent. Subject to the terms and conditions of the exchange offer, delivery of National Oilwell Varco notes and payment of any cash exchange consideration (as applicable) in connection with the exchange of Grant Prideco notes accepted by us will be made by the exchange agent on the exchange date upon receipt of such notice. Subject to the terms and conditions of the consent solicitation, any consent payments will be made by the exchange agent on the first exchange date upon receipt of such notice. The exchange agent will act as agent for participating holders of the Grant Prideco notes for the purpose of receiving consents and Grant Prideco notes from, and transmitting National Oilwell Varco notes, cash exchange consideration and consent payments to, such holders. If any tendered Grant Prideco notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Grant Prideco notes are withdrawn prior to the expiration of the exchange offer, such unaccepted or withdrawn Grant Prideco notes will be returned without expense to the tendering holder as promptly as practicable after the expiration or termination of the exchange offer.

 

If we receive the requisite consents by the consent payment deadline, the proposed amendments to the Grant Prideco indenture will become effective concurrently with the consummation of the merger.

 

Procedures for Consenting and Tendering

 

If you hold Grant Prideco notes and wish to have those notes exchanged for National Oilwell Varco notes and, as applicable, cash exchange consideration, you must validly tender (or cause the valid tender of) your Grant Prideco notes using the procedures described in this prospectus and in the accompanying letter of transmittal and consent. The proper tender of Grant Prideco notes will constitute an automatic consent to the proposed amendments to the Grant Prideco indenture.

 

The procedures by which you may tender or cause to be tendered Grant Prideco notes will depend upon the manner in which you hold the Grant Prideco notes, as described below.

 

Grant Prideco Notes Held Through a Nominee

 

If you are a beneficial owner of Grant Prideco notes that are held of record by a custodian bank, depositary, broker, trust company or other nominee, and you wish to tender Grant Prideco notes in the exchange offer, you should contact the record holder promptly and instruct the record holder to tender the Grant Prideco notes and deliver a consent on your behalf using one of the procedures described below.

 

Grant Prideco Notes Held with DTC

 

Pursuant to authority granted by The Depository Trust Company, or DTC, if you are a DTC participant that has Grant Prideco notes credited to your DTC account and thereby held of record by DTC’s nominee, you may directly tender your Grant Prideco notes and deliver a consent as if you were the record holder. Accordingly, references herein to record holders include DTC participants with Grant Prideco notes credited to their accounts. Within two business days after the date of this prospectus, the exchange agent will establish accounts with respect to the Grant Prideco notes at DTC for purposes of the exchange offer.

 

Any participant in DTC may tender Grant Prideco notes and deliver a consent to the proposed amendments to the Grant Prideco indenture by effecting a book-entry transfer of the Grant Prideco notes to be tendered in the exchange offer into the account of the exchange agent at DTC and either (1) electronically transmitting its acceptance of the exchange offer through DTC’s Automated Tender Offer Program, or ATOP, procedures for

transfer; or (2) completing and signing the letter of transmittal and consent according to the instructions and delivering it, together with any signature guarantees and other required documents, to the exchange agent at its address on the back cover page of this prospectus, in either case before the exchange offer expires.

 

If ATOP procedures are followed, DTC will verify each acceptance transmitted to it, execute a book-entry delivery to the exchange agent’s account at DTC and send an agent’s message to the exchange agent. An “agent’s message” is a message, transmitted by DTC to and received by the exchange agent and forming part of a book-entry confirmation, which states that DTC has received an express acknowledgement from a DTC participant tendering Grant Prideco notes that the participant has received and agrees to be bound by the terms of the letter of transmittal and consent and that National Oilwell Varco and Grant Prideco may enforce the agreement against the participant. DTC participants following this procedure should allow sufficient time for completion of the ATOP procedures prior to the expiration date of the exchange offer.

 

The letter of transmittal and consent (or facsimile thereof), with any required signature guarantees, or (in the case of book-entry transfer) an agent’s message in lieu of the letter of transmittal and consent, and any other required documents, must be transmitted to and received by the exchange agent prior to the expiration date of the exchange offer at one of its addresses set forth on the back cover page of this prospectus. Delivery of such documents to DTC does not constitute delivery to the exchange agent.

 

Letter of Transmittal and Consent

 

Subject to and effective upon the acceptance for exchange and issuance of National Oilwell Varco notes and, as applicable, the payment of cash exchange consideration, in exchange for Grant Prideco notes tendered by a letter of transmittal and consent in accordance with the terms and subject to the conditions set forth in this prospectus, by executing and delivering a letter of transmittal and consent (or agreeing to the terms of a letter of transmittal and consent pursuant to an agent’s message) a tendering holder of Grant Prideco notes:

 

 

Proper Execution and Delivery of Letter of Transmittal and Consent

 

If you wish to participate in the exchange offer and consent solicitation, delivery of your Grant Prideco notes, signature guarantees and other required documents are your responsibility. Delivery is not complete until the required items are actually received by the exchange agent. If you mail these items, we recommend that you (1) use registered mail properly insured with return receipt requested and (2) mail the required items sufficiently in advance of the expiration date with respect to the exchange offer to allow sufficient time to ensure timely delivery.

Except as otherwise provided below, all signatures on the letter of transmittal and consent or a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the NYSE Medallion Signature Program or the Stock Exchange Medallion Program. Signatures on the letter of transmittal and consent need not be guaranteed if:

 

 

Withdrawal of Tenders and Revocation of Corresponding Consents

 

Tenders of Grant Prideco notes in connection with the exchange offer may be withdrawn at any time prior to the expiration of the exchange offer. Tenders of Grant Prideco notes may not be withdrawn at any time thereafter. Consents to the proposed amendments in connection with the consent solicitation may be revoked at any time prior to the consent payment deadline. Consents may not be withdrawn at any time thereafter. The valid withdrawal of tendered Grant Prideco notes prior to the consent payment deadline will be deemed to be a concurrent revocation of the related consent to the proposed amendments to the Grant Prideco indenture. You may only revoke a consent by validly withdrawing the related Grant Prideco notes prior to the consent payment deadline. If you validly withdraw your Grant Prideco notes following the consent payment deadline, but before the expiration of the exchange offer, your consent will be counted, but you will not receive the consent payment.

 

Beneficial owners desiring to withdraw Grant Prideco notes previously tendered should contact the DTC participant through which they hold their Grant Prideco notes. In order to withdraw Grant Prideco notes previously tendered, a DTC participant may, prior to the expiration of the exchange offer, withdraw its instruction previously transmitted through ATOP by (1) withdrawing its acceptance through ATOP, or (2) delivering to the exchange agent by mail, hand delivery or facsimile transmission, notice of withdrawal of such instruction. The notice of withdrawal must contain the name and number of the DTC participant. Withdrawal of a prior instruction will be effective upon receipt of such notice of withdrawal by the exchange agent. All signatures on a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the NYSE Medallion Signature Program or the Stock Exchange Medallion Program, except that signatures on the notice of withdrawal need not be guaranteed if the Grant Prideco notes being withdrawn are held for the account of an eligible institution. A withdrawal of an instruction must be executed by a DTC participant in the same manner as such DTC participant’s name appears on its transmission through ATOP to which such withdrawal relates. A DTC participant may withdraw a tender only if such withdrawal complies with the provisions described in this paragraph.

 

Withdrawals of tenders of Grant Prideco notes may not be rescinded and any Grant Prideco notes withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offer. Properly withdrawn Grant Prideco notes, however, may be retendered by following the procedures described above at any time prior to expiration of the exchange offer.

 

Miscellaneous

 

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Grant Prideco notes in connection with the exchange offer will be determined by us, in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any or all tenders not in proper form or the acceptance for exchange of which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in the tender of any Grant Prideco notes in the exchange offer, and our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal and consent) will be final and binding on all parties. None of National Oilwell Varco, Grant Prideco, the exchange agent, the information agent, the dealer manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

Tenders of Grant Prideco notes involving any irregularities will not be deemed to have been made until such irregularities have been cured or waived. Grant Prideco notes received by the exchange agent in connection with any exchange offer that are not validly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the DTC participant who delivered such Grant Prideco notes by crediting an account maintained at DTC designated by such DTC participant as promptly as practicable after the expiration date of the exchange offer or the withdrawal or termination of the exchange offer.

 

Transfer Taxes

 

We will pay all transfer taxes, if any, applicable to the transfer and sale of Grant Prideco notes to us in the exchange offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holders or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include:

 

 

If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the letter of transmittal and consent, the amount of those transfer taxes will be billed directly to the tendering holder and/or withheld from any payments due with respect to the Grant Prideco notes tendered by such holder.

 

U.S. Federal Backup Withholding; Withholding on Consent Payments to Non-U.S. Holders

 

U.S. federal income tax law requires that a holder of Grant Prideco notes, whose notes are accepted for exchange, provide the exchange agent, as payer, with the holder’s correct taxpayer identification number or otherwise establish a basis for an exemption from backup withholding. This information should be provided on Internal Revenue Service, or IRS, Form W-9. In the case of a holder who is an individual, other than a resident alien, this identification number is his or her social security number. For holders other than individuals, the identification number is an employer identification number. Exempt holders, including, among others, all corporations and certain foreign individuals, are not subject to these backup withholding and reporting requirements, but must establish that they are so exempt. If you do not provide the exchange agent with your correct taxpayer identification number or an adequate basis for an exemption or a completed IRS Form W-8BEN (“Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding”), you may be subject to backup withholding on payments made in exchange for any Grant Prideco notes and a penalty imposed by the IRS. Backup withholding is not an additional federal income tax. Rather, the amount of tax withheld will be credited against the federal income tax liability of the holder subject to backup withholding. If backup withholding results in an overpayment of taxes, you may obtain a refund from the IRS. You should consult with a tax advisor regarding qualifications for exemption from backup withholding and the procedure for obtaining the exemption.

 

To prevent backup withholding, you must either (1) provide a completed IRS Form W-9 and indicate either (a) your correct taxpayer identification number or (b) an adequate basis for an exemption, or (2) provide a completed Form W-8BEN.

 

In compliance with U.S. federal withholding tax requirements applicable to payments of certain U.S. source income to foreign persons, Grant Prideco intends to withhold tax at the rate of 30% on consent payments made to non-U.S. holders, unless the holder establishes an exemption or a reduced rate. See “United States Federal Income Tax Consequences — Non-U.S. Holders — Consent Payments”.

 

Exchange Agent

 

Global Bondholder Services Corporation has been appointed the exchange agent for the exchange offer and consent solicitation. Letters of transmittal and consent and all correspondence in connection with the exchange offer should be sent or delivered by each holder of Grant Prideco notes, or a beneficial owner’s custodian bank, depositary, broker, trust company or other nominee, to the exchange agent at the addresses and telephone numbers

set forth on the back cover page of this prospectus. We will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable, out-of-pocket expenses in connection therewith.

 

Information Agent

 

Global Bondholder Services Corporation has been appointed as the information agent for the exchange offer and the consent solicitation, and will receive customary compensation for its services. Questions concerning tender procedures and requests for additional copies of this prospectus or the letter of transmittal and consent should be directed to the information agent at the address and telephone numbers set forth on the back cover page of this prospectus. Holders of Grant Prideco notes may also contact their custodian bank, depositary, broker, trust company or other nominee for assistance concerning the exchange offer.

 

Dealer Manager

 

We have retained Goldman, Sachs & Co. to act as dealer manager in connection with the exchange offer and consent solicitation and will pay the dealer manager for soliciting tenders in the exchange offer and consents in the consent solicitation a customary percentage of the total principal amount outstanding of each series of Grant Prideco notes if the required consents are received and the exchange offer is completed. We will also reimburse the dealer manager for certain expenses. The obligations of the dealer manager to perform such function are subject to certain conditions. We have agreed to indemnify the dealer manager against certain liabilities, including liabilities under the federal securities laws. Questions regarding the terms of the exchange offer or the consent solicitation may be directed to the dealer manager at the address and telephone number set forth on the back cover page of this prospectus.

 

From time to time, the dealer manager has provided, and may provide in the future, investment banking and other services for National Oilwell Varco and Grant Prideco for customary compensation. The dealer merger is acting as a financial advisor to National Oilwell Varco with respect to the merger.

 

The dealer manager in the ordinary course of its business purchases and/or sells securities, including the National Oilwell Varco notes, for its own account and for the account of its customers. As a result, the dealer managers at any time may own certain of our debt securities, including the National Oilwell Varco notes. In addition the dealer manager may tender the National Oilwell Varco notes into the tender offer for its own account.

 

Other Fees and Expenses

 

The expenses of soliciting tenders and consents with respect to the Grant Prideco notes will be borne by us. The principal solicitation is being made by mail; however, additional solicitations may be made by facsimile transmission, telephone or in person by the dealer manager and the information agent, as well as by officers and other employees of National Oilwell Varco and its affiliates.

 

Tendering holders of Grant Prideco notes will not be required to pay any fee or commission to the dealer manager. However, if a tendering holder handles the transaction through its broker, dealer, commercial bank, trust company or other institution, such holder may be required to pay brokerage fees or commissions.

 

The following is a summary comparison of the material terms of the Grant Prideco notes and the National Oilwell Varco notes. The National Oilwell Varco notes issued in the exchange offer will be governed by the National Oilwell Varco indenture. The summary does not purport to be complete and is qualified in its entirety by reference to the Grant Prideco indenture and the National Oilwell Varco indenture. Copies of those indentures are available from the information agent upon request.

 

The Grant Prideco notes represent, as of the date of this prospectus, the only debt securities issued under the Grant Prideco indenture.

 

Terms used in the descriptions of the Grant Prideco notes and the National Oilwell Varco notes below and not otherwise defined in this prospectus have the meanings given to such terms in the Grant Prideco indenture and the National Oilwell Varco indenture, respectively. Article and section references in the descriptions of the notes below are references to the applicable indenture under which the notes were or will be issued.

 

The description of the Grant Prideco notes reflects the Grant Prideco notes as currently constituted and does not reflect any changes to the covenants and other terms of the Grant Prideco notes or the Grant Prideco indenture that may be effected following the consent solicitation as described under “The Proposed Amendments”.

 

 

We are soliciting the consent of the holders of Grant Prideco notes to (1) eliminate many covenants in the Grant Prideco indenture, (2) eliminate the restrictions on Grant Prideco’s ability to consolidate, merge or sell all or substantially all of its assets and (3) eliminate some events of default under the Grant Prideco indenture. If the proposed amendments described below are adopted, the amendments will apply to all Grant Prideco notes not acquired in the exchange offer. Thereafter, all such Grant Prideco notes will be governed by the Grant Prideco indenture as amended by the proposed amendments, which will have less restrictive terms and afford reduced protections to the holders of such securities compared to those currently in the Grant Prideco indenture. See “Risk Factors — Risks Related to the Exchange Offer, the Consent Solicitation and the National Oilwell Varco Notes — The proposed amendments to the Grant Prideco indenture will afford reduced protection to remaining holders of Grant Prideco notes”.

 

The descriptions below of the provisions of the Grant Prideco indenture to be eliminated or modified do not purport to be complete and are qualified in their entirety by reference to the Grant Prideco indenture and the form of supplemental indenture to the Grant Prideco indenture that contains the proposed amendments with respect to the Grant Prideco notes (and that is to be executed by Grant Prideco and the trustee under the Grant Prideco indenture in the event the required consents are obtained). The form of supplemental indenture is included in this prospectus as Annex A.

 

The proposed amendments constitute a single proposal and a consenting holder of Grant Prideco notes must consent to the proposed amendments in their entirety and may not consent selectively with respect to certain of the proposed amendments.

 

Pursuant to the terms of the Grant Prideco Indenture, the proposed amendments require the consent of the holders of at least a majority in principal amount of the Grant Prideco notes outstanding. As of the date of this prospectus, the aggregate principal amount of the Grant Prideco notes outstanding is $174,585,000.

 

The valid tender of a holder’s Grant Prideco notes will constitute the consent of such tendering holder to the proposed amendments.

 

If the requisite consents are received, all of the sections or provisions of the Grant Prideco indenture listed below will be deleted. For a description of these covenants, see “Description of the Differences Between Grant Prideco Notes and National Oilwell Varco Notes”.

 

 

 

 

 

In addition, clauses (c) and (d) (default of certain specified covenants), (f) (cross-acceleration) and (g) (judgment defaults) of Section 6.01 (Events of Default) would be deleted.

 

Conforming Changes, etc.  The proposed amendments would amend the Grant Prideco indenture to make certain conforming or other changes to the Grant Prideco indenture, including modification or deletion of certain definitions and cross-references.

 

By consenting to the proposed amendments to the Grant Prideco indenture, you will be deemed to have waived any default, event of default or other consequence under such indenture for failure to comply with the terms of the provisions identified above (whether before or after the date of the supplemental indenture effecting the amendments described above).

 

Effectiveness of Proposed Amendments

 

If we receive the requisite consents by the consent payment deadline, the proposed amendments to the Grant Prideco indenture will become effective concurrently with the consummation of the merger.

 

If the proposed amendments become so effective:

 

 

General

 

The National Oilwell Varco notes are to be issued under an indenture to be dated as of the first date on which we exchange National Oilwell Varco notes for Grant Prideco notes pursuant to the exchange offer. The indenture will be a contract between National Oilwell Varco and The Bank of New York Trust Company, N.A., which will act as trustee. By its terms, the indenture will incorporate certain provisions of the Trust Indenture Act and, upon consummation of the exchange offer, the National Oilwell Varco indenture will be subject to and governed by the Trust Indenture Act. The National Oilwell Varco indenture and the National Oilwell Varco notes will contain the full legal text of the matters described in this section. The National Oilwell Varco indenture and the National Oilwell Varco notes are governed by New York law. We have filed a form of the National Oilwell Varco indenture as an exhibit to the registration statement of which this prospectus is a part.

 

The following is a description of the material provisions of the National Oilwell Varco notes and the related indenture and is a summary only. Because this section is a summary, it does not describe every aspect of those documents. This summary is subject to and qualified in its entirety by reference to all the provisions of those documents, including definitions of terms referenced in this prospectus.

 

The notes are direct, unsecured and senior obligations of National Oilwell Varco. The National Oilwell Varco indenture does not limit our ability to incur additional indebtedness.

 

Principal and Maturity

 

The National Oilwell Varco notes will mature on August 15, 2015, unless sooner redeemed. Although only up to $174,585,000 in aggregate principal amount of National Oilwell Varco notes would be issued in the exchange offer, we may, so long as no Event of Default under the National Oilwell Varco indenture has occurred and is continuing, issue and sell additional principal amounts of the National Oilwell Varco notes in the future without the consent of the holders of the National Oilwell Varco notes. The National Oilwell Varco notes, together with any additional notes subsequently issued, will constitute a single series of National Oilwell Varco notes under the National Oilwell Varco indenture.

 

The National Oilwell Varco notes are not entitled to the benefits of a sinking fund.

 

All of the National Oilwell Varco notes will be held initially in the form of one or more global notes. See “— Legal Ownership — Global Notes” for a general description of the global notes.

 

Interest

 

The National Oilwell Varco notes bear interest at the annual rate of 6.125%, payable semi-annually in arrears on February 15, and August 15 of each year to noteholders in whose name the National Oilwell Varco notes are registered at the close of business on February 1 or August 1 (whether or not a business day) preceding the applicable interest payment date. We refer to each of those payment days as an interest payment date. If an interest payment date or a redemption date occurs on a date that is not a business day, payment will be made on the next business day and no additional interest will accrue. Interest payments will commence on August 15, 2008.

 

Interest on the notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

 

Ranking

 

The National Oilwell Varco notes rank equally with all of our existing and future unsecured senior indebtedness and senior to all of our existing and future subordinated debt. The indenture does not limit our ability to incur additional indebtedness. Because we are a holding company that conducts all our operations through subsidiaries, the notes will be effectively subordinated to all obligations of our subsidiaries, which, after giving effect to the merger, will include Grant Prideco and its subsidiaries. Consequently, our right to receive assets of any subsidiary (and thus the ability of noteholders to benefit indirectly from these assets) is subject to the prior claims of creditors of that subsidiary. As of December 31, 2007, our subsidiaries had approximately $5,390.7 million of total balance sheet liabilities, whereas pro forma Grant Prideco had approximately $595.6 million of total balance sheet liabilities (including the Grant Prideco notes).

The indenture governing the National Oilwell Varco notes permits us to incur an unlimited amount of indebtedness. Our subsidiaries may also incur an unlimited amount of indebtedness. The National Oilwell Varco notes are not guaranteed by any of our subsidiaries.

 

Redemption

 

Optional Redemption.  Except as described below, the National Oilwell Varco notes are not redeemable before August 15, 2010. Thereafter, we may redeem the National Oilwell Varco notes at our option, in whole or in part, upon not less than 30 nor more than 60 days notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing August 15 of the years set forth below:

 

 

In addition, we must pay accrued and unpaid interest on the National Oilwell Varco notes redeemed.

 

Optional Redemption Upon Equity Offerings.  From time to time, on or prior to August 15, 2008, we may, at our option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 35% of the principal amount of the National Oilwell Varco notes issued under the National Oilwell Varco indenture at a redemption price of 106.125% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided that:

 

(1) at least 65% of the principal amount of National Oilwell Varco notes issued under the National Oilwell Varco indenture remains outstanding immediately after any such redemption; and

 

(2) we make such redemption not more than 90 days after the consummation of any such Equity Offering.

 

“Disqualified Stock” means any of our corporate stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the corporate stock), or upon the happening of any event (other than upon an optional redemption by us), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the corporate stock, in whole or in part, on or prior to the date that is 91 days after the date on which the National Oilwell Varco notes mature.

 

“Equity Offering” means any public or private sale of our corporate stock, including all warrants, options or other rights to acquire our corporate stock (but excluding any debt security that is convertible into, or exchangeable for, our corporate stock), but other than Disqualified Stock.

 

Selection and Notice.  If less than all of the National Oilwell Varco notes are to be redeemed at any time, the trustee will select notes for redemption as follows:

 

(1) if the National Oilwell Varco notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the National Oilwell Varco notes are listed; or

 

(2) if the National Oilwell Varco notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate.

 

No National Oilwell Varco notes of $1,000 or less can be redeemed in part. If a partial redemption is made with the proceeds of an Equity Offering, the trustee will select the notes only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures). Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. Notices of redemption may not be conditional.

 

If any National Oilwell Varco note is to be redeemed in part only, the notice of redemption that relates to that National Oilwell Varco note will state the portion of the principal amount of that note that is to be redeemed. A new National Oilwell Varco note in principal amount equal to the unredeemed portion of the original National Oilwell Varco note will be issued in the name of the holder of notes upon cancellation of the original note. National Oilwell

Varco notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on National Oilwell Varco notes or portions of them called for redemption unless we default in our obligation to redeem the National Oilwell Varco notes.

 

Same Day Settlement

 

The National Oilwell Varco notes will trade in The Depository Trust Company’s settlement system until maturity. As a result, The Depository Trust Company will require secondary trading activity in the notes to be settled in immediately available funds. So long as the notes continue to trade in The Depository Trust Company’s settlement system, all payments of principal and interest on the global notes will be made by us in immediately available funds.

 

Certain Definitions

 

The following definitions are applicable to the discussion of the National Oilwell Varco indenture in this summary.

 

“Consolidated Net Tangible Assets” means the aggregate amount of assets included on our consolidated balance sheet, less applicable reserves and other properly deductible items and after deducting therefrom (a) all current liabilities (other than liabilities that, by their terms, are extendable or renewable at the option of the obligor to a date that is 12 months or more after the date on which such current liabilities are determined) and (b) all goodwill, trade names, trademarks, patents, copyrights, unamortized debt discount and expense and other like intangibles, all in accordance with generally accepted accounting principles consistently applied.

 

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantees or obligations the full faith and credit of the United States is pledged.

 

“Lien” means, with respect to any property or asset, any mortgage, pledge, lien, encumbrance, charge or security interest of any kind in respect of such property or asset, whether or not filed, recorded or otherwise perfected under applicable law, but excluding agreements to refrain from granting Liens.

 

“Permitted Liens” means:

 

 

“Person” means (a) any form of business entity, association, grouping, trust or other form now or hereafter permitted by the laws of any state of the United States of America or any foreign government or utilized by businesses in the conduct of their activities and (b) a natural person, as the context may require.

 

“Principal Property” means (a) any real property, manufacturing plant, office building, warehouse or other physical facility, or any other like depreciable asset of us or any Restricted Subsidiary, whether owned at the date of

the indenture or thereafter acquired that in the opinion of our Board of Directors is of material importance to the total business we and our Restricted Subsidiaries conduct, as a whole; provided, however, that any such property shall not be deemed a Principal Property if such property does not have a fair value in excess of 5% of the total assets included on our consolidated balance sheet prepared in accordance with generally accepted accounting principles consistently applied.

 

“Restricted Subsidiary” means (a) any currently existing Subsidiary whose principal assets and business are located in the United States or Canada and (b) any Subsidiary that we designate to be a Restricted Subsidiary.

 

“Sale and Leaseback Transaction” means the sale or transfer by us or a Restricted Subsidiary of any Principal Property owned by us or it with the intention of taking back a lease on such property.

 

“Secured Debt” means indebtedness for money we or a Restricted Subsidiary borrow and any other indebtedness of us or a Restricted Subsidiary on which interest is paid or payable (other than indebtedness owed by a Restricted Subsidiary to us, by a Restricted Subsidiary to another Restricted Subsidiary or by us to a Restricted Subsidiary), that in any such case is secured by (a) any Lien on any Principal Property of us or a Restricted Subsidiary or (b) a Lien on any shares of stock or indebtedness of a Restricted Subsidiary that owns a Principal Property. The amount of Secured Debt at any time outstanding shall be the amount we or a Restricted Subsidiary then owe thereon.

 

“Significant Subsidiary” means a subsidiary that would be a “Significant Subsidiary” within the meaning of Rule 1-02 under Regulation S-X promulgated by the Securities and Exchange Commission.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which we, or we and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own voting securities entitling any one or more of us and our Subsidiaries to elect a majority of the directors, either at all times, or so long as there is no default or contingency which permits the holders of any other class or classes of securities to vote for the election of one or more directors, (b) any partnership of which we, or we and one or more of our Subsidiaries, or any one or more Subsidiaries, is at the date of determination, a general or limited partner of such partnership, but only if we and our Subsidiaries are entitled to receive more than 50% of the assets of such partnership upon dissolution or more than 50% of the profits of such partnership, or (c) any other Person (other than a corporation or partnership) in which we, or we and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly, at the date of determination thereof, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such Person.

 

Important Covenants

 

Limitation on Liens

 

The National Oilwell Varco indenture provides that we will not, nor will we permit any Restricted Subsidiary to, create, incur, issue, assume or guarantee any Secured Debt without making effective provision whereby the notes and any other indebtedness of or guaranteed by us or any of our Restricted Subsidiaries then entitled thereto, subject to applicable priorities of payment, shall be secured by a Lien equally and ratably with any and all other obligations and indebtedness thereby secured, so long as any of the other obligations and indebtedness shall be so secured; provided, that if any such Lien securing such Secured Debt ceases to exist, such equal and ratable security for the benefit of the noteholders shall automatically cease to exist without any further action; provided, further, that if the Secured Debt is expressly subordinated to the notes, the Lien securing such subordinated Secured Debt shall be subordinate and junior to the Lien securing the notes with the same relative priority as such Secured Debt shall have with respect to the notes. These provisions do not apply to Secured Debt that is secured by Permitted Liens.

 

Notwithstanding these restrictions, we and our Restricted Subsidiaries may, without equally and ratably securing the notes, create, incur, issue, assume or guarantee Secured Debt not otherwise permitted or excepted if the sum of (a) the amount of such Secured Debt plus (b) the aggregate value of Sale and Leaseback Transactions (excluding Sale and Leaseback Transactions described in clauses (1) through (4) of “Limitation of Sale and Leaseback Transactions”), does not exceed 10% of Consolidated Net Tangible Assets (as shown in our quarterly consolidated balance sheet most recently published prior to the date of the creation, incurrence, issuance, assumption or guarantee).

Limitation on Sale and Leaseback Transactions

 

The indenture provides that we will not, and we will not permit any of our Restricted Subsidiaries to, engage in a Sale and Leaseback Transaction unless:

 

(1) the Sale and Leaseback Transaction occurs within one year from the date of completion of the acquisition of the Principal Property subject thereto or the date of the completion of construction, development or substantial repair or improvements, or commencement of full operations, on such Principal Property, whichever is later;

 

(2) the Sale and Leaseback Transaction involves a lease for a period, including renewals, of not more than three years;

 

(3) we or a Restricted Subsidiary would be entitled to incur Secured Debt secured by a Lien on the Principal Property subject thereto in a principal amount equal to or exceeding the net sale proceeds from such Sale and Leaseback Transaction without equally and ratably securing the notes pursuant to the covenant “Limitation on Liens” described above; or

 

(4) we or a Restricted Subsidiary, within a one-year period after such Sale and Leaseback Transaction, apply or cause to be applied an amount not less than the net sale proceeds from such Sale and Leaseback Transaction to:

 

 

Notwithstanding the foregoing, the National Oilwell Varco indenture provides that we may, and may permit each of our Restricted Subsidiaries to, effect any Sale and Leaseback Transaction that is not excepted by clauses (1) through (4) (inclusive) of the above paragraph, provided that, after giving effect thereto and the application of proceeds, if any, received by us or any Restricted Subsidiaries as a result thereof, the net sale proceeds from such Sale and Leaseback Transaction, together with the aggregate principal amount of all Secured Debt then outstanding (other than the notes) secured by Liens upon Principal Property that are not Permitted Liens would not exceed 10% of the Consolidated Net Tangible Assets (as shown in our quarterly consolidated balance sheet most recently published prior to the date such Sale and Leaseback Transaction is effected).

 

Consolidation, Merger And Sale Of Assets

 

The National Oilwell Varco indenture provides that we may (a) consolidate with or merge into or (b) sell, convey, transfer, lease or otherwise dispose of our properties and assets substantially as an entirety to, any Person, provided that (i) the Person surviving such consolidation or merger (if we are not the continuing entity) is a Person organized and validly existing under the laws of the United States, any political subdivision thereof or any State thereof and assumes by supplemental indenture all of our obligations on the notes and under the indenture, and (ii) after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, exists. Upon a disposition of assets as described in clause (b) of the preceding sentence, we will be released from any further liability under the notes and the indenture.

 

Events Of Default

 

In the National Oilwell Varco indenture, an Event of Default will mean any of the following:

 

 

If an Event of Default (other than an Event of Default, as a result of the bankruptcy, insolvency or reorganization of us or a Significant Subsidiary) occurs and continues, either the trustee or the holders of at least 25% in aggregate principal amount of the notes outstanding, by notice to us, may declare the principal amount of all notes to be due and payable immediately. If an Event of Default occurs as a result of the bankruptcy, insolvency or reorganization of us or a Significant Subsidiary, the principal amount of all the notes will automatically, and without any action by the trustee or any holder, become immediately due and payable. After any acceleration, but before a judgment or decree for the payment of the money due has been obtained by the trustee, the holders of a majority in aggregate principal amount of the notes outstanding, by written notice to the trustee, may rescind and annul the acceleration and its consequences if all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in the indenture. For information as to waiver of defaults, see “Modification and Waiver” below.

 

Other than its duties in case of a default that is continuing, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any holders, unless the holders furnish the trustee reasonable indemnity. Subject to these provisions to indemnify the trustee, the holders of a majority in aggregate principal amount of the notes outstanding have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, for the notes.

 

No holder of any National Oilwell Varco note has the right to institute any proceeding with respect to the National Oilwell Varco indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless:

 

 

These limitations do not apply if a holder institutes a proceeding for the enforcement or payment of the principal of, or the premium or interest on, any note on or after the applicable due date specified in such note.

 

We are required to furnish the trustee with an annual statement from our officers as to whether or not, to our knowledge, we are in default in the performance or observance of any of the terms, provisions or conditions of the indenture and, if so, specifying all such known defaults. We are also required to deliver to the Trustee a certificate, as soon as possible, but in no event later than 5 days, after we become aware that a Default or Event of Default has occurred. If a Default or Event of Default occurs and is continuing and if it is actually known to a responsible officer of the trustee, the trustee must mail to the noteholders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal, interest or premium, if any, on any note, the trustee may withhold the notice, if and so long as, a committee of its responsible officers in good faith determines that withholding the notice is in the interests of the noteholders.

 

Modification And Waiver

 

Under the National Oilwell Varco indenture, generally we and the trustee may modify our rights and obligations with the consent of the holders of a majority in principal amount of the notes. We may not modify or amend the National Oilwell Varco indenture, without the consent of the holder of each note affected thereby, if the amendment or modification would (with respect to any notes held by a nonconsenting holder):

 

 

 

Without the consent of any noteholder, we and the trustee may amend the National Oilwell Varco indenture:

 

 

Holders of a majority in principal amount of the National Oilwell Varco notes may waive our compliance with certain restrictive provisions of the National Oilwell Varco indenture or waive any past default or event of default under the indenture, except a continuing default in the payment of principal of any premium or interest on the notes and covenants and provisions of the indenture that require the consent of the holder of each note affected thereby.

 

Except in certain limited circumstances, we are entitled to set any day as a record date for the purpose of determining the noteholders entitled to give or take any direction, notice, consent, waiver or other action under the indenture, in the manner and subject to the limitations provided in the indenture. In certain limited circumstances, the trustee may be entitled to set a record date for noteholder action or for payments if there is a default. If a record date is set for action to be taken by the noteholders, the action may be taken only by Persons who are noteholders on the record date. To be effective, action must be taken by holders of the requisite principal amount of the notes within a specified period following the record date. For any particular record date, this period will be 180 days or such shorter period as may be specified by us (or the trustee, if it sets the record date), and may be shortened or lengthened (but not beyond 180 days) from time to time.

 

Discharging Our Obligations; Defeasance

 

Satisfaction and Discharge

 

We may satisfy and discharge certain of our obligations with respect to notes which have not already been delivered to the trustee for cancellation and which have either become due and payable or are by their terms due and payable within one year by:

 

 

Defeasance and Discharge

 

We may discharge all of our indebtedness and obligations with respect to the National Oilwell Varco notes (except for obligations to exchange or register the transfer of the notes, to replace stolen, lost or mutilated outstanding notes, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit in trust for the benefit of the noteholders of money or Government Securities, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, any premium and interest on the notes on the maturity date in accordance with the terms of the indenture and the notes. Such defeasance or discharge may occur only if, among other things, we have delivered to the trustee an opinion of counsel to the effect that we have received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that the noteholders will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge were not to occur.

 

Defeasance of Certain Covenants

 

The National Oilwell Varco indenture provides that we may omit to comply with certain restrictive covenants, including the covenants described under “Limitation on Liens”, “Limitation on Sale and Leaseback Transactions” and “Consolidation, Merger and Sale of Assets”, in which event certain Events of Default, which are described above (with respect to such respective covenants) under “Events of Default”, will no longer constitute Events of Default. In order to exercise such option to defease such covenants, we will be required to deposit, in trust for the benefit of the noteholders, money or Government Securities, or both, which, through the payment of principal and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, any premium and interest on the notes on the maturity date in accordance with the terms of the indenture and the notes. We will also be required, among other things, to deliver to the trustee an opinion of counsel to the effect that noteholders will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance were not to occur.

 

If subsequent to the completion of a defeasance of certain covenants as described in the immediately preceding paragraph, the notes are declared due and payable because of the occurrence of any remaining Event of Default, the amount of money and Government Securities we deposit in trust would be sufficient to pay amounts due on the notes on the maturity date but may not be sufficient to pay amounts due on the notes upon any acceleration resulting from such Event of Default. In such case, we would remain liable for such payments.

 

Concerning The Trustee

 

The Bank of New York Trust Company, N.A. is the trustee under the National Oilwell Varco indenture.

 

Legal Ownership

 

Street Name and Other Indirect Holders

 

Investors who hold National Oilwell Varco notes in accounts at banks, brokers and other financial institutions will generally not be recognized by us as legal holders of notes. This is called holding in street name. These intermediary banks, brokers and other financial institutions pass along principal, interest and other payments on the National Oilwell Varco notes, either because they agree to do so in their customer agreements or because they are legally required to do so. If you will hold National Oilwell Varco notes in street name, you should check with your own institution to find out:

 

 

Direct Holders

 

National Oilwell Varco’s obligations, as well as the obligations of the trustee and those of any third parties employed by us or the trustee, extend only to Persons who are registered as holders of National Oilwell Varco notes. We do not have any responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interest in a global note, for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any action taken or omitted to be taken by DTC or any participant because the notes are issued in the form of global notes as described below. For example, once we make a payment to the registered holder, we have no further responsibility for the payment, even if that holder is legally required to pass the payment along to you as a street name customer but does not do so.

 

Global Notes

 

A global note is a special type of indirectly held note. Because we will issue the National Oilwell Varco notes only in the form of global notes, the ultimate beneficial owners can only be indirect holders. We do this by requiring that the global notes be registered in the name of a financial institution we select and by requiring that the National Oilwell Varco notes included in the global notes not be transferred to the name of any other direct holder unless the special circumstances described below occur. The financial institution that acts as the sole direct holder of the global note is called the depositary. Any Person wishing to own a note must do so indirectly by virtue of an account with a bank, broker or other financial institution that in turn has an account with the depositary.

 

Special Investor Considerations for Global Notes

 

As an indirect holder, an investor’s rights relating to the global notes will be governed by the account rules of the investor’s bank, broker or other financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize this type of investor as a holder of notes and instead deal only with the depositary that holds the global notes.

 

If you are an investor, you should be aware that:

 

 

Special Situations When Global Notes Will Be Terminated

 

In a few special situations described in the next paragraph, the global notes will terminate and interests in them will be exchanged for physical certificates representing the notes. After that exchange, the choice of whether to hold notes directly or in street name will be up to you. You must consult your own bank, broker or other financial institution to find out how to have your interests in the notes transferred to your own name, so that you will be a direct holder. The rights of street name investors and direct holders in the notes have been previously described in the subsections entitled “Street Name and Other Indirect Holders” and “Direct Holders”.

The special situations for termination of the global notes are:

 

 

Additional Mechanics

 

The following discussion only applies if the global notes are terminated as described above under “— Legal Ownership — Global Notes — Special Situations When Global Notes Will Be Terminated” and the notes are issued in the form of physical certificates.

 

The notes will be issued:

 

 

You may have your notes divided into more notes of smaller denominations (but not less than $1,000) or combined into fewer notes of larger denominations, as long as the total principal amount is not changed. This is called an exchange.

 

You may exchange or transfer notes at the office of the trustee. The trustee acts as our agent for registering notes in the names of holders and transferring notes. We may change this appointment to another entity or perform these functions ourselves. The entity performing the role of maintaining the list of registered holders is called the security registrar. It will also perform transfers. You will not be required to pay a service charge to transfer or exchange the notes, but you may be required to pay for any tax or other governmental charge associated with the exchange or transfer. The transfer or exchange will only be made if the security registrar is satisfied with your proof of ownership.

 

We may cancel the designation of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.

 

The unaudited pro forma condensed combined financial statements have been prepared assuming the merger of National Oilwell Varco and Grant Prideco is accounted for as a purchase under U.S. generally accepted accounting principles, and are based on the historical consolidated financial statements of each company which include, in the opinion of management of both companies, all adjustments necessary to present fairly the results for such periods. The unaudited pro forma condensed combined financial statements reflect the pending disposition of certain Grant Prideco tubular business units as further discussed in Note F to the Unaudited Pro Forma Condensed Combined Financial Statements. The disposition is expected to close in the first half of 2008 subject to customary closing conditions, including regulatory approval. However, there can be no assurance the pending disposition will be completed prior to the closing of the merger or at all. The Pro Forma Financial Statements do not reflect cost savings that may result from the merger. The following unaudited pro forma condensed combined balance sheet as of December 31, 2007, and unaudited pro forma condensed combined statement of operations for the year ended December 31, 2007, should be read in conjunction with the historical financial statements of National Oilwell Varco and Grant Prideco and the related notes which are incorporated by reference into this document. The unaudited pro forma condensed combined balance sheet was prepared as if the merger occurred on December 31, 2007 and the unaudited pro forma condensed income statement was prepared as if the merger occurred on January 1, 2007.

 

The unaudited pro forma condensed combined financial statements are not necessarily indicative of results of operations or financial position that would have occurred had the merger been consummated earlier, nor are they necessarily indicative of future results.

 

National Oilwell Varco estimates that it will incur fees and expenses totaling approximately $110 million in connection with the acquisition of Grant Prideco, and it has included these costs in calculating the purchase price. After the acquisition is completed, National Oilwell Varco expects to incur additional charges and expenses relating to restructuring overhead functions and certain operations. The amount of these charges has not yet been determined. In addition, the pro forma information assumes a write-up in inventory to fair market value of $112.7 million. National Oilwell Varco expects that the majority of this write-up will flow out to costs of goods sold during the 12-month period following the closing date of the acquisition. The allocation of purchase price to the assets and liabilities of Grant Prideco is subject to change based on the final valuation by National Oilwell Varco’s independent third-party valuation firm.

NATIONAL OILWELL VARCO, INC. AND GRANT PRIDECO, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

(In millions)