<PAGE>   1
================================================================================

                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

================================================================================
(MARK ONE)
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1999 OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                               SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 1-12317

                             NATIONAL-OILWELL, INC.
             (Exact name of registrant as specified in its charter)


             DELAWARE                                  76-0475815
-----------------------------------     -------------------------------------
   (State or other jurisdiction                      (IRS Employer
 of incorporation or organization)                 Identification No.)
 
                              10000 RICHMOND AVENUE
                                    4TH FLOOR
                                 HOUSTON, TEXAS
                                   77042-4200
              ----------------------------------------------------  
                    (Address of principal executive offices)

                                 (713) 346-7500
              ----------------------------------------------------  
              (Registrant's telephone number, including area code)


                 Securities registered pursuant to Section 12(b) of the Act:


     COMMON STOCK, PAR VALUE $.01            NEW YORK STOCK EXCHANGE
     ----------------------------         ------------------------------   
           (Title of Class)               (Exchange on which registered)
                             
                         
        Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 YES [X] NO [ ]
                                       

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 13, 2000, 66,283,519 common shares were outstanding. Based upon the
closing price of these shares on the New York Stock Exchange and, excluding
solely for purposes of this calculation 16,091,583 shares beneficially owned by
directors, executive officers, and First Reserve Corporation, the aggregate
market value of the common shares of National-Oilwell, Inc. held by
non-affiliates was approximately $1.3 billion. By this calculation, the
Registrant is not making a determination of the affiliate or non-affiliate
status of any person.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement in connection with the 2000 Annual Meeting of
Stockholders are incorporated in Part III of this report.



<PAGE>   2


                                     PART I


ITEM 1.   BUSINESS

GENERAL

National Oilwell is a worldwide leader in the design, manufacture and sale of
comprehensive systems and components used in oil and gas drilling and
production, as well as in providing supply chain integration services to the
upstream oil and gas industry.

National Oilwell manufactures and assembles drilling machinery, including
drawworks, mud pumps and power swivels (also known as "top drives"), which are
the major mechanical components of drilling rigs, as well as masts, derricks and
substructures. Many of these components are designed specifically for more
demanding applications, which include offshore, extended reach and deep land
drilling. The Company estimates that more than 90% of the mobile offshore rig
fleet and the majority of the world's larger land rigs (2,000 horsepower and
greater) manufactured in the last twenty years utilize drawworks, mud pumps and
other drilling machinery components manufactured by National Oilwell's Products
and Technology segment. National Oilwell also provides electrical power systems,
computer control systems and automation systems for drilling rigs. The Company's
systems, including the Cyberbase(TM) and automated pipe handling systems, are
used in many of the industry's most technologically demanding applications. In
addition, National Oilwell provides engineering and fabrication services to
integrate its drilling products and deliver complete land drilling rigs and
drilling modules for mobile offshore drilling rigs or offshore drilling
platforms.

Through its Products and Technology segment, National Oilwell designs and
manufactures drilling motors and specialized drilling tools for rent and sale.
Drilling motors are essential components of systems for horizontal, directional,
extended reach and performance drilling. Drilling tools include drilling jars,
shock tools and other specialized products.

The Company's Distribution Services segment offers comprehensive supply chain
integration services to the drilling and production segments. National Oilwell's
network of service centers located in the United States and Canada and near
major drilling and production activity worldwide use state of the art
information technology platforms to provide procurement, inventory management
and logistics services. These service centers stock and sell a variety of
expendable items for oilfield applications and spare parts for equipment
manufactured by National Oilwell.

BUSINESS STRATEGY

National Oilwell's business strategy is to enhance its market positions and
operating performance by:

Leveraging Its Installed Base of Higher Capacity Drilling Machinery and 
Equipment

The Company believes its market position and comprehensive product offering
present substantial opportunities to capture a significant portion of
expenditures for the construction of new, higher capacity drilling rigs and
equipment as well as the upgrade and refurbishment of existing drilling rigs and
equipment. Over the next few years, the advanced age of the existing fleet of
drilling rigs, coupled with drilling activity involving greater depths and
extended reach, is expected to generate demand for new equipment, especially in
the higher capacity end of the market. National Oilwell's automation and control
systems offer the potential to improve the performance of new and existing
drilling rigs. The Company's larger drawworks, mud pumps and power swivels often
provide the largest capacities currently available in the industry. The large
installed base of National Oilwell equipment also provides recurring demand for
spare parts and expendable products necessary for proper and efficient
operation.



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<PAGE>   3

Expanding Its Downhole Products Business

National Oilwell believes that economic opportunities for directional,
horizontal, extended reach and other value-added drilling applications will
increase, providing an opportunity for growth in the rental and sale of
high-performance drilling motors and downhole tools.

Building on Information Technology and Process Improvement Strategy

National Oilwell has developed and is implementing an integrated information
technology and process improvement strategy to enhance procurement, inventory
management and logistics activities. As a result of the need to improve industry
efficiency, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers, or are
forward integrating suppliers into their procurement, inventory management and
logistics operations to achieve cost and capital improvements. The Company
believes that it is well positioned to provide these services as a result of
its:

    o   large and geographically diverse network of distribution service centers
        in major oil and gas producing areas;

    o   strong relationship with a large community of industry suppliers;

    o   knowledge of customers' procurement processes, suppliers' capabilities
        and products' performance; and

    o   information systems that offer customers and suppliers enhanced
        e-commerce capabilities.

In addition, the integration of its distribution expertise, extensive network
and growing base of customer alliances provides an increased opportunity for
cost-effective marketing of National Oilwell's manufactured parts and equipment.

Continuing to Make Acquisitions That Enhance its Product Line

National Oilwell believes that the oilfield service and equipment industry will
continue to experience consolidation as businesses seek to align themselves with
other market participants in order to gain access to broader markets integrated
product offerings. From 1997 through the first quarter of 2000, National Oilwell
has made a total of eleven acquisitions and plans to continue to participate in
this trend.

OPERATIONS

Products and Technology

National Oilwell designs, manufactures and sells drilling systems and components
for both land and offshore drilling rigs as well as complete land drilling and
well servicing rigs. The major mechanical components include drawworks, mud
pumps, power swivels, SCR houses, solids control equipment, traveling equipment
and rotary tables. These components are essential to the pumping of fluids and
hoisting, supporting and rotating of the drill string. Many of these components
are designed specifically for applications in offshore, extended reach and deep
land drilling. This equipment is installed on new rigs and often replaced during
the upgrade and refurbishment of existing rigs.

Masts, derricks and substructures are designed and manufactured for use on land
rigs and on fixed and mobile offshore platforms, and are suitable for drilling
applications to depths of up to 30,000 feet or more. Other products include
pedestal cranes, reciprocating and centrifugal pumps and fluid end expendables
for all major manufacturers' pumps. National Oilwell's business includes the
sale of replacement parts for its own manufactured machinery and equipment.



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<PAGE>   4

The merger with Hitec greatly expands National Oilwell's product offering and
capabilities. Hitec is a recognized leader in the design of drilling systems and
solutions. Its core business is the design and production of control and data
acquisition systems for drilling related operations and automated and remotely
controlled machinery for drilling rigs.

Together with National Oilwell, Hitec designed the ActiveHeave(TM) Drilling
System which incorporates an advanced computer control system within the
drawworks. The AHD uses the drawworks to compensate for the heaving motion of an
offshore vessel, thus eliminating the need for an expensive passive motion
compensation system in the derrick. As a result, offshore vessels can improve
their drilling efficiency and drill in more severe weather conditions and rough
seas.

Other products created by Hitec include the Cyberbase(TM) operator system which
incorporates computer software, keypads and joysticks rather than traditional
gauges, lights and switches. The Cyberbase(TM) system forms the basis for the
state-of-the-art driller's cabin. Another product is the automated pipe handling
system that provides an efficient and cost effective method of joining lengths
of drill pipe or casing.

While offering a complete line of conventional rigs, National Oilwell has
extensive experience in providing rig designs to satisfy requirements for harsh
or specialized environments. Such products include drilling and well servicing
rigs designed for the Arctic, highly mobile drilling and well servicing rigs for
jungle and desert use, modular well servicing rigs for offshore platforms and
modular drilling facilities for North Sea platforms. With Hitec, the Company can
also design and produce a fully integrated drilling solution for the topside of
an offshore rig.

National Oilwell also designs and manufactures drilling motors, drilling jars
and specialized drilling tools for rent and sale. Drilling motors are devices
placed between the drill string and the drill bit to cause the bit to rotate
without necessarily rotating the drill string. Drilling motors are essential
components in systems for horizontal, directional, extended reach and
performance drilling. Drilling jars are used to assist in the release of a drill
string that becomes stuck in a well bore. Other products include shock tools,
reamers and stabilizers.

Distribution Services

National Oilwell provides distribution services through its network of over 145
distribution service centers. These distribution service centers stock and sell
a variety of expendable items for oilfield applications and spare parts for
National Oilwell equipment. As oil and gas companies and drilling contractors
have refocused on their core competencies and emphasized efficiency initiatives
to reduce costs and capital requirements, National Oilwell's distribution
services have expanded to offer outsourcing and alliance arrangements that
include comprehensive procurement, inventory management and logistics support.
In addition, management believes that the Company has a competitive advantage in
the distribution services business by distributing market-leading products
manufactured by its Products and Technology business.

The supplies and equipment stocked by National Oilwell's distribution service
centers vary by location. Each distribution point generally offers a large line
of oilfield products including valves, fittings, flanges, spare parts for
oilfield equipment and miscellaneous expendable items. Most drilling contractors
and oil and gas companies typically buy such supplies and equipment pursuant to
non-exclusive contracts, which normally specify a discount from National
Oilwell's list price for each product or product category.

Strategic alliances are significant to the Distribution Services business and
differ from standard agreements for supplies and equipment in that National
Oilwell becomes the customer's primary supplier of those items. In certain
cases, National Oilwell has assumed responsibility for procurement, inventory
management and product delivery for the customer, occasionally by working
directly out of the customer's facilities.

National Oilwell believes that e-commerce brings a significant advantage to
larger companies that are technologically proficient. During the last two years,
over $15 million has been spent by National Oilwell to improve the information
technology systems of the Distribution Group and allow ease of interface with
technology 


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systems of others. National Oilwell's e-commerce strategy incorporates
interfacing directly with customers' systems, trading exchanges and development
of its own system that will leverage its position in the upstream market.
National Oilwell believes it has an advantage in this effort due to its
geographic size, knowledge of the industry and customers, existing relationships
with vendors and existing means of product delivery, all in addition to its
information systems and data base.

Marketing

Substantially all of National Oilwell's capital equipment and spare parts sales,
and a large portion of its smaller pumps and parts sales, are made through its
direct sales force and distribution service centers. Sales to foreign
state-owned oil companies are typically made in conjunction with agent or
representative arrangements. National Oilwell's downhole products are generally
rented in Canada and Venezuela and sold worldwide through its own sales force
and through commissioned representatives. Distribution sales are made through
the Company's network of distribution service centers. Customers for National
Oilwell's products and services include drilling and other service contractors,
exploration and production companies, supply companies and nationally owned or
controlled drilling and production companies.

Competition

The oilfield services and equipment industry is highly competitive and National
Oilwell's revenues and earnings can be affected by price changes, introduction
of new technologies and products and improved availability and delivery.
National Oilwell competes in each of its segments with a large number of
companies, none of which are dominant in that particular segment.

Manufacturing and Backlog

National Oilwell has manufacturing facilities located in the United States,
Canada and Norway as of February 2000. The manufacture of parts or purchase of
components is also outsourced to qualified subcontractors. The manufacturing
operations require a variety of components, parts and raw materials which
National Oilwell purchases from multiple commercial sources. National Oilwell
has not experienced and does not expect any significant delays in obtaining
deliveries of materials.

Sales of products are made on the basis of written orders and oral commitments.
The Company's backlog for equipment at recent year ends has been:

1999     $  77 million
1998        77 million
1997       270 million
1996        38 million

Distribution Suppliers

National Oilwell obtains products sold by its Distribution Services business
from a number of suppliers, including its own Products and Technology segment.
No single supplier of products is significant to the company. National Oilwell
has not experienced and does not expect a shortage of products that it sells.

Engineering

National Oilwell maintains a staff of engineers and technicians to:

    o   design and test new products, components and systems for use in drilling
        and pumping applications;

    o   enhance the capabilities of existing products; and

    o   assist the Company's sales organization and customers with special
        projects.



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<PAGE>   6

National Oilwell's product engineering efforts focus on developing technology to
improve the economics and safety of drilling and pumping processes. While
important in the past, the merger with Hitec demonstrates the commitment to
expand and accelerate efforts that emphasize technology and complete drilling
solutions.

Patents and Trademarks

National Oilwell owns or has a license to use a number of patents covering a
variety of products. Although in the aggregate these patents are of importance,
the Company does not consider any single patent to be of a critical or essential
nature. In general, National Oilwell has historically relied upon technological
capabilities, quality products and application of its expertise rather than
patented technology in the conduct of its business.

Employees

As of December 31, 1999, the Company had a total of 2,977 employees, 1,791 of
whom were salaried and 1,186 of whom were paid on an hourly basis. Of this
workforce, 827 employees are employed in Canada and 163 are employed by the
Company's other foreign subsidiaries.


                                  RISK FACTORS

Before purchasing any shares of National Oilwell common stock, you should
consider carefully the following factors, in addition to the other information
contained or incorporated by reference herein.

National Oilwell Depends on the Oil and Gas Industry

National Oilwell is very dependent upon the oil and gas industry and its
willingness to explore for and produce oil and gas. The industry's willingness
to explore and produce depends upon the prevailing view of future product
prices. Many factors affect the supply and demand for oil and gas and therefore
influence product prices, including:

    o   level of production from known reserves;

    o   cost of producing oil and gas;

    o   level of drilling activity;

    o   worldwide economic activity;

    o   national government political requirements;

    o   development of alternate energy sources; and

    o   environmental regulation.

If there is a significant reduction in demand for drilling services, in cash
flows of drilling contractors or production companies or in drilling or well
servicing rig utilization rates, then demand for National Oilwell's products
will drop.

Oil and Gas Prices Are Volatile

Oil and gas prices have been volatile over the last ten years, ranging from $10
- $40 per barrel. Oil prices were low in 1998, generally ranging from $11 to $16
per barrel. In 1999 oil prices recovered to more normal historical levels but
there is no assurance that oil prices will remain at these levels for any length
of time. Spot gas prices have also been volatile over the last ten years,
ranging from less than $1.00 per mcf of gas to above $3.00. Gas prices were



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<PAGE>   7

moderate in 1998 generally ranging from $1.80 to $2.20 per mcf. In 1999 and
early 2000 gas prices have experienced an upward trend but still remain
volatile.

These price changes have caused 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 that we
manufacture. In the second half of 1998, lower oil prices slowed production and
new drilling, particularly in areas where the per barrel cost of production is
high. This slowdown quickly affected National Oilwell's Distribution business
and subsequently negatively impacted its Products and Technology segment. While
oil and gas commodity prices have been higher in 1999 and early 2000, this may
not have a positive impact on the businesses of National Oilwell. The Company
cannot predict future oil and gas prices or the effect prices will have on
exploration and production levels.

National Oilwell's Industry Is Highly Competitive

The oilfield products and services industry is highly competitive. The following
competitive actions can each affect the revenues and earnings of National
Oilwell:

    o   price changes;

    o   new product and technology introductions; and

    o   improvements in availability and delivery.

National Oilwell competes with many companies. Some of these companies may
possess greater financial resources than National Oilwell or offer certain
products that National Oilwell does not have.

National Oilwell Faces Potential Product Liability and Warranty Claims

Customers use some of National Oilwell's products in potentially hazardous
drilling, completion and production applications that can cause:

    o   injury or loss of life;

    o   damage to property, equipment or the environment; and

    o   suspension of operations.

National Oilwell has what it believes to be the amounts and types of insurance
coverage which are consistent with normal industry practice. However, National
Oilwell's insurance does not protect it against all liabilities. The Company
cannot guarantee that its insurance will be adequate to cover all liabilities
National Oilwell may incur. National Oilwell also cannot assure that it will be
able to maintain its insurance in the future at levels it thinks are necessary
and at rates it considers reasonable. Particular types of insurance coverage may
not be available in the future.

National Oilwell may be named as a defendant in product liability or other
lawsuits asserting potentially large claims if an accident occurs at a location
where its equipment and services have been used. National Oilwell is currently
party to legal and administrative proceedings. National Oilwell cannot predict
the outcome of these proceedings, nor the effects any negative outcomes may have
on it.

Foreign and Domestic Political Developments and Governmental Regulations Can 
Affect National Oilwell

Many aspects of National Oilwell's operations are affected by political
developments, including restrictions on the ability to do business in various
foreign jurisdictions. National Oilwell is also subject to foreign and domestic



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government regulations, such as regulations relating to oilfield operations,
worker safety and environmental protection.

In addition, National Oilwell depends on demand for its products and services
from the oil and gas industry, and is therefore affected by any changes in laws
and regulations that affect the oil and gas industry. If laws or regulations are
adopted which hinder exploration for or production of oil and gas, the Company's
operations could suffer. National Oilwell cannot predict the extent to which its
future operations may be affected by political developments, new legislation or
new regulations.

Environmental Regulations Can Affect National Oilwell

Many foreign, federal, state, provincial and local environmental laws and
regulations affect the operations of National Oilwell, as well as the operations
of our customers. The technical requirements of these laws and regulations are
becoming increasingly expensive, complex and stringent. These laws and
regulations may sanction National Oilwell for damages to natural resources or
threats to public health and safety. These laws can also make National Oilwell
liable for the actions of others, or for our prior acts that were legal at the
time.

Violations of laws or regulations may result in any one or more of the
following:

    o   revocation of permits;

    o   corrective action orders;

    o   administrative or civil penalties; or

    o   criminal prosecution.

Certain environmental laws may subject National Oilwell to joint and several
liability for spills or releases of hazardous substances. This means that
National Oilwell could be forced to pay an entire judgment even in a case in
which it was only partially responsible for the damage. The Company could also
be sued for personal injuries or property damage as a result of alleged exposure
to hazardous substances, as well as damage to natural resources.

Instability of Foreign Markets Could Have a Negative Impact on the Revenues of  
National Oilwell

Some of the revenues of National Oilwell depend upon customers in the Middle
East, Africa, Southeast Asia, South America and other international markets.
These revenues are subject to risks of instability of foreign economies and
governments. National Oilwell's sales can be affected by laws and regulations
limiting exports to particular countries and sometimes export laws and
regulations of one jurisdiction contradict those of another.

National Oilwell is exposed to the risks of changes in exchange rates between
the U.S. dollar and foreign currencies. National Oilwell does not currently
engage in or plan to engage in any significant hedging or currency trading
transactions designed to compensate for adverse currency fluctuations.

National Oilwell May Not Be Able to Successfully Manage Its Growth

National Oilwell acquired three companies in 1997, five in 1998, two in 1999 and
one in the first quarter of 2000. National Oilwell also intends to acquire
additional companies in the future, whenever feasible. National Oilwell cannot
predict whether suitable acquisition candidates will be available on reasonable
terms. Further, National Oilwell may not have access to adequate funds to
complete any desired acquisitions. Once acquired, National Oilwell cannot
guarantee that it will successfully integrate the operations of the acquired
companies.

Combining organizations could interrupt the activities of some or all of the
businesses of National Oilwell, and have a negative impact on operations. Recent
acquisitions and recent growth in revenues have placed significant demands on
National Oilwell to do the following:



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    o   improve the combined entity's operational, financial and management
        information systems;

    o   develop further the management skills of National Oilwell's managers and
        supervisors; and

    o   continue to train, motivate and effectively manage National Oilwell's
        employees.


National Oilwell Has Debt

In 1998, National Oilwell issued 6 7/8% senior notes due July 1, 2005. As a
result of this issuance, National Oilwell has become more leveraged. As of
December 31, 1999, the Company had a total of $196.0 million of debt, and a
total of $395.1 million of stockholders' equity. National Oilwell's leverage
requires it to use some of its cash flow from operations for payment of interest
on its debt. National Oilwell's leverage may also make it more difficult to
obtain additional financing in the future. Further, National Oilwell's leverage
could make it more vulnerable to economic downturns and competitive pressures.

Potential Future Sale of Shares of National Oilwell Could Affect Its Market 
Price

Future sales of shares of National Oilwell by stockholders or option holders
could have a negative effect on the market price of National Oilwell stock. At
March 10, 2000, National Oilwell has issued outstanding options to purchase a
total of 2,762,692 of its shares at prices ranging from $5.62 to $28.81 per
share. First Reserve Corporation has certain rights to cause National Oilwell to
file a registration statement with the SEC to allow the sale of their shares,
and certain others also have the right to be included in any registration
statements National Oilwell files. The following is a list of the amount of
shares subject to registration rights:

STOCKHOLDER                                             NUMBER OF SHARES
-----------                                             ----------------

First Reserve Corporation                                 6,816,634
Other Stockholders (12 persons)                           2,168,773


I
TEM 2.   PROPERTIES

National Oilwell owned or leased approximately 170 facilities worldwide as of
December 31, 1999, including the following principal manufacturing and
administrative facilities:


<TABLE>
<CAPTION>
                              APPROXIMATE
                             BUILDING SPACE
LOCATION                     (SQUARE FOOT)     DESCRIPTION                                   STATUS
--------                     -------------     -----------                                   ------
<S>                          <C>               <C>                                           <C> 
Houston, Texas                   260,000       Manufactures and services drilling            Leased
                                               machinery and equipment
Galena Park, Texas               188,000       Fabricates drilling components and rigs       Owned
Houston, Texas                   178,000       Administrative offices and Manufactures       Owned
                                               SCR systems
Edmonton, Alberta, Canada        162,000       Manufactures downhole tools                   Owned
McAlester, Oklahoma              117,000       Manufactures pumps and expendable parts       Owned
Houston, Texas                   100,000       Administrative offices                        Leased
Victoria, Texas                   71,000       Manufactures and services mobile rigs         Owned
Marble Falls, Texas               65,000       Manufactures drilling expendable parts        Owned
Nisku, Alberta, Canada            59,000       Manufactures drilling machinery and           Owned
                                               equipment
Edmonton, Alberta, Canada         57,000       Manufactures drilling machinery and           Owned
                                               equipment
Rosenberg, Texas                  44,000       Manufactures downhole tools                   Leased
</TABLE>


--------------------------



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<PAGE>   10

The Company owns or leases ten satellite repair and manufacturing facilities
that refurbish and manufacture new equipment and parts and approximately 145
distribution service centers worldwide. Management believes that the capacity of
facilities is adequate to meet demand currently anticipated for 2000.



ITEM 3.   LEGAL PROCEEDINGS
National Oilwell has various claims, lawsuits and administrative proceedings
that are pending or threatened, all arising in the ordinary course of business,
with respect to commercial, product liability and employee matters. Although no
assurance can be given with respect to the outcome of these or any other pending
legal and administrative proceedings and the effect such outcomes may have,
management believes that any ultimate liability resulting from the outcome of
such proceedings will not have a material adverse effect on National Oilwell's
consolidated financial statements.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1999.


                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information 
National Oilwell common stock is listed on the New York Stock Exchange (ticker 
symbol: NOI). The following table sets forth the stock price range during the 
past three years:


<TABLE>
<CAPTION>
                  1999                  1998                1997
          --------------------  --------------------  --------------------
Quarter     High         Low      High         Low      High         Low    
-------   --------     -------  --------     -------  --------     -------
<S>       <C>          <C>      <C>          <C>      <C>          <C>
First      $13.69       $ 8.50   $34.00       $23.88   $19.32       $14.00
Second      14.13        10.00    39.75        25.94    28.88        15.82    
Third       18.50        13.00    29.13         7.75    37.50        25.07
Fourth      16.50        12.00    17.69         8.81    44.44        27.88
</TABLE>

  
As of March 15, 2000, there were 424 holders of record of National Oilwell
common stock. National Oilwell has never paid cash dividends, and none are
anticipated during 2000.


ITEM 6.   SELECTED FINANCIAL DATA

Data for all periods shown below is restated to combine Dupre' results pursuant
to pooling-of-interests accounting. As a result of the differing year ends of
National Oilwell and Dreco prior to the combination of the companies, the
balance sheets and results of operations for dissimilar year ends have been
combined pursuant to pooling-of-interests accounting. National Oilwell's results
of operations for the year ended December 31, 1997 include Dreco's results of
operations for the six months ended May 31, 1997 and the six months ended
December 31, 1997. Data for the year ended December 31, 1996 includes the
operations of Dreco for the twelve months ended and as of November 30, 1996.
Data for the year ended August 31, 1995 reflect the operations of Dreco and
Dupre' only, as National Oilwell did not exist as a corporation prior to January
1, 1996.



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<PAGE>   11

<TABLE>
<CAPTION>
                                                                                                                            YEAR
                                                                                                                            ENDED
                                                                             YEAR ENDED DECEMBER 31,                      AUGUST 31,
                                                            ---------------------------------------------------------     ----------
                                                              1999            1998            1997(2)         1996(3)       1995(1)
                                                            --------       ----------       ----------       --------     ----------
                                                                   (IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)      
                                                                                                                         (UNAUDITED)
<S>                                                         <C>            <C>              <C>              <C>           <C>
OPERATING DATA:
     Revenues                                               $745,215       $1,271,914       $1,097,406       $822,443      $129,634
     Operating income (loss)(4)                               21,901          122,512           91,786         30,534        11,203
     Income (loss) before taxes and extraordinary loss(5)      4,518          109,356           86,145         19,428        13,045
     Income (loss) before extraordinary loss (5)               1,520           68,954           54,827         12,695         8,493
     Net income (loss)                                         1,520           68,954           54,204          8,695         8,493
     Income (loss) per share before extraordinary loss(5)      
          Basic                                                 0.03             1.26             1.03           0.30          0.60
          Diluted                                               0.03             1.26             1.02           0.30          0.59
     Net income (loss) per share
          Basic                                                 0.03             1.26             1.02           0.20          0.60
          Diluted                                               0.03             1.26             1.01           0.20          0.59

OTHER DATA:
     Depreciation and amortization                            23,244           20,598           15,443          9,219         4,907
     Capital expenditures                                     15,369           29,241           34,783         15,796         6,666
     
BALANCE SHEET DATA:
     Working capital                                         302,166          364,130          255,610        171,608        35,090
     Total assets                                            782,311          855,888          602,993        376,523        87,208
     Long-term debt, less current maturities                 196,007          221,198           61,719         39,302         2,183
     Stockholders' equity                                    395,075          393,299          284,208        173,099        51,584
</TABLE>



(1) Data for the year ended August 31, 1995 reflect the
    operations of Dreco and Dupre' only, as the operations of National Oilwell
    were acquired from a predecessor partnership as of January 1, 1996 and, in
    accordance with generally accepted accounting principles, cannot be combined
    prior to that date. Data for Dupre' is as of December 31, 1995.

(2) In order to conform Dreco's fiscal year end to match National Oilwell's
    year end, the results of operations for the month of June 1997 have been
    included directly in stockholders' equity. Dreco's revenues and net income
    were $13.4 million and $0.9 million for the month.

(3) In order to conform Dreco's fiscal year end to National Oilwell's
    December 31 year end, the results of operations for the period from
    September 1, 1995 through November 30, 1995 have been included directly in
    stockholders' equity. Dreco's revenues and net income were $33.4 million and
    $3.2 million for such period.

(4) In December 1998, National Oilwell recorded a $16,400,000 charge related
    to personnel reductions and facility closures and a $5,600,000 charge
    related to the writedown to the lower of cost or market of certain tubular
    inventories. In September 1997, National Oilwell recorded a $10,660,000
    charge related to merger expenses incurred in connection with the
    combination with Dreco. In October 1996, National Oilwell recorded
    $16,611,000 in charges related to the cancellation of management agreements
    and expenses related to special incentive plans that terminated upon the
    occurrence of the initial public offering of its common stock.

(5) National Oilwell recorded extraordinary losses in September 1997 of
    $623,000 (net of $376,000 income tax benefit) and in October 1996 of
    $4,000,000 (net of $2,400,000 income tax benefit) due to the write-offs of
    deferred debt issuance costs.


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

INTRODUCTION

National Oilwell is a worldwide leader in the design, manufacture and sale of
drilling systems, drilling equipment and downhole products as well as the
distribution to the oil and gas industry of maintenance, repair and operating
products. National Oilwell's revenues are directly related to the level of
worldwide oil and gas drilling and production activities and the profitability
and cash flow of oil and gas companies and drilling contractors , which in turn
are affected by current and anticipated prices of oil and gas. Beginning in late
1997, oil prices declined to less than $15 per barrel due to concerns about
excess production, less demand from Asia due to an economic slowdown and warmer
than average weather in many parts of the United States. The resulting lower
demand for products and services had an increasingly negative effect on the
Distribution Services business throughout 1998 and on both segments in 1999. Oil
prices have recovered since late July 1999 to a range of $25-$31 per barrel.
National Oilwell 


                                       10

<PAGE>   12

expects its revenues to increase if its customers gain confidence in sustained
commodity prices at this level and as their cash flows from operations improve,
allowing them to purchase products sold by National Oilwell. See "Risk Factors".

National Oilwell conducts its operations through the following segments:

Products and Technology

The Products and Technology segment designs and manufactures a large line of
proprietary products, including drawworks, mud pumps, power swivels, electrical
control systems and downhole motors and tools, as well as complete land drilling
and well servicing rigs, and structural components such as cranes, masts,
derricks and substructures for offshore rigs. A substantial installed base of
these products results in a recurring replacement parts and maintenance
business. Sales of new capital equipment can result in large fluctuations in
volume between periods depending on the size and timing of the shipment of
orders. In addition, the segment provides drilling pump expendable products for
maintenance of National Oilwell's and other manufacturers' equipment.

With the addition of Hitec in February 2000, the Company intends to expand its
emphasis on technology, especially in the areas of automation and remotely
controlled equipment.

Effective January 1, 1999, National Oilwell changed the structure of its
internal organization and now includes the former Downhole Products segment as a
product line within the Products and Technology segment. Prior year segment
information has been restated to reflect this change. The Company sold its drill
bit product line in June 1999 for approximately $12 million, recording a pre-tax
loss of $1.0 million ($0.6 million after-tax). Revenues and operating income
recorded in 1999 for the drill bit operations were $6.1 million and $0.1
million, respectively.

On July 8, 1999, National Oilwell acquired the assets of CE Drilling Products,
Inc. for approximately $65 million in cash, financed primarily by borrowing $57
million under its revolving credit facility. This business involves the
manufacture, sale and service of drilling machinery and related parts. The
transaction has been accounted for under the purchase method of accounting.

Distribution Services

Distribution Services revenues result primarily from the sale of maintenance,
repair and operating supplies ("MRO") from National Oilwell's network of
distribution service centers and, prior to July 1999, from the sale of well
casing and production tubing. These products are purchased from numerous
manufacturers and vendors, including National Oilwell's Products and Technology
segment. The Company sold its tubular product line in June 1999 for
approximately $15 million, generating a pre-tax loss of $0.9 million ($0.5
million after-tax). Revenues and operating loss recorded in 1999 for the tubular
operations were $23.6 million and $0.6 million, respectively.

On July 1, 1999, National Oilwell purchased 100% of the outstanding stock of
Dupre' Supply Company and Dupre' International Inc. in exchange for 1,920,000
shares of National Oilwell common stock, pending finalization of post-closing
adjustments. These companies are leading suppliers of pipe, fittings, valves and
valve automation services and complement the existing operations of the
Distribution Services segment. This transaction has been accounted for under the
pooling-of-interests method of accounting and, accordingly, historical financial
statements have been restated.



                                       11

<PAGE>   13
RESULTS OF OPERATIONS

Operating results by segment are as follows (in millions):


<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                         1999            1998           1997
                                        ------         --------       --------
<S>                                     <C>            <C>            <C>
Revenues:
     Products and Technology            $365.6         $  729.9       $  440.8
     Distribution Services               410.3            608.5          722.7
     Eliminations                        (30.7)           (66.5)         (66.1)
                                        ------         --------       --------
          Total                         $745.2         $1,271.9       $1,097.4
                                        ======         ========       ========

Operating Income:
     Products and Technology            $ 33.3         $  136.6       $   79.0
     Distribution Services                (6.0)             8.9           32.1
     Corporate                            (5.4)            (6.6)          (8.7)
                                        ------         --------       --------
                                        $ 21.9         $  138.9       $  102.4
     Special Charge                         -              16.4           10.7
                                        ------         --------       --------
          Total                         $ 21.9         $  122.5       $   91.7
                                        ======         ========       ========
</TABLE>



Products and Technology

Revenues for the Products and Technology segment decreased by $364.3 million (50
%) from 1998 primarily due to reduced sales of major capital equipment ($250
million), drilling spares ($92 million) and expendable pump parts ($17 million).
The sales of all types of capital equipment were substantially lower than the
prior year. Operating income in 1999 decreased by $103.3 million from the prior
year due to this substantial revenue decline. As a percentage of revenue, 1999
operating income fell approximately 50% from 18.7% to 9.1% with lower volume
being the primary driver.

Revenues for 1998 increased by $289.1 million over 1997 primarily due to
increased sales of major capital equipment and drilling spares. Specifically,
the sale of complete rig packages, mud pumps, cranes and SCR equipment were
substantially greater than the prior year. Revenues generated by acquisitions
completed in 1998 totaled approximately $48 million during the year. Operating
income increased by $57.6 million in 1998 compared to the prior year due
principally to the increased sales volume. Various acquisitions completed in
1998 contributed $2.6 million in operating profit during the year.

Backlog of the Products and Technology capital products was $77 million at
December 31, 1999 and 1998 compared to $270 million at December 31, 1997.
Substantially all of the current backlog is expected to be shipped by June 2000.

Distribution Services

Distribution Services revenues in 1999 fell $198.2 million from the 1998 level
due to the depressed market conditions and the mid-year sale of the tubular
product line which generated revenues in 1999 of approximately $24 million, or
$23 million lower than the prior year. The margin reduction resulting from the
lower revenues was the primary contributor to the $6.0 million operating loss.

Distribution Services revenues during 1998 fell short of the comparable 1997
period by $114.2 million. This 16% decrease reflects the reduced demand for
tubular and general rig operating supplies precipitated by the significant
decrease in oil prices. North American revenues were off approximately 20%, with
tubular revenues roughly two-thirds of the level achieved in 1997. Operating
income in 1998 was approximately $23 million below 1997, due to reduced margins
from the decline in revenues partially offset by reduced operating expenses, and
the recording of a $5.6 million charge related to the writedown to lower of cost
or market of certain tubular inventories.



                                       12

<PAGE>   14

Corporate

Corporate charges represent the unallocated portion of centralized and executive
management costs. A reduction of $1.1 million in 1999 as compared to 1998 was
attributable to ongoing decentralization efforts and relocation of the corporate
offices. These costs also decreased substantially in 1998 due to the elimination
of duplicate corporate costs that existed prior to the combination with Dreco.

Special Charges

During the fourth quarter of 1998, the Company recorded a special charge of
$16.4 million ($10.4 million after tax, or $0.20 per share) related to
operational changes resulting from the depressed market for the oil and gas
industry. The components of the special charge were asset impairments of $5.4
million, severance costs of $5.6 million and facility closures and exit costs of
$5.4 million. All of the actions related to this charge have been implemented.

During 1997, National Oilwell recorded a $10.7 million charge ($8.1 million
after tax) related to various professional fees and integration costs incurred
in connection with the combination with Dreco.

Interest Expense

Interest expense in 1999 was greater than the prior year due to carrying a
higher debt level for the entire year resulting from the issuance of the 6 7/8%
senior notes in mid 1998. Interest expense also increased during 1998 when
compared to 1997 due to the incurrence of the senior notes.

Income Taxes

National Oilwell is subject to U.S. federal, state and foreign taxes and
recorded a combined tax rate of 66% in 1999, 37% in 1998 and 36% in 1997. The
1999 effective tax rate was impacted by the inclusion of the pre-merger
operating results of the Dupre' companies (see Note 1) due to
pooling-of-interests accounting and its S Corporation tax status. Concurrent
with the acquisition, Dupre' terminated its status as an S Corporation.
Excluding the impact of Dupre's pre-merger results, National Oilwell's combined
effective tax rate for 1999 was 43%, compared to 37% in 1998 and 38% in 1997.


The Company has net operating loss carryforwards in the United States that could
reduce future tax expense by up to $5.9 million. Additional loss carryforwards
in Europe generally would reduce goodwill if realized in the future. Due to the
uncertainty of future utilization, most of the potential benefits described
above have been fully reserved. During 1999, National Oilwell realized a tax
benefit of $1.0 million from its U.S. carryforwards.

The Company generated a tax loss in 1999 and intends to carry back this loss
against prior years. Accordingly, the Company has recorded a current tax benefit
and corresponding current tax receivable of $10.2 million.

Extraordinary Losses

In the third quarter of 1997, National Oilwell replaced its existing credit
facility and recorded a charge of $1.0 million ($0.6 million after tax) due to
the write-off of deferred debt costs


LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, National Oilwell had working capital of $302.2 million, a
decrease of $62.0 million from December 31, 1998. Significant components of
National Oilwell's assets are accounts receivable and inventories. Accounts
receivable decreased by $115.5 million during 1999. Inventories at each year-end
were similar as reductions from lower activity levels and sales of product lines
were offset by additions from companies acquired. Other significant changes in
working capital components include a decrease in accounts payable of $30.6
million and customer prepayments of $8.6 million, due to lower activity levels
and the recognition of a $10.2 million income tax receivable.

Total capital expenditures were $15.4 million during 1999, $29.2 million in 1998
and $34.8 million in 1997. Additions and enhancements to the downhole rental
tool fleet and information management and inventory control 


                                       13

<PAGE>   15

systems represent the majority of these capital expenditures. Capital
expenditures are expected to approximate $20 million in 2000. National Oilwell
believes it has sufficient existing manufacturing capacity to meet currently
anticipated demand through 2000 for its products and services.

On September 25, 1997, National Oilwell entered into a five-year unsecured $125
million revolving credit facility. The credit facility is available for
acquisitions and general corporate purposes. The credit facility provides for
interest at prime or LIBOR plus 0.625%, subject to adjustment based on National
Oilwell's Capitalization Ratio, as defined. The credit facility contains
financial covenants and ratios regarding minimum tangible net worth, maximum
debt to capital and minimum interest coverage. In March 2000, the credit
facility was amended to lower the minimum interest coverage ratio effective as
of December 31, 1999.

National Oilwell believes that cash generated from operations and amounts
available under the credit facility will be sufficient to fund operations,
working capital needs, capital expenditure requirements and financing
obligations. National Oilwell also believes any significant increase in capital
expenditures caused by any need to increase manufacturing capacity can be funded
from operations or through debt financing.

National Oilwell intends to pursue acquisition candidates, but the timing, size
or success of any acquisition effort and the related potential capital
commitments cannot be predicted. National Oilwell expects to fund future cash
acquisitions primarily with cash flow from operations and borrowings, including
the unborrowed portion of the credit facility or new debt issuances, but may
also issue additional equity either directly or in connection with acquisitions.
There can be no assurance that acquisition funds will be available at terms
acceptable to National Oilwell.

Inflation has not had a significant impact on National Oilwell's operating
results or financial condition in recent years.

SUBSEQUENT EVENT

On February 4, 2000, stockholders of Hitec ASA, a leading supplier of highly
advanced systems and solutions, including leading-edge automation and remote
control technologies, for the oil and gas industry, approved a merger with
National Oilwell. Approximately 7.9 million shares of common stock and NOK 148.7
million (approximately $19 million) were issued in exchange for 98.7% of the
outstanding shares of Hitec. Each Hitec share was exchanged for .2125904 of a
National Oilwell share plus NOK 3.95152. Concurrently with the combination, the
non-drilling related assets of Hitec were sold for NOK 148.7 million. National
Oilwell will account for this transaction as a purchase for financial reporting
purposes with goodwill related to this transaction approximating $150 million.

On March 15, 2000, National Oilwell signed a definitive merger agreement with
IRI International Corporation (NYSE: IIR) whereby National Oilwell would issue
approximately 13,500,000 shares of common stock in exchange for all of the
outstanding common stock of IRI. The transaction is subject to stockholder
approval of both companies and regulatory approval. The transaction would be
accounted for as a pooling of interests.

IMPACT OF YEAR 2000

In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. The Company experienced no significant disruptions in
information technology or any other systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
expensed approximately $700,000 during 1999 in connection with remediating its
systems. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year to
ensure that any latent Year 2000 matters that may arise are addressed promptly.

MARKET RISK DISCLOSURE

The Company is subject to market risk exposure related to changes in interest
rates on its credit facility which is comprised of revolving credit notes in the
United States and Canada. A portion of the borrowings are denominated in
Canadian funds which could expose the Company to market risk with exchange rate
movements, although such is mitigated by the Company's substantial operations in
Canada. These instruments carry interest at a pre-agreed upon percentage point
spread from either the prime interest rate or LIBOR. Under its credit facility,
the Company may, at its option, fix the interest rate for certain borrowings
based on a spread over LIBOR for 30 days to 6 months. At December 31, 1999, the
Company had $46.0 million outstanding under its credit facility. Based on this



                                       14

<PAGE>   16

balance, an immediate change of one percent in the interest rate would cause a
change in interest expense of approximately $0.5 million on an annual basis. The
Company's objective in maintaining variable rate borrowings is the flexibility
obtained regarding early repayment without penalties and lower overall cost as
compared with fixed-rate borrowings.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Company
expects to adopt the new Statement effective January 1, 2001. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. The Company has not completed its evaluation but currently does not
anticipate that the adoption of this Statement will have a significant effect on
its results of operations or financial position.

FORWARD - LOOKING STATEMENTS

Some of the information in this document contains, or has incorporated by
reference, forward-looking statements. Statements that are not historical facts,
including statements about our beliefs and expectations, are forward-looking
statements. Forward-looking statements typically are identified by use of terms
such as "may," "will," "expect," "anticipate," "estimate," and similar words,
although some forward-looking statements are expressed differently. You should
be aware that our actual results could differ materially from those contained in
the forward-looking statements due to a number of factors, including changes in
oil and gas prices, customer demand for our products and worldwide economic
activity. You should also consider carefully the statements under "Risk Factors"
which address additional factors that could cause our actual results to differ
from those set forth in the forward-looking statements. Given these
uncertainties, current or prospective investors are cautioned not to place undue
reliance on any such forward-looking statements. We disclaim any obligation or
intent to update any such factors or forward-looking statement to reflect future
events or developments.


I
TEM      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Incorporated by reference to Item 7 above, "Market Risk Disclosure".


ITEM 8.   FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

          Attached hereto and a part of this report are financial statements and
          supplementary data listed in Item 14.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
          FINANCIAL DISCLOSURE

          None.



                                       15

<PAGE>   17

                                    Part III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Incorporated by reference to the definitive Proxy Statement for the
          2000 Annual Meeting of Stockholders.


ITEM 11.  EXECUTIVE COMPENSATION

          Incorporated by reference to the definitive Proxy Statement for the
          2000 Annual Meeting of Stockholders.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          Incorporated by reference to the definitive Proxy Statement for the 
          2000 Annual Meeting of Stockholders.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Incorporated by reference to the definitive Proxy Statement for the 
          2000 Annual Meeting of Stockholders



                                       16

<PAGE>   18


                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K

a)        Financial Statements and Exhibits

  1. Financial Statements
     The following financial statements are presented in response to Part II,

     Item 8:
                                                                 Page(s) in
                                                                 This Report
                                                                 -----------

     Consolidated Balance Sheets....................................21

     Consolidated Statements of
     Operations.....................................................22

     Consolidated Statements of Cash Flows..........................23

     Consolidated Statements of Stockholders' Equity................24

     Notes to Consolidated Financial Statements.....................25


  2. Financial Statement Schedules

     All schedules are omitted because they are not applicable, not required or
     the information is included in the financial statements or notes thereto.


  3. Exhibits

   2.1   Combination Agreement, dated as of May 14, 1997, as amended, between
         National-Oilwell, Inc. and Dreco Energy Services Ltd. (Annex B) (3)

   2.2   Plan of Arrangement and Exchangeable Share Provisions (Annex E) (3)

   3.1   Amended and Restated Certificate of Incorporation of National-Oilwell, 
         Inc. (Annex D)(3)

   3.2   By-laws of National-Oilwell, Inc. (Exhibit 3.2)(1)

   9.1   Form of Voting and Exchange Trust Agreement by and between
         National-Oilwell, Inc., Dreco Energy Services Ltd. and Montreal Trust
         Company of Canada (Annex G)(3)

   10.1  Employment Agreement dated as of January 16, 1996 between Joel V. Staff
         and the Company with similar agreements with James J. Fasnacht, 
         Jerry N. Gauche and Steven W. Krablin, and a similar agreement dated 
         as of February 5, 1996 between Merrill A. Miller, Jr. and the Company,
         and a similar agreement dated as of March 1, 2000 between Jon Gjedebo
         and the Company (Exhibit 10.1)(1)*

   10.2  Restricted Stock Agreement between the Company and Joel V. Staff, with
         similar agreements with James J. Fasnacht, Jerry N. Gauche, Steven W.
         Krablin and Merrill A. Miller, Jr. (Exhibit 10.10)(1)*

   10.3  Stockholders Agreement among the Company and its stockholders dated as
         of January 16, 1996 (Exhibit 10.3)(1)

   10.4  Waiver and First Amendment to Stockholders Agreement dated as of July
         24, 1996 (Exhibit 10.4)(1)

   10.5  Second Amendment to Stockholders Agreement dated as of October 18, 1996
         (Exhibit 10.17)(1)

   10.6  Amended and Restated Stock Award and Long-Term Incentive Plan (Exhibit
         10.6)(2)*


                                       17

<PAGE>   19

   10.7  Supplemental Savings Plan (Exhibit 10.12)(1)*

   10.8  Loan Agreement dated September 25, 1997 (Exhibit 10.1) (4)

   10.9  Amendment to Loan Agreement dated as of December 31, 1999

   10.10 Form of Support Agreement by and between National-Oilwell, Inc. and 
         Dreco Energy Services Ltd. (Annex F)(3)

   10.11 Employment Agreement dated as of April 19, 1999 between Honor Guiney 
         and the Company.*

   21.1  Subsidiaries of the Company

   23.1  Consent of Ernst & Young LLP

   24.1  Power of Attorney (included on signature page hereto)

   27.1  Financial Data Schedule

b) Reports on Form 8-K
   No reports on Form 8-K were filed during the quarter ended December 31, 1999.


---------------

     *   Compensatory plan or arrangement for management or others

    (1)  Filed as an Exhibit to Registration Statement No. 333-11051 on Form 
         S-1, as amended, initially filed on August 29, 1996.

    (2)  Filed with the Proxy Statement for the 1999 Annual Meeting of
         Stockholders, filed on May 12, 1999.

    (3)  Filed as an Annex to the Joint Proxy Statement/Prospectus in Post 
         Effective Amendment No. 1 to Registration Statement No. 333-32191 on 
         Form S-4 filed on August 21, 1997.

    (4)  Filed as an Exhibit to the National-Oilwell, Inc. Quarterly Report on
         Form 10-Q filed on November 7, 1997.



                                       18

<PAGE>   20

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                              NATIONAL-OILWELL, INC.

    Date:  March 16, 2000                     By:  /s/ STEVEN W. KRABLIN
    ---------------------                        -------------------------
                                                     Steven W. Krablin
                                                    Vice President and  
                                                 Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.

Each person whose signature appears below in so signing, constitutes and
appoints Steven W. Krablin and M. Gay Mather, and each of them acting alone,
his true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, in any and all capacities, to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments to this report, and in each case to file the same, with all exhibits
thereto and other documents in connection therewith, and hereby ratifies and
confirms all that said attorney-in-fact or his substitute or substitutes may do
or cause to be done by virtue hereof.

      Signatures                    Title                             Date
      ----------                    -----                             ----

/s/   JOEL V. STAFF              Chairman of the Board,           March 16, 2000
-------------------------        President and Chief              --------------
      Joel V.  Staff             Executive Officer (Principal
                                 Executive Officer)

/s/  STEVEN W. KRABLIN           Vice President and Chief         March 16, 2000
-------------------------        Financial Officer (Principal     --------------
     Steven W. Krablin           Financial Officer and
                                 Principal Accounting Officer)

/s/  HOWARD I. BULL              Director                         March 16, 2000
-------------------------                                         --------------
     Howard I. Bull

/s/  JAMES C. COMIS III          Director                         March 16, 2000
-------------------------                                         --------------
     James C. Comis III

/s/  W. McCOMB DUNWOODY          Director                         March 16, 2000
-------------------------                                         --------------
     W. McComb Dunwoody

/s/  JON GJEDEBO                 Director                         March 16, 2000
-------------------------                                         --------------
     Jon Gjedebo

/s/  BEN A. GUILL                Director                         March 16, 2000
-------------------------                                         --------------
     Ben A. Guill

/s/  WILLIAM E. MACAULAY         Director                         March 16, 2000
-------------------------                                         --------------
     William E. Macaulay

/s/  FREDRICK W. PHEASEY         Director                         March 16, 2000
-------------------------                                         --------------
     Fredrick W. Pheasey


                                       19

<PAGE>   21



                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
National-Oilwell, Inc.

    We have audited the accompanying consolidated balance sheets of
National-Oilwell, Inc., as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
National-Oilwell, Inc., at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.


                                 /s/ ERNST & YOUNG LLP

Houston, Texas
March 16, 2000

<PAGE>   22
                             NATIONAL-OILWELL, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


                                     ASSETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1999           1998
                                                              ------------   ------------
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents                                     $ 12,403       $ 11,963
  Receivables, less allowance of $5,506 and $4,963               185,920        301,405
  Inventories                                                    254,052        253,385
  Deferred taxes                                                   9,296         16,489
  Income taxes receivable                                         10,171             --
  Prepaid and other current assets                                 6,534          7,677
                                                                --------       --------
     Total current assets                                        478,376        590,919

Property, plant and equipment, net                               109,147         96,174
Deferred taxes                                                     7,781          6,757
Goodwill, net                                                    174,498        145,696
Property held for sale                                             7,424          9,981
Other assets                                                       5,085          6,361
                                                                --------       --------
                                                                $782,311       $855,888
                                                                ========       ========

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt                             $     --       $  8,427
  Accounts payable                                               100,963        131,575
  Customer prepayments                                            16,838         25,392
  Accrued compensation                                             4,232          7,237
  Other accrued liabilities                                       54,177         54,158
                                                                --------       --------
     Total current liabilities                                   176,210        226,789

Long-term debt                                                   196,007        221,198
Deferred taxes                                                     6,138          4,097
Other liabilities                                                  8,881         10,505
                                                                --------       --------
     Total liabilities                                           387,236        462,589
 
Commitments and contingencies

Stockholders' equity:
  Common stock-par value $.01; 58,223,971 and 57,916,785
     shares issued and outstanding at December 31, 1999 and
     December 31, 1998                                               582            579
  Additional paid-in capital                                     246,553        248,194
  Accumulated other comprehensive income                         (11,537)       (13,821)
  Retained earnings                                              159,477        158,347
                                                                --------       --------
                                                                 395,075        393,299
                                                                --------       --------
                                                                $782,311       $855,888
                                                                ========       ========
</TABLE>



        The accompanying notes are an integral part of these statements.


                                       21

<PAGE>   23
                             NATIONAL-OILWELL, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                             ----------------------------------
                                                               1999        1998         1997
                                                             --------   ----------   ----------
<S>                                                          <C>        <C>          <C>
Revenues                                                     $745,215   $1,271,914   $1,097,406
Cost of revenues                                              603,579      990,341      880,708
                                                             --------   ----------   ----------
Gross profit                                                  141,636      281,573      216,698

Selling, general, and administrative                          119,735      142,628      114,252
Special charge                                                     --       16,433       10,660
                                                             --------   ----------   ----------
Operating income                                               21,901      122,512       91,786

Interest and financial costs                                  (15,509)     (13,901)      (7,088)
Interest income                                                   737        1,025        1,524
Other income (expense), net                                    (2,611)        (280)         (77)
                                                             --------   ----------   ----------
Income before income taxes and extraordinary loss               4,518      109,356       86,145
Provision for income taxes                                      2,998       40,402       31,318
                                                             --------   ----------   ----------
Net income before extraordinary loss                            1,520       68,954       54,827
Extraordinary loss, net of tax benefit                             --           --          623
                                                             --------   ----------   ----------
Net income                                                   $  1,520   $   68,954   $   54,204
                                                             ========   ==========   ==========
Net income per share:
  Basic
     Net income before extraordinary loss                    $   0.03   $     1.26   $     1.03
     Extraordinary loss                                            --           --        (0.01)
                                                             --------   ----------   ----------
Net income                                                   $   0.03   $     1.26   $     1.02
                                                             ========   ==========   ==========
Net income per share:
  Diluted
     Net income before extraordinary loss                    $   0.03   $     1.26   $     1.02
     Extraordinary loss                                            --           --        (0.01)
                                                             --------   ----------   ----------
     Net income                                              $   0.03   $     1.26   $     1.01
                                                             ========   ==========   ==========
Weighted average shares outstanding:
  Basic                                                        58,214       54,665       53,009
                                                             ========   ==========   ==========
  Diluted                                                      58,528       54,847       53,842
                                                             ========   ==========   ==========
</TABLE>

 
        The accompanying notes are an integral part of these statements.

                                       22

<PAGE>   24
                             NATIONAL-OILWELL, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1999       1998        1997
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
Cash flow from operating activities:
  Net income                                                  $  1,520   $  68,954   $ 54,204
  Adjustments to reconcile net income to net cash provided
     (used) by operating activities:
  Depreciation and amortization                                 23,244      20,598     15,443
  Provision for losses on receivables                            3,055         610        730
  Provision for deferred income taxes                            7,861      (4,092)    (3,121)
  Gain on sale of assets                                        (2,937)     (2,315)    (2,954)
  Foreign currency transaction (gain) loss                         464        (103)       602
  Special charge                                                    --      16,433     10,660
  Extraordinary loss                                                --          --        999
Changes in assets and liabilities, net of acquisitions:
  Receivables                                                  117,291     (49,524)   (64,290)
  Unbilled revenues                                                 --      31,521    (17,641)
  Inventories                                                   (5,963)     17,327    (71,359)
  Prepaid and other current assets                               1,083       3,985      1,886
  Accounts payable                                             (41,479)    (46,986)    51,252
  Other assets/liabilities, net                                (19,653)    (23,379)    23,332
                                                              --------   ---------   --------
          Net cash provided (used) by operating activities      84,486      33,029       (257)
                                                              --------   ---------   --------
Cash flow from investing activities:
  Purchases of property, plant and equipment                   (15,369)    (29,241)   (34,783)
  Proceeds from sale of assets                                   5,674      10,001      4,525
  Proceeds from product line dispositions                       26,599          --         --
  Businesses acquired, net of cash                             (67,029)   (130,963)   (19,253)
  Other                                                             --          --        248
                                                              --------   ---------   --------
          Net cash used by investing activities                (50,125)   (150,203)   (49,263)
                                                              --------   ---------   --------
Cash flow from financing activities:
  Borrowings (payments) on line of credit                      (33,597)      1,317     61,267
  Retirement of long-term debt                                      --     (40,855)   (41,359)
  Net proceeds from issuance of long-term debt                      --     148,937         --
  Proceeds from issuance of common stock                            --          --     37,240
  Proceeds from stock options exercised                            164       1,002      6,546
  Other                                                           (677)     (1,434)    (2,134)
                                                              --------   ---------   --------
          Net cash provided (used) by financing activities     (34,110)    108,967     61,560
                                                              --------   ---------   --------
Effect of exchange rate losses on cash                             189        (221)    (4,097)
                                                              --------   ---------   --------
Increase (decrease) in cash and equivalents                        440      (8,428)     7,943
Cash and cash equivalents, beginning of year                    11,963      20,391     14,198
Change in cash to conform fiscal year end                           --          --     (1,750)
                                                              --------   ---------   --------
Cash and cash equivalents, end of year                        $ 12,403   $  11,963   $ 20,391
                                                              ========   =========   ========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       23

<PAGE>   25
                             NATIONAL-OILWELL, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>

                                                                ACCUMULATED
                                                  ADDITIONAL       OTHER
                                      COMMON       PAID-IN     COMPREHENSIVE    RETAINED
                                      STOCK        CAPITAL         INCOME       EARNINGS         TOTAL
                                      ------      ---------    -------------   ----------      ---------
<S>                                   <C>         <C>            <C>            <C>            <C>      
Balance at December 31, 1996          $  254      $ 149,493      $ (2,287)      $  25,639      $ 173,099
  Net income                                                                       54,204         54,204
  Currency translation adjustments                                 (4,731)                        (4,731)
                                                                                               ---------
    Comprehensive income                                                                          49,473

  Stock options exercised                  5          6,546                                        6,551
  Issuance of 1,053,000 shares            10         37,225                                       37,235
  Stock issued for acquisitions            8         10,984                         3,130         14,122
  Two-for-one stock split                259           (259)                                          -- 
  Change in subsidiary's year end                                                     917            917 
  Premerger S-corp distributions                                                   (1,150)        (1,150)
  Tax benefit of options exercised                    3,961                                        3,961
                                      ------      ---------      --------       ---------      ---------

Balance at December 31, 1997             536        207,950        (7,018)         82,740        284,208
  Net income                                                                       68,954         68,954
  Currency translation adjustments                                 (6,979)                        (6,979)
  Unrealized losses on securities                                     176                            176
                                                                                               ---------
    Comprehensive income                                                                          61,502 

  Stock options exercised                             1,002                                        1,002
  Stock issued for acquisition            43         39,138                         6,653         45,834
  Tax benefit of options exercised                      104                                          104
                                      ------      ---------      --------       ---------      ---------

Balance at December 31, 1998             579        248,194       (13,821)        158,347        393,299
  Net income                                                                        1,520          1,520
  Currency translation adjustments                                  1,744                          1,744
  Unrealized gains on securities                                      540                            540
                                                                                               ---------
    Comprehensive income                                                                           3,804

  Stock options exercised                  3            165                                          168
  Tax benefit of options exercised                      217                                          217
  Premerger S-corp distributions                       (287)                         (390)          (677)
  Reversal of 1997 option 
    tax benefits                                     (1,736)                                      (1,736)
                                      ------      ---------      --------       ---------      ---------

Balance at December 31, 1999          $  582      $ 246,553      $(11,537)      $ 159,477      $ 395,075
                                      ======      =========      ========       =========      =========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                       24




<PAGE>   26
                             NATIONAL-OILWELL, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Organization and Basis of Presentation


Information concerning common stock and per share data has been restated on an
equivalent share basis and assumes the exchange of all Exchangeable Shares
issued in connection with the combination with Dreco Energy Services Ltd., as
described below. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported and contingent amounts of assets and
liabilities as of the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Effective September 25, 1997, National Oilwell completed a combination with
Dreco Energy Services Ltd. The combination was accounted for as a
pooling-of-interests and the consolidated financial statements of National
Oilwell and Dreco have been combined with all prior periods restated. As a
result of the combination, each Dreco Class "A" common share outstanding was
converted into .9159 of a Dreco Exchangeable Share and approximately 14.4
million Exchangeable Shares were issued. Each Exchangeable Share is intended to
have substantially identical economic and legal rights as, and will ultimately
be exchanged on a one-for-one basis for, a share of National Oilwell common
stock. As of December 31, 1999, approximately 84% of the Exchangeable Shares had
been converted into National Oilwell common stock.

On July 1, 1999, National Oilwell acquired all the outstanding stock of Dupre'
Supply Company and Dupre' International Inc., a Louisiana based distribution and
valve automation business for 1.9 million shares of National Oilwell common
stock. The transaction was a tax-free exchange and was recorded in accordance
with the pooling-of-interests method of accounting. All prior periods have been
restated.

Effective July 8, 1999, National Oilwell acquired the assets and certain
operating liabilities of CE Drilling Products, Inc. in a cash transaction valued
at approximately $65 million. Continental Emsco Drilling Products consists of
Emsco drilling machinery and Wilson mobile rigs. The transaction was accounted
for under the purchase method of accounting. The financial statements reflect
the preliminary allocation of purchase price. The final purchase price is
subject to certain pre-acquisition contingencies and valuation of certain
assets. The transaction did not have a material effect on National Oilwell's
statements.

On June 17, 1999, National Oilwell sold its tubular product line within its
Distribution Services segment for approximately $15 million, generating a
pre-tax loss of $0.9 million ($0.5 million after-tax). Revenues and operating
loss recorded in 1999 for the tubular operations were $23.6 million and $0.6
million, respectively.

On June 24, 1999, National Oilwell sold its drill bit product line within its
Products & Technology segment for approximately $12 million, recording a pre-tax
loss of $1.0 million ($0.6 million after-tax). Revenues and operating income
recorded in 1999 for the drill bit business were $6.1 million and $0.1 million,
respectively.



                                       25

<PAGE>   27


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of National Oilwell
and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions and balances have been eliminated in consolidation.

Fair Value of Financial Instruments

Financial instruments consist primarily of cash and cash equivalents,
receivables, payables and debt instruments. Cash equivalents include only those
investments having a maturity of three months or less at the time of purchase.
The carrying values of these financial instruments approximate their respective
fair values.


Inventories

Inventories consist of oilfield products, manufactured equipment, manufactured
specialized drilling products and downhole motors and spare parts for
manufactured equipment and drilling products. Inventories are stated at the
lower of cost or market using the first-in, first-out or average cost methods.


Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Expenditures for major
improvements which extend the lives of property and equipment are capitalized
while minor replacements, maintenance and repairs are charged to operations as
incurred. Disposals are removed at cost less accumulated depreciation with any
resulting gain or loss reflected in operations. Depreciation is provided using
the straight-line method or declining balance method over the estimated useful
lives of individual items.


Intangible Assets

Deferred financing costs are amortized on a straight-line basis over the life of
the related debt security and accumulated amortization was $539,000 and $205,000
at December 31, 1999 and 1998, respectively. Goodwill is amortized on a
straight-line basis over its estimated life of 10-40 years. Accumulated
amortization at December 31, 1999 and 1998 was $9,234,000 and $4,061,000. On an
annual basis, the Company estimates the future estimated discounted cash flows
of the business to which goodwill related in order to determine that the
carrying value of the goodwill had not been impaired.


Foreign Currency

The functional currency for National Oilwell's Canadian, United Kingdom, German
and Australian operations is the local currency. The cumulative effects of
translating the balance sheet accounts from the functional currency into the
U.S. dollar at current exchange rates are included in accumulated other
comprehensive income. The U.S. dollar is used as the functional currency for the
Singapore and Venezuelan operations. Accordingly, certain assets are translated
at historical exchange rates and all translation adjustments are included in
income. For all operations, gains or losses from remeasuring foreign currency
transactions into the functional currency are included in income.



                                       26

<PAGE>   28

Revenue Recognition

Revenue from the sale and rental of products and delivery of services is
recognized upon passage of title, incurrance of rental charges or delivery of
services to the customer. Revenue is recognized on certain significant contracts
in the Products and Technology segment using the percentage of completion method
based on the percentage of total costs incurred to total costs expected.
Provision for estimated losses, if any, is made in the period such losses are
estimable.


Income Taxes

Income taxes have been provided using the liability method in accordance with
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes.

Concentration of Credit Risk

National Oilwell grants credit to its customers, which operate primarily in the
oil and gas industry. National Oilwell performs periodic credit evaluations of
its customers' financial condition and generally does not require collateral,
but may require letters of credit for certain international sales. Reserves are
maintained for potential credit losses and such credit losses have historically
been within management's expectations.


Stock-Based Compensation

National Oilwell uses the intrinsic value method in accounting for its
stock-based employee compensation plans. Compensation costs for stock options
would be recognized over the vesting period if options were granted with an
exercise price below market on the date of grant.


Net Income Per Share

The following table sets forth the computation of weighted average basic and
diluted shares outstanding (in thousands):


<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                            ------------------------------------
                                             1999          1998            1997
                                            ------        ------          ------
<S>                                         <C>           <C>             <C>
Denominator for basic earnings per
  share--weighted average shares            58,214        54,665          53,009
Effect of dilutive securities:
  Employee stock options                       314           182             833
                                            ------        ------          ------
Denominator for diluted earnings per
  share--adjusted weighted average
  shares and assumed conversions            58,528        54,847          53,842
                                            ======        ======          ======
</TABLE>


3.  INVENTORIES

    Inventories consist of (in thousands):


<TABLE>
<CAPTION>
                                               DECEMBER 31,       DECEMBER 31,
                                                   1999               1998
                                               ------------       ------------
<S>                                            <C>                <C>     
Raw materials and supplies                       $ 19,434           $ 24,304
Work in process                                    32,793             39,991
Finished goods and purchased products             201,825            189,090
                                                 --------           --------
     Total                                       $254,052           $253,385
                                                 ========           ========        
</TABLE>


                                       27

<PAGE>   29


4.  STATEMENTS OF CASH FLOWS
    The following information supplements the Consolidated Statements of Cash
    Flows (in thousands):


<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                     -------------------------------
                                                      1999        1998        1997
                                                     -------     -------     -------
<S>                                                  <C>         <C>         <C>
Cash paid during the period for:
  Interest                                           $16,539     $ 6,989     $ 7,648
  Income taxes                                        13,214      48,003      24,405
</TABLE>



5.  PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment consists of (in thousands):


<TABLE>
<CAPTION>
                                                ESTIMATED      DECEMBER 31,    DECEMBER 31,
                                               USEFUL LIVES        1999            1998
                                               ------------    ------------    ------------
<S>                                            <C>             <C>             <C>
Land and improvements                           2-20 Years          6,388        $  6,421
Buildings and improvements                      5-31 Years         41,266          27,080
Machinery and equipment                         5-12 Years         54,276          52,774
Computer and office equipment                   3-12 Years         42,658          36,810
Rental equipment                                 1-7 Years         37,081          29,217
                                                                 --------        --------
                                                                  181,669         152,302
     Less accumulated depreciation                                (72,522)        (56,128)
                                                                 --------        --------
                                                                 $109,147        $ 96,174
                                                                 ========        ========
</TABLE>



6.  LONG-TERM DEBT

    Long-term debt consists of (in thousands):


<TABLE>
<CAPTION>
                                                             DECEMBER 31,    DECEMBER 31,
                                                                 1999            1998
                                                             ------------    ------------
<S>                                                          <C>             <C>
Revolving credit facilities                                    $ 46,007        $ 55,637
6 7/8 senior notes                                              150,000         150,000
Other                                                                --          23,988
                                                               --------        --------
                                                                196,007         229,625
     Less current portion                                            --           8,427
                                                               --------        --------
                                                               $196,007        $221,198
                                                               ========        ========
</TABLE>



On September 25, 1997, National Oilwell entered into a five-year unsecured $125
million revolving credit facility. The credit facility is available for
acquisitions and general corporate purposes and provides up to $50 million for
letters of credit, of which $13.9 million were outstanding at December 31, 1999.
The credit facility provides for interest at prime or LIBOR plus 0.625% (8.50%
and 7.125% at December 31, 1999) subject to adjustment based on National
Oilwell's Capitalization Ratio, as defined. The credit facility contains
financial covenants and ratios regarding minimum tangible net worth, maximum
debt to capital and minimum interest coverage. In March 2000, the credit
facility was amended to lower the minimum interest coverage ratio effective as
of December 31, 1999.

National Oilwell also has additional credit facilities totaling $23.0 million
used primarily for letters of credit, of which $4.1 million were outstanding at
December 31, 1999.

In June 1998, National Oilwell sold $150 million of 6.875% unsecured senior
notes due July 1, 2005. Interest is payable on January 1 and July 1 of each
year.


                                       28

<PAGE>   30

7.  PENSION PLANS

National Oilwell and its consolidated subsidiaries have pension plans covering
substantially all of its employees. Defined-contribution pension plans cover
most of the U.S. and Canadian employees and are based on years of service, a
percentage of current earnings and matching of employee contributions. For the
years ended December 31, 1999, 1998 and 1997, pension expense for
defined-contribution plans was $2.8 million, $3.7 million and $3.5 million, and
all funding is current.

National Oilwell's subsidiaries in the United Kingdom have a defined-benefit
pension plan whose participants are primarily retired and terminated employees
who are no longer accruing benefits. The pension plan assets are invested
primarily in equity securities, United Kingdom government securities, overseas
bonds and cash deposits. At December 31, 1999, the plan assets at fair market
value were $52.6 million and the projected benefit obligation was $30.0 million.

8.  ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of other comprehensive income are as follows (in thousands):



<TABLE>
<CAPTION>
                                                   Unrealized
                                 Currency         On Available-
                                Translation         for-sale
                                Adjustments        Securities             Total
                               -------------      -------------       -------------
<S>                            <C>                <C>                 <C>

Balance at December 31, 1996   $     (2,287)      $          --       $     (2,287)

Currency translation 
  adjustments                        (4,731)                 --             (4,731)
                               -------------      -------------       -------------
Balance at December 31, 1997         (7,018)                 --             (7,018)

Currency translation 
  adjustments                        (6,979)                 --             (6,979)
Unrealized gains on available-
  for-sale securities                    --                 244                244
Deferred taxes relating to 
  unrealized gains on
  available-for-sale 
  securities                             --                 (68)               (68)
                               -------------      -------------       -------------
Balance at December 31, 1998        (13,997)                176            (13,821)

Currency translation 
  adjustments                         1,744                  --              1,744
Unrealized gains on available-
  for-sale securities                    --                 815                815
Deferred taxes relating to 
  unrealized gains on
  available-for-sale 
  securities                             --                (275)              (275)
                               -------------      -------------       -------------
Balance at December 31, 1999   $     (12,253)     $         716       $     (11,537)
                               =============      =============       =============
</TABLE>


9.  COMMITMENTS AND CONTINGENCIES

National Oilwell leases land, buildings and storage facilities, vehicles and
data processing equipment under operating leases extending through various dates
up to the year 2004. Rent expense for the years ended December 31, 1999, 1998
and 1997 was $11.8 million, $10.3 million and $9.0 million. National Oilwell's
minimum rental commitments for operating leases at December 31, 1999, excluding
future payments applicable to facilities to be closed as part of the 1998
Special Charge, were as follows: 2000 - $7.0 million; 2001 - $5.1 million; 2002
- $3.2 million; 2003 - $2.0 million and 2004 - $0.8 million.



                                       29

<PAGE>   31
National Oilwell is involved in various claims, regulatory agency audits and
pending or threatened legal actions involving a variety of matters. The total
liability on these matters at December 31, 1999 cannot be determined; however,
in the opinion of management, any ultimate liability, to the extent not
otherwise provided for, should not materially affect the financial position,
liquidity or results of operations of National Oilwell.

National Oilwell's business is affected both directly and indirectly by
governmental laws and regulations relating to the oilfield service industry in
general, as well as by environmental and safety regulations that specifically
apply to National Oilwell's business. Although National Oilwell has not incurred
material costs in connection with its compliance with such laws, there can be no
assurance that other developments, such as stricter environmental laws,
regulations and enforcement policies thereunder could not result in additional,
presently unquantifiable costs or liabilities to National Oilwell.


10.  COMMON STOCK

National Oilwell has authorized 75 million shares of $.01 par value common
stock. National Oilwell also has authorized 10 million shares of $.01 par value
preferred stock, none of which is issued or outstanding.

National Oilwell's stock plans collectively authorize the grant of restricted
stock or options to purchase up to 5,832,606 shares of National Oilwell's common
stock to officers, key employees, non-employee directors and other persons.
Options granted generally vest over a 3-year period starting one year from the
date of grant and generally expire 5 years from the date of grant.

Options outstanding at December 31, 1999 under the stock option plans have
exercise prices between $5.62 and $28.81 per share, and expire at various dates
from March 21, 2002 to January 13, 2007. The weighted average exercise price on
the 2,068,666 outstanding options at December 31, 1999 is $14.59.

The following summarizes option activity:


<TABLE>
<CAPTION>
                                         WEIGHTED AVERAGE            TOTAL
                                           SHARE PRICE              OPTIONS
                                        ------------------         ---------
<S>                                          <C>                   <C> 
OPTIONS OUTSTANDING:

Balance at December 31, 1997                   13.94                 538,592
Granted                                        27.46                 513,896
Cancelled                                      22.82                 (44,020)
Exercised                                       9.60                (103,957)
                                                                   ---------      
Balance at December 31, 1998                   21.74                 904,511
Granted                                        10.43               1,357,255
Cancelled                                      20.73                (167,194)
Exercised                                       6.85                 (25,906)
                                                                   ---------
Balance at December 31, 1999                   14.59               2,068,666
                                                                   =========
</TABLE>



                                       30

<PAGE>   32


<TABLE>
<S>                                                           <C>            <C>
OPTIONS EXERCISABLE
Exercisable at December 31, 1997                                 $ 6.16          46,948
Vested                                                            13.74         178,249
Cancelled                                                         22.32          (7,034)
Exercised                                                          9.60        (103,957)
                                                                              ---------
Exercisable at December 31, 1998                                 $13.97         114,206
Vested                                                            15.39         329,234
Cancelled                                                         21.61         (37,073)
Exercised                                                          6.85         (25,906)
                                                                              ---------
Exercisable at December 31, 1999                                 $15.31         380,461
                                                                              =========
</TABLE>


The weighted average fair value of options granted during 1999 was approximately
$7.31 per share as determined using the Black-Scholes option-pricing model.
Assuming that National Oilwell had accounted for its stock-based compensation
using the alternative fair value method of accounting under FAS No. 123 and
amortized the fair value to expense over the option's vesting period, earnings
per share would have been affected by $0.05 from the amounts reported. These pro
forma results may not be indicative of future effects.

The Company evaluates annually the grant of options to eligible participants and
in February 2000, 681,683 options to purchase shares of common stock were
granted at an exercise price of $22.56, the fair value of the common stock at
the date of grant.

11.  INCOME TAXES

The domestic and foreign components of income before income taxes were as
follows (in thousands):



<TABLE>
<CAPTION>
                                                       DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>
Domestic                                                 $(9,172)       $ 58,788       $50,996
Foreign                                                   13,690          50,568        35,149
                                                         -------        --------       -------
                                                         $ 4,518        $109,356       $86,145
                                                         =======        ========       =======
</TABLE>

 
   The components of the provision for income taxes consisted of (in thousands):


<TABLE>
<CAPTION>
                                                       DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>
Current:
  Federal                                                $(8,238)       $ 24,357       $17,508
  State                                                     (745)          2,074         1,496
  Foreign                                                  4,120          18,063        15,435
                                                         -------        --------       -------
                                                          (4,863)         44,494        34,439
                                                         -------        --------       -------
Deferred:
  Federal                                                  6,361          (4,151)         (287)
  State                                                      572            (845)          (64)
  Foreign                                                    928             904        (2,770)
                                                         -------        --------       -------
                                                           7,861          (4,092)       (3,121)
                                                         -------        --------       -------
                                                         $ 2,998        $ 40,402       $31,318
                                                         =======        ========       =======
</TABLE>

 

                                       31

<PAGE>   33

The difference between the effective tax rate reflected in the provision for
income taxes and the U.S. federal statutory rate was as follows (in thousands):

<TABLE>
<CAPTION>
                                           DECEMBER 31,        DECEMBER 31,        DECEMBER 31,
                                               1999                1998                1997
                                           ------------        ------------        ------------
<S>                                        <C>                 <C>                 <C>
Federal income tax at statutory rate          $ 1,582             $ 38,282            $ 30,115
Foreign income tax rate differential              (68)                 237                 495
State income tax, net of federal benefit         (181)               1,151                 919
S Corporation earnings                            824                   (9)             (1,179)
Tax benefit of foreign sales corporation           --               (2,547)               (990)
Nondeductible expenses                          1,804                1,223               2,837
Incremental U.S. tax on foreign earnings           --                2,517                  --
Unbenefited losses                                990                2,903                 209
Change in deferred tax valuation allowance     (1,758)              (2,765)             (1,617)
Other                                            (195)                (590)                529
                                              -------             --------            --------
                                              $ 2,998             $ 40,402            $ 31,318
                                              =======             ========            ========
</TABLE>

   
    The Company generated a loss in the current year for U.S. federal income tax
purposes and intends to carry this loss back to the 1997 taxable year and claim
a refund of federal income taxes paid. Accordingly, the Company has recorded a
current tax benefit and corresponding current tax receivable of $10.2 million.

    Significant components of National Oilwell's deferred tax assets and
liabilities were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,             DECEMBER 31,
                                                                      1999                    1998
                                                                  ------------             ------------
<S>                                                               <C>                      <C>
     Deferred tax assets:
       Accrued liabilities                                        $ 11,161                 $ 18,641
       Net operating loss carryforwards                             12,531                   13,521
       Other                                                        10,168                    9,625
                                                                  --------                 --------
               Total deferred tax assets                            33,860                   41,787
               Valuation allowance for deferred tax assets         (16,783)                 (18,541)
                                                                  --------                 --------
                                                                    17,077                   23,246
                                                                  --------                 --------
     Deferred tax liabilities:
       Tax over book depreciation                                    1,349                    1,743
       Other                                                         4,789                    2,354
                                                                  --------                 --------
               Total deferred tax liabilities                        6,138                    4,097
                                                                  --------                 --------
               Net deferred tax assets                            $ 10,939                 $ 19,149
                                                                  ========                 ========
</TABLE>
          

In the United States, the Company has $17.3 million of net operating loss
carryforwards as of December 31, 1999 which expire at various dates through
2009. These operating losses were acquired in the combination with Dreco Energy
Services Ltd. and are associated with Dreco's US subsidiary. As a result of
share exchanges occurring since the date of combination resulting in a more than
50% aggregate change in the beneficial ownership of Dreco, the availability of
these loss carryforwards to reduce future United States federal taxable income
may have become subject to various limitations under Section 382 of the Internal
Revenue Code of 1986, as amended. In addition, these net operating losses can
only be used to offset separate company 


                                       32

<PAGE>   34

taxable income of Dreco's US subsidiary. Since the ultimate realization of these
net operating losses is uncertain, the related potential benefit of $5.9 million
has been recorded with a full valuation allowance. Future income tax expense
will be reduced if the Company ultimately realizes the benefit of these net
operating losses.

Outside the United States, the company has $19.8 million of net operating loss
carryforwards as of December 31, 1999 that are available indefinitely. The
related potential benefit available of $6.7 million has been recorded with a
valuation allowance of $5.5 million. If the Company ultimately realizes the
benefit of these net operating losses, $3.8 million would reduce goodwill and
other intangible assets and $1.7 million would reduce income tax expense.

The deferred tax valuation allowance decreased $1.8 million and $2.8 million for
the period ending December 31, 1999 and December 31, 1998, respectively,
resulting from the realization of foreign net operating losses and investment
tax credits that were previously deferred. National Oilwell's deferred tax
assets are expected to be realized principally through future earnings.

Undistributed earnings of the Company's foreign subsidiaries amounted to $58.5
million and $59.1 million at December 31, 1999 and December 31, 1998,
respectively. Those earnings are considered to be permanently reinvested and no
provision for U.S. federal and state income taxes has been made. Distribution of
these earnings in the form of dividends or otherwise would result in both U.S.
federal taxes (subject to an adjustment for foreign tax credits) and withholding
taxes payable in various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practical; however,
unrecognized foreign tax credit carryforwards would be available to reduce some
portion of the U.S. liability. Withholding taxes of approximately $6.9 million
would be payable upon remittance of all previously unremitted earnings at
December 31, 1999.


12.  SPECIAL CHARGES

During the fourth quarter of 1998, the Company recorded a special charge of
$16.4 million ($10.4 million after tax, or $0.20 per share) related to
operational changes resulting from the depressed market for the oil and gas
industry. The components of the special charge were asset impairments of $5.4
million, severance costs of $5.6 million and facility closures and exit costs of
$5.4 million. All of the severance actions related to this charge have been
implemented.

During 1997, National Oilwell recorded a $10.7 million charge ($8.1 million
after tax) related to various professional fees and integration costs incurred
in connection with the combination with Dreco.


13.  EXTRAORDINARY LOSSES

In the third quarter of 1997, the replacement of the previous credit facility
resulted in the write-off of $1.0 million ($0.6 million after tax) in deferred
financing costs related to the replaced agreement.



14.  RELATED PARTY TRANSACTIONS

Prior to becoming a public company, National Oilwell entered into a five-year
Management Services Agreement with National Oilwell's then largest stockholders,
whereby National Oilwell would pay for senior management assistance and other
services as agreed and pay fees in connection with each acquisition or
disposition completed during a five-year period. After becoming a public
company, this agreement was terminated pursuant to a Deferred Fee 


                                       33

<PAGE>   35

Agreement. As of December 31, 1999, cash payments aggregating $4.4 million have
been made to Inverness/Phoenix LLC and First Reserve Corporation in connection
with the Deferred Fee Agreement and no further liability exists.

On May 29, 1998, National Oilwell acquired Phoenix Energy Products Holdings,
Inc., an affiliate of First Reserve Corporation, for approximately $115 million.



15.  BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

National Oilwell's operations consist of two segments: Products and Technology
and Distribution Services. The Products and Technology segment designs and
manufactures a variety of oilfield equipment for use in oil and gas drilling,
completion and production activities, including drilling motors and specialized
drilling tools for rent and sale. The Distribution Services segment distributes
an extensive line of oilfield supplies and equipment. Intersegment sales and
transfers are accounted for at commercial prices and are eliminated in
consolidation. The accounting policies of the reportable segments are the same
as those described in the summary of significant accounting policies of the
Company. The Company evaluates performance of each reportable segment based upon
its operating income, excluding non-recurring items.

No single customer accounted for 10% or more of consolidated revenues during the
three years ended December 31, 1999.



                                       34

<PAGE>   36


Summarized financial information is as follows (in thousands):
Business Segments



<TABLE>
<CAPTION>
                                            PRODUCTS AND   DISTRIBUTION     CORPORATE/
                                             TECHNOLOGY      SERVICES     ELIMINATIONS(1)     TOTAL
                                            ------------   ------------   ---------------   ----------
<S>                                         <C>            <C>            <C>               <C>
DECEMBER 31, 1999
Revenues from:
  Unaffiliated customers                      $335,535       $409,680        $      --      $  745,215
  Intersegment sales                            30,053            674          (30,727)             --
                                              --------       --------        ---------      ----------
          Total revenues                       365,588        410,354          (30,727)        745,215

Operating income (loss)                         33,329         (5,959)          (5,469)         21,901
Capital expenditures                             5,294          9,968              107          15,369
Depreciation and amortization                   18,641          4,269              334          23,244
Identifiable assets                            555,212        197,918           29,181         782,311

DECEMBER 31, 1998
Revenues from:
  Unaffiliated customers                      $663,402       $608,512        $      --      $1,271,914
  Intersegment sales                            66,420             --          (66,420)             --
                                              --------       --------        ---------      ----------
          Total revenues                       729,822        608,512          (66,420)      1,271,914

Operating income (loss)                        136,594          8,911(2)       (22,993)        122,512(2)
Capital expenditures                            14,142         14,220              879          29,241
Depreciation and amortization                   16,511          3,047            1,040          20,598
Identifiable assets                            598,563        226,893           30,432         855,888

DECEMBER 31, 1997
Revenues from:
  Unaffiliated customers                      $374,673       $722,733        $      --      $1,097,406
  Intersegment sales                            66,180             --          (66,180)             --
                                              --------       --------        ---------      ----------
          Total revenues                       440,853        722,733          (66,180)      1,097,406

Operating income (loss)                         79,004         32,128          (19,346)         91,786
Capital expenditures                            30,536          3,612              635          34,783
Depreciation and amortization                   12,398          1,830            1,215          15,443
Identifiable assets                            352,372        213,056           37,565         602,993
</TABLE>

 

(1) Operating loss of Corporate includes a special charge of $16,433 for 1998 
    and $10,660 for 1997

(2) Includes a $5,600 charge related to the writedown to the lower of cost or
    market of certain tubular inventories.



                                       35

<PAGE>   37


Geographic Areas:


<TABLE>
<CAPTION>
                                     UNITED                UNITED
                                     STATES      CANADA    KINGDOM    OTHER    ELIMINATIONS     TOTAL
                                   ----------   --------   -------   -------   ------------   ----------
<S>                                <C>          <C>        <C>       <C>       <C>            <C>
DECEMBER 31, 1999
Revenues from:
  Unaffiliated customers           $  519,291   $163,597   $35,723   $26,604     $     --     $  745,215
  Interarea sales                      31,249     22,577     2,441       619      (56,886)            --
                                   ----------   --------   -------   -------     --------     ----------
     Total revenues                   550,540    186,174    38,164    27,223      (56,886)       745,215

Long-lived assets                     394,887    317,558    37,637    32,229           --        782,311

DECEMBER 31, 1998
Revenues from:
  Unaffiliated customers           $  988,112   $196,493   $54,625   $32,684     $     --     $1,271,914
  Interarea sales                      58,112     34,912     4,056     1,044      (98,124)            --
                                   ----------   --------   -------   -------     --------     ----------
     Total revenues                 1,046,224    231,405    58,681    33,728      (98,124)     1,271,914
Long-lived assets                     489,112    306,847    36,321    23,608           --        855,888

DECEMBER 31, 1997
Revenues from:
  Unaffiliated customers           $  825,739   $201,360   $38,223   $32,084     $     --     $1,097,406
  Interarea sales                      42,273     11,858     2,383       703      (57,217)            --
                                   ----------   --------   -------   -------     --------     ----------
     Total revenues                   868,012    213,218    40,606    32,787      (57,217)     1,097,406
Long-lived assets                     409,026    131,078    27,240    35,649           --        602,993
</TABLE>

 
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     Summarized quarterly results as restated to reflect the combination with
Dupre' were as follows (in thousands, except per share data)
 

<TABLE>
<CAPTION>
                                           1ST QUARTER   2ND QUARTER   3RD QUARTER   4TH QUARTER     TOTAL
                                           -----------   -----------   -----------   -----------   ----------
<S>                                        <C>           <C>           <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 1999
Revenues                                    $203,923      $174,765      $168,244      $198,283     $  745,215
Gross Profit                                  41,464        33,080        30,051        37,041        141,636
Income (loss) before taxes                     5,619        (2,625)       (2,595)        4,119          4,518
Net income                                     3,335        (2,443)       (1,872)        2,500          1,520
Net income per diluted share                    0.06         (0.04)        (0.03)         0.04           0.03

YEAR ENDED DECEMBER 31, 1998
Revenues                                    $327,108      $320,398      $330,204      $294,204     $1,271,914
Gross Profit(1)                               67,204        74,911        77,300        62,158        281,573
Special Charge                                    --            --            --        16,433         16,433
Income (loss) before taxes                    34,278        38,127        33,317         3,634        109,356
Net income                                    21,869        23,841        20,891         2,353         68,954
Net income per diluted share                    0.40          0.44          0.38          0.04           1.26
</TABLE>

 
---------------
 
(1) The 4th quarter includes a $5,600 charge related to the writedown of certain
    tubular inventories to the lower of cost or market.
 

                                       36

<PAGE>   38

17.  SUBSEQUENT EVENT

On February 4, 2000, stockholders of Hitec ASA, a leading supplier of highly
advanced systems and solutions, including leading-edge automation and remote
control technologies, for the oil and gas industry, approved a merger with
National Oilwell. Approximately 7.9 million shares of common stock and NOK 148.7
million (approximately $19 million) were issued in exchange for 98.7% of the
outstanding shares of Hitec. Each Hitec share was exchanged for .2125904 of a
National Oilwell share plus NOK 3.95152. Concurrently with the combination, the
non-drilling related assets of Hitec were sold for NOK 148.7 million. National
Oilwell will account for this transaction as a purchase for financial reporting
purposes with goodwill related to this transaction approximating $150 million.

On March 15, 2000, National Oilwell signed a definitive merger agreement with
IRI International Corporation (NYSE: IIR) whereby National Oilwell would issue
approximately 13,500,000 shares of common stock in exchange for all of the
outstanding common stock of IRI. The transaction is subject to stockholder
approval of both companies and regulatory approval. The transaction would be
accounted for as a pooling of interests.





                                       37


<PAGE>   39

 
                              INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT 
NUMBER                             DESCRIPTION
------                             -----------
<S>            <C>
  2.1          Combination Agreement, dated as of May 14, 1997, as amended,
               between National-Oilwell, Inc. and Dreco Energy Services Ltd.
               (Annex B)(3)

  2.2          Plan of Arrangement and Exchangeable Share Provisions (Annex
               E)(3)

  3.1          Amended and Restated Certificate of Incorporation of
               National-Oilwell, Inc. (Annex D)(3)

  3.2          By-laws of National-Oilwell, Inc. (Exhibit 3.2)(1)

  9.1          Form of Voting and Exchange Trust Agreement by and between
               National-Oilwell, Inc., Dreco Energy Services Ltd. and Montreal
               Trust Company of Canada (Annex G)(3)

 10.1          Employment Agreement dated as of January 16, 1996 between Joel
               V. Staff and the Company with similar agreements with James J.
               Fasnacht, Jerry N. Gauche and Steven W. Krablin, and a similar
               agreement dated as of February 5, 1996 between Merrill A. Miller,
               Jr. and the Company, and a similar agreement dated as of March 1,
               2000 between Jon Gjedebo and the Company (Exhibit 10.1)(1)*

 10.2          Restricted Stock Agreement between the Company and Joel V. Staff,
               with similar agreements with James J. Fasnacht, Jerry N. Gauche,
               Steven W. Krablin and Merrill A. Miller, Jr. (Exhibit 10.10)(1)*

 10.3          Stockholders Agreement among the Company and its stockholders
               dated as of January 16, 1996 (Exhibit 10.3)(1)

 10.4          Waiver and First Amendment to Stockholders Agreement dated as of
               July 24, 1996 (Exhibit 10.4)(1)

 10.5          Second Amendment to Stockholders Agreement dated as of October
               18, 1996 (Exhibit 10.17)(1)

 10.6          Amended and Restated Stock Award and Long-Term Incentive Plan
               (Exhibit 10.6)(2)*

 10.7          Supplemental Savings Plan (Exhibit 10.12)(1)*

 10.8          Loan Agreement dated September 25, 1997 (Exhibit 10.1)(4)

 10.9          Amendment to Loan Agreement dated as of December 31, 1999

 10.10         Form of Support Agreement by and between National-Oilwell, Inc.
               and Dreco Energy Services Ltd. (Annex F)(3)

 10.11         Employment Agreement dated as of April 19, 1999 between Honor
               Guiney and the Company.*

 21.1          Subsidiaries of the Company

 23.1          Consent of Ernst & Young LLP

 24.1          Power of Attorney (included on signature page hereto)

 27.1          Financial Data Schedule
</TABLE>


-----------------


  *  Compensatory plan or arrangement for management or others

 (1) Filed as an Exhibit to Registration Statement No. 333-11051 on Form S-1, as
     amended, initially filed on August 29, 1996.

 (2) Filed with the Proxy Statement for the 1999 Annual Meeting of Stockholders,
     filed on May 12, 1999.

 (3) Filed as an Annex to the Joint Proxy Statement/Prospectus in Post Effective
     Amendment No. 1 to Registration Statement No. 333-32191 on Form S-4 filed
     on August 21, 1997.

 (4) Filed as an Exhibit to the National-Oilwell, Inc. Quarterly Report on Form
     10-Q filed on November 7, 1997.





<PAGE>   1
                                                                    EXHIBIT 10.9

                           AMENDMENT TO LOAN AGREEMENT


        THIS AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered
into as of December 31, 1999 by and among NATIONAL-OILWELL, L.P., a Delaware
limited partnership, NATIONAL-OILWELL CANADA LTD., a British Columbia company,
and DRECO ENERGY SERVICES LTD., an Alberta corporation (collectively herein
called the "Borrowers"); each of the Lenders which is or may from time to time
become a party to the Loan Agreement (as defined below) (individually, a
"Lender" and, collectively, the "Lenders"), THE CHASE MANHATTAN BANK OF CANADA,
as "Canadian Agent" ("Canadian Agent"), CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (previously known as Texas Commerce Bank National Association), as
"U.S. Agent" ("U.S. Agent"), WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as
U.S. Co-Agent, THE BANK OF NOVA SCOTIA, as Canadian Co-Agent, and
NATIONAL-OILWELL, INC., a Delaware corporation (the "Parent").

                                    RECITALS

        A. The Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
executed and delivered that certain Loan Agreement dated as of September 25,
1997, as amended by instruments dated as of June 1, 1998, June 24, 1998, August
26, 1998, April 1, 1999 and December 20, 1999. Said Loan Agreement, as amended,
supplemented and restated, is herein
 called the "Loan Agreement". Any
capitalized term used in this Amendment and not otherwise defined shall have the
meaning ascribed to it in the Loan Agreement.

        B. The Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
desire to amend the Loan Agreement in certain respects.

        NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders, the Canadian Agent and the U.S. Agent
do hereby agree as follows:

        SECTION 1. Amendment to Loan Agreement. Section 7.3(c) of the Loan
Agreement is hereby amended to read in its entirety as follows:

               (c) Interest Coverage Ratio - an Interest Coverage Ratio of not
        less than (i) for the fiscal quarter ending on December 31, 1999 through
        the fiscal quarter ending on June 30, 2000, 2.00 to 1.00, (ii) for the
        fiscal quarter ending on September 30, 2000, 2.50 to 1.00 and (iii) 3.00
        to 1.00 at all times thereafter.

        SECTION 2. Ratification. Except as expressly amended by this Amendment,
the Loan Agreement and the other Loan Documents shall remain in full force and
effect. Except as expressly provided in this Amendment, (a) none of the rights,
title and interests existing and to exist under the Loan Documents are hereby
released, diminished or impaired, and (b) Parent and the Borrowers hereby
reaffirm all covenants, representations and warranties in the Loan Documents.

        SECTION 3. Expenses. Parent shall pay to the Canadian Agent and the U.S.
Agent all reasonable fees and expenses of their respective legal counsel
(pursuant to Section 11.3 of the Loan Agreement) incurred in connection with the
execution of this Amendment.





<PAGE>   2

        SECTION 4. Certifications. Each of Parent and the Borrowers hereby
certifies that (a) no material adverse change in its assets, liabilities,
financial condition, business or affairs has occurred and (b) no Default or
Event of Default has occurred and is continuing or will occur as a result of
this Amendment.

        SECTION 5. Miscellaneous. This Amendment (a) shall be binding upon and
inure to the benefit of Parent, the Borrowers, the Lenders, the Canadian Agent
and the U.S. Agent and their respective successors, assigns, receivers and
trustees; (b) may be modified or amended only by a writing signed by the
required parties; (c) shall be governed by and construed in accordance with the
laws of the State of Texas and the United States of America; (d) may be executed
in several counterparts by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same agreement and (e) together with the other Loan Documents, embodies the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter. The headings herein shall be
accorded no significance in interpreting this Amendment.

             NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SECTION 26.02

        THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN
DOCUMENTS EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.




        IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.

                                NATIONAL-OILWELL, L.P.,
                                a Delaware limited partnership, as U.S. Borrower

                                By:  Its Sole General Partner, NOW Oilfield
                                     Services, Inc., a Delaware corporation


                                     By:           /s/ Daniel L. Molinaro
                                        ----------------------------------------
                                     Name:         Daniel L. Molinaro
                                          --------------------------------------
                                     Title:        Treasurer
                                           -------------------------------------



<PAGE>   3

                                NATIONAL-OILWELL CANADA LTD.,
                                a British Columbia company,
                                as Canadian Borrower


                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------



                                DRECO ENERGY SERVICES LTD.,
                                an Alberta corporation, as Canadian Borrower


                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------



                                NATIONAL-OILWELL, INC.,
                                a Delaware corporation, as Parent


                                By:                /s/ Daniel L. Molinaro
                                   ---------------------------------------------
                                Name:              Daniel L. Molinaro
                                     -------------------------------------------
                                Title:             Treasurer
                                      ------------------------------------------



                                CHASE BANK OF TEXAS, NATIONAL 
                                ASSOCIATION, as U.S. Agent and as a U.S. Lender


                                By:                /s/ Mona M. Foch
                                   ---------------------------------------------
                                Name:              Mona M. Foch
                                     -------------------------------------------
                                Title:             Managing Director
                                      ------------------------------------------






<PAGE>   4


                                THE CHASE MANHATTAN BANK OF CANADA,
                                as Canadian Agent and as a Canadian Lender


                                By:                /s/ Christine Chan
                                   ---------------------------------------------
                                Name:              Christine Chan
                                     -------------------------------------------
                                Title:             Vice President
                                      ------------------------------------------

                                WELLS FARGO BANK (TEXAS), NATIONAL
                                ASSOCIATION, as U.S. Co-Agent and as a U.S.
                                Lender


                                By:                /s/ Frank W. Schageman
                                   ---------------------------------------------
                                Name:              Frank W. Schageman
                                     -------------------------------------------
                                Title:             Vice President
                                      ------------------------------------------



                                THE BANK OF NOVA SCOTIA,
                                as Canadian Co-Agent and as a
                                Canadian Lender


                                By:                /s/ J. Doug Foster
                                   ---------------------------------------------
                                Name:              J. Doug Foster
                                     -------------------------------------------
                                Title:             Director
                                      ------------------------------------------




                                THE BANK OF NOVA SCOTIA,
                                as a U.S. Lender


                                By:               /s/ F.C.H. Ashby
                                   ---------------------------------------------
                                Name:             F.C.H. Ashby
                                     -------------------------------------------
                                Title:            Senior Manager Loan Operations
                                      ------------------------------------------



                                THE BANK OF NEW YORK


                                 By:                /s/ Peter W. Keller
                                   ---------------------------------------------
                                 Name:              Peter W. Keller
                                     -------------------------------------------
                                 Title:             Vice President
                                      ------------------------------------------
                                 BANK ONE LOUISIANA, N.A.

<PAGE>   5


                                 By:                /s/ J. Charles Freel, Jr.
                                    --------------------------------------------
                                 Name:              J. Charles Freel, Jr.
                                      ------------------------------------------
                                 Title:             First Vice President
                                       -----------------------------------------




                                 SOUTHWEST BANK OF TEXAS


                                 By:                /s/ Randall L. Walker
                                    --------------------------------------------
                                 Name:              Randall L. Walker
                                      ------------------------------------------
                                 Title:             Senior Vice President
                                       -----------------------------------------



                                 FIRST UNION NATIONAL BANK


                                 By:                /s/ Robert R. Wetteroff
                                    --------------------------------------------
                                 Name:              Robert R. Wetteroff
                                      ------------------------------------------
                                 Title:             Senior Vice President
                                       -----------------------------------------





<PAGE>   1
                                                                   Exhibit 10.11

                              EMPLOYMENT AGREEMENT

        This Employment Agreement ("Agreement") is entered into between
National-Oilwell, L.P. having offices at 10000 Richmond Avenue, Houston, Texas
77042 ("Employer"), an indirect subsidiary of National Oilwell, Inc. ("NOW"),
and. Honor Guiney, an individual currently residing at 896 North Faver Drive,
Castle Rock, Colorado 80104 ("Employee"), to be effective as of April 19, 1999.

        WHEREAS, Employee has been a consultant with Employer as the person in
charge of Employer's Information Technologies Group since on or about September
1, 1998; and

        WHEREAS, Employer is desirous of continuing to utilize the services of
Employee as an employee rather than a consultant, pursuant to the terms and
conditions and for the consideration set forth in this Agreement and of
terminating any prior existing agreement or arrangement; and

        WHEREAS, Employee is desirous of working in the employ of Employer
pursuant to such terms and conditions and for such consideration set forth in
this Agreement and of terminating any prior existing agreement or arrangement.

        NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer, NOW and Employee agree as

follows:

1.      EMPLOYMENT AND DUTIES:

        1.1. Both Employer and Employee agree that the Employee shall be
employed by Employer, beginning April 19, 1999, and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.

        Notwithstanding anything else contained herein to the contrary, Employee
shall have the option, with Employer's consent, to work on a part time basis
from the commencement of this Agreement until August 1, 1999, after which date
Employee must work full time pursuant to the terms of this Agreement. In the
event Employee elects to work on a part time basis, Employer may allocate
Employee's salary accordingly.

        1.2. Employee shall serve as Chief Information Officer of NOW, Employer
and their affiliates and subsidiaries. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position as determined by Employer or
NOW, as well as such additional or different duties and services appropriate to
such position which Employee from time to time may be reasonably directed to
perform by Employer or NOW. Employee shall at all times comply with and be
subject to such policies and procedures as Employer or NOW may establish from




<PAGE>   2

time to time, including without limitation, the Statement of Policy on Business
Ethics, Statement of Policy Regarding Conflict of Interest, Antitrust Laws,
Statement of Policy on Insider Trading and Statement of Policy Regarding
Improper Business Payment.

        1.3. Employee shall, subject to the location and travel provisions of
Section 2.3, during the period of Employee's employment by Employer, devote
Employee's full business time, energy, and best efforts to the business and
affairs of Employer. Employee may not engage, directly or indirectly, in any
other business, investment, or activity that interferes with Employee's
performance of Employee's duties hereunder, is not in the best interests of
Employer, NOW, or any of their subsidiaries or affiliates, or requires any
significant portion of Employee's business time.

        1.4. Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of Employer, NOW, or any of their subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer,
NOW, or any of their subsidiaries or affiliates. In keeping with these duties,
Employee shall make full disclosure to Employer and to NOW of all business
opportunities pertaining to Employer's business and shall not appropriate for
Employee's own benefit business opportunities concerning the subject matter of
the fiduciary relationship.

2.      COMPENSATION AND BENEFITS:

        2.1. Employee's initial base salary under this Agreement shall be Two
Hundred Eight Thousand Dollars ($208,000.00) per annum and shall be paid in
biweekly installments in accordance with Employer's standard payroll practice.
Employee's base salary may be increased from time to time at the sole discretion
of Employer and, after any such change, Employee's new level of base salary
shall be Employee's base salary for purposes of this Agreement until the
effective date of any subsequent change.

        2.2. NOW and Employee shall enter into a separate written stock option
agreement pursuant to which Employee shall be granted options to purchase shares
of common stock of NOW subject to the terms and conditions of the Non-Statutory
Option Agreement between Honor Guiney and National Oilwell, Inc. dated April 19,
1999 (the "TARSAP"). The number of shares and terms of the restrictions placed
upon exercising the options shall be as specified in the TARSAP. Employee
acknowledges that her base salary, the TARSAP and her right to purchase Twenty
Thousand (20,000) shares of NOW stock at an exercise price of $8.625 as provided
in Employee's stock option agreement with NOW dated September 1, 1998, and her
right to purchase Thirty Five Thousand (35,000) shares of NOW stock at an
exercise price of $10.125, as provided in Employee's stock option agreement with
NOW dated February 9, 1999, ("collectively these two option grants being
referred to herein as the Option Plan") constitutes sufficiently high
remuneration that she shall not be entitled to 



<PAGE>   3

participation in any other Employer provided bonus or incentive plans; however,
she will be entitled to participate in any Employer stock option plans subject
to the Board of Directors approval of her participation.

        2.3. Employer acknowledges that Employee resides in Castle Rock,
Colorado and does not intend to relocate to Employer's principal place of
business in Houston, Texas. Employer will therefore, for the Term of this
Agreement, so long as Employee is a resident of Colorado, provide the following
to Employee at Employer's expense:

1. weekly round-trip air transportation between Denver, Colorado and Houston,
   Texas,

2. ground transportation in Houston, Texas,

3. reasonable apartment accommodations in Houston, Texas,

4. reasonable furniture for an apartment in Houston, Texas,

5. Reasonable long distance telephone expenses,

6. One Hundred Fifteen Dollars ($115.00) per week for meals and other incidental
   expenses while away from Colorado.

It is understood that Employee may travel between Colorado and Texas, and
therefore may only be at Employer's Houston, Texas location four (4) business
days per week. All travel and travel related expenses shall be per Employer's
standard travel policy.

        2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees. Such
benefits, plans, and programs may include, without limitation, medical, health,
and dental care, life insurance, disability protection, and pension plans.
Nothing in this Agreement is to be construed or interpreted to provide greater
rights, participation, coverage, or benefits under such benefit plans or
programs than provided to similarly situated employees pursuant to the terms and
conditions of such benefit plans and programs.

        2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Unless
specifically provided for in a written plan document adopted by the Board of
Directors of NOW, none of the benefits or arrangements described in this Article
2 shall be secured or funded in any way, and each shall instead constitute an




<PAGE>   4
unfunded and unsecured promise to pay money in the future exclusively from the
general assets of Employer and its subsidiaries and affiliates.

        2.6. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.

        2.7.   Employee shall be entitled to four (4) weeks paid vacation per 
year.

3.      TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
        PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

        3.1. The term of this Agreement shall commence on April 19, 1999, and
expire on March 31, 2001, and shall be automatically extended on a daily basis
thereafter.

        3.2. Notwithstanding any other provisions of this Agreement, NOW and
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:

        (i)    For "cause" upon the determination by NOW's Chief Executive
               Officer that "cause" exists for the termination of the employment
               relationship. As used in this Section 3.2(i), the term "cause"
               shall mean (a) Employee has engaged in gross negligence,
               incompetence or willful misconduct in the performance of, or
               Employee's refusal to perform, the duties and services required
               of Employee pursuant to this Agreement; (b) Employee is charged
               with a crime involving moral turpitude; or (c) Employee's
               material breach of any material provision of this Agreement or
               corporate code or policy. It is expressly acknowledged and agreed
               that the final decision as to whether "cause" exists for
               termination of the employment relationship by Employer is
               delegated to NOW's Board of Directors for determination.
               Employee, if she so requests, after reasonable notice of the
               Chief Executive Officer's decision that cause exists, shall be
               entitled to be heard before the Board of Directors. If Employee
               disagrees with the decision reached by NOW's Board of Directors,
               the dispute will be limited to whether NOW's Board of Directors
               reached its decision in good faith;

        (ii)   for any other reason whatsoever, including termination without
               cause, in the sole discretion of NOW's Chief Executive Officer or
               the Board of Directors;

        (iii)  upon Employee's being offered employment by a successor to all or
               a portion of Employee's or NOW's business or assets with (a)
               comparable responsibilities, (b) the same or greater base salary,
               (c) comparable value for her participation in any stock option
               plans and (d) comparable severance benefits.



<PAGE>   5

        (iv)   upon Employee's death; or

        (v)    upon Employee's becoming incapacitated by accident, sickness, or
               other circumstance which in the reasonable opinion of a qualified
               doctor approved by NOW's Board of Directors renders her mentally
               or physically incapable of performing the duties and services
               required of Employee, and which will continue, in the reasonable
               opinion of such doctor, for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2(iii), provided that if Employee accepts the employment
contemplated by Section 3.2(iii) such Voluntary Termination will not prevent the
possible application of Section 3.3(ii) or (iii) if the successor employer
terminates Employee's employment by virtue of an Involuntary Termination within
one year after completion of the relevant transaction. The effect of such
termination if a Voluntary Termination is specified in Section 3.4; the effect
of such termination if an Involuntary Termination is specified in Section 3.5.
The effect of the employment relationship being terminated pursuant to Section
3.2(iv) as a result of Employee's death is specified in Section 3.7. The effect
of the employment relationship being terminated pursuant to Section 3.2(v) as a
result of the Employee becoming incapacitated is specified in Section 3.8.

        3.3. Notwithstanding any other provisions of this Agreement, Employee
shall have the right to terminate the employment relationship under this
Agreement at any time for any of the following reasons:

        (i)    a material breach by Employer or NOW of any material provision of
               this Agreement, including, without limitation, elimination of
               Employee's job and her not being offered employment by NOW,
               Employer or a successor to all or a portion of Employer's or
               NOW's business or assets, with (a) comparable responsibilities,
               (b) the same or greater base salary, (c) comparable value for her
               participation in any stock option plans and (d) comparable
               severance benefits any of which remains uncorrected for 30 days
               following written notice of such breach by Employee to NOW's
               Board of Directors;

        (ii)   (x) NOW completes the sale of assets (which does not constitute
               all or substantially all of NOW's assets) having a gross sales
               price which exceeds 50% of the consolidated total capitalization
               of NOW and its subsidiaries (consolidated total stockholders'
               equity plus consolidated total long-term debt as determined in
               accordance with 



<PAGE>   6


               generally accepted accounting principles) as at the end of the
               last full fiscal quarter prior to the date such sale is made, (y)
               the Chief Executive Officer of NOW shall have voted against any
               such sale as a director of NOW and (z) Employee's employment is
               terminated after such transaction by virtue of an Involuntary
               Termination within one year after the completion of such
               transaction;

        (iii)  any corporation, person or group within the meaning of Sections
               13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
               amended (the "Act"), other than Inverness Management LLC or First
               Reserve Corporation or their respective affiliates, becomes the
               beneficial owner (within the meaning of Rule 13d-3 under the Act)
               of voting securities of NOW or the general partner of Employer
               representing more than thirty (30%) percent of the total votes
               eligible to be cast at any election of directors of NOW or the
               general partner of Employer and Employee's employment is
               terminated after such event by virtue of Involuntary Termination
               within one year after the occurrence of such event;

        (iv)   the dissolution of NOW; or

        (v)    for any other reason whatsoever, in the sole discretion of 
               Employee.

The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i), 3.3(ii), 3.3(iii),
or 3.3(iv); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee shall constitute a "Voluntary
Termination" if made pursuant to Sections 3.3(v); the effect of such termination
is specified in Section 3.4.

        3.4. Upon a "Voluntary Termination" of the employment relationship by
Employee or a termination of the employment relationship for "Cause" by Employer
or NOW, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the date
of termination. Employee shall be entitled to pro rata salary through the date
of such termination, but Employee shall not be entitled to any bonuses not yet
paid at the date of such termination.

        3.5. Upon an Involuntary Termination of the employment relationship by
either Employer or Employee pursuant to Sections 3.2(ii), 3.3(i), 3.3(ii) or
3.3(iii) and upon Voluntary Termination by Employee after March 31, 2001,
Employee shall be entitled, in consideration of Employee's continuing
obligations hereunder after such termination (including, without limitation,
Employee's non-competition obligations), to receive payment equal to one
calendar year base salary as specified in Section 2.1. In addition, Employer
shall provide for up to one calendar year's benefits, which benefits shall be
construed to be equal to the total value of all non-salary benefits received by
Employee as an employee of 

<PAGE>   7

Employer for one calendar year, including Employer provided or subsidized
insurance, tax deferred savings, medical benefits. Employer shall pay one year's
salary and benefits over a twelve-month period. Employee shall enter into a
reasonable consulting or similar arrangement with Employer for the amount of
time she is receiving payment under this Section. The Employer's obligation to
pay COBRA benefits for Employee shall cease upon the earlier of one calendar
year or Employee commencing to work for another employer where medical benefits
are available. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer, NOW, or their subsidiaries or affiliates, and
Employer's, NOW's and their subsidiaries' and affiliates' sole and exclusive
liability to Employee under this Agreement, in contract, tort, or otherwise, for
any Involuntary Termination of the employment relationship or Voluntary
Termination of such relationship after March 31, 2001, provided however,
Employee's rights and obligations with respect to Employee stock options are
governed by the respective option agreements.

        3.6. Employee covenants not to sue or lodge any claim, demand or cause
of action against Employer based on Involuntary Termination or Voluntary
Termination after March 31, 2001 for any monies other than those specified in
Section 3.5. If Employee breaches this covenant, Employer, NOW and their
subsidiaries' and affiliates' shall be entitled to recover from Employee all
sums expended by Employer, NOW and their subsidiaries and affiliates (including
costs and attorneys fees) in connection with such suit, claim, demand or cause
of action. Employer, NOW and their subsidiaries and affiliates shall not be
entitled to offset any of the amounts specified in the immediately preceding
sentence against amounts otherwise owing by Employer, NOW and their subsidiaries
and affiliates to Employee prior to a final determination under the terms of the
arbitration provisions of this Agreement that Employee has breached the covenant
contained in this Section 3.6.

        3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination, but
Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination,
provided however, Employee's rights and obligations with respect to Employee
stock options are governed by the respective option agreements

        3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to her pro rata salary through
the date of such termination, but Employee shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination.

        3.9. In all cases, the compensation and benefits payable to Employee
under this Agreement upon termination of the employment relationship shall be
reduced and offset by any amounts to which Employee may otherwise be entitled
under any and all severance plans or policies of Employer, NOW, or their

<PAGE>   8

subsidiaries or affiliates or any successor to all or a portion of the business
or assets of NOW or Employer.

        3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.

        3.11. This Agreement governs the rights and obligations of Employer and
Employee with respect to Employee's salary and other perquisites of employment.
Except as otherwise provided in this Agreement, Employee's rights and
obligations with respect to Employee stock options are governed by the
respective option agreements.

4.      UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

        4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of NOW, Employer and their
subsidiaries and affiliates, including specifically, without limitation, the
United States Foreign Corrupt Practices Act, generally codified in 15 USC 78
(FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If
Employee pleads guilty to or nolo contendre or admits civil or criminal
liability under applicable United States law, or if a court finds that Employee
has personal civil or criminal liability under the FCPA or other applicable
United States law, or if a court finds that Employee committed an action
resulting in any NOW entity having civil or criminal liability or responsibility
under applicable United States law, such action or finding shall constitute
"cause" for termination under this Agreement unless NOW's Board of Directors
determines that the actions found to be in violation of the FCPA or other
applicable United States law were taken in good faith and in compliance with all
applicable policies of Employer and NOW. Moreover, to the extent that any NOW
entity is found or held responsible for any civil or criminal fines or sanctions
of any type under the FCPA or other applicable United States law or suffers
other damages as a result of Employee's actions, Employee shall be responsible
for, and shall reimburse and pay to such NOW entity an amount of money equal to,
such civil or criminal fines, sanctions or damages. The rights afforded NOW
entities under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.

5.      OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

        5.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to 

<PAGE>   9

NOW's, Employer's or any of their subsidiaries' or affiliates' businesses,
products or services (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names, and marks) shall be disclosed to NOW and Employer and are and shall be
the sole and exclusive property of NOW and Employer. Upon termination of
Employee's employment, for any reason, Employee promptly shall deliver the same,
and all copies thereof, to NOW and Employer.

        5.2. Employee will not, at any time during or after her employment by
Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer, NOW, or their subsidiaries or
affiliates, or make any use thereof, except in the carrying out of her
employment responsibilities hereunder. NOW and its subsidiaries and affiliates
shall be third party beneficiaries of Employee's obligations under this Section.
As a result of Employee's employment by Employer, Employee may also from time to
time have access to, or knowledge of, confidential business information or trade
secrets of third parties, such as customers, suppliers, partners, joint
ventures, and the like, of Employer, NOW, and their subsidiaries and affiliates.
Employee also agrees to preserve and protect the confidentiality of such third
party confidential information and trade secrets to the same extent, and on the
same basis, as Employer's, NOW's or any of their subsidiaries' or affiliates'
confidential business information and trade secrets.

        5.3. If, during Employee's employment by Employer, Employee creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, E-mail, voice mail, electronic databases,
drawings, maps, architectural renditions, models, manuals, brochures, or the
like) relating to Employer's, NOW's or any of their subsidiaries' or affiliates'
businesses, products, or services, whether such work is created solely by
Employee or jointly with others (whether during business hours or otherwise and
whether on Employer's, NOW's or any of their subsidiaries' or affiliates'
premises or otherwise), Employer and NOW shall be deemed the author of such work
if the work is prepared by Employee in the scope of her employment; or, if the
work is not prepared by Employee within the scope of her employment but is
specially ordered by Employer, NOW, or any of their subsidiaries or affiliates
as a contribution to a collective work, as a part of a motion picture or other
audiovisual work, as a translation, as a supplementary work, as a compilation,
or as an instructional text, then the work shall be considered to be work made
for hire and Employer, NOW, or any of their subsidiaries or affiliates shall be
the author of the work. If such work is neither prepared by Employee within the
scope of her employment nor a work specially ordered that is deemed to be a work
made for hire, then Employee hereby agrees to assign, and by these presents does

<PAGE>   10

assign, to Employer and NOW all of Employee's worldwide right, title, and
interest in and to such work and all rights of copyright therein.

        5.4. Both during the period of Employee's employment by Employer and
thereafter, Employee shall assist Employer, NOW, or any of their subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's,
NOW's or any of their subsidiaries' or affiliates' worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Employer, NOW, or any
of their subsidiaries or affiliates or their nominees and the execution of all
lawful oaths and applications for applications for patents and registration of
copyright in the United States and foreign countries.

6.      POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

        6.1. As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, and as an additional incentive for Employer and
NOW to enter into this Agreement, Employer, NOW and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer, NOW or any of their subsidiaries or affiliated companies
are conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:

        (i)    engage in any business competitive with any line of business
               conducted by Employer, NOW, or any of their subsidiaries or
               affiliates;

        (ii)   render advice or services to, or otherwise assist, any other
               person, association, or entity who is engaged, directly or
               indirectly, in any business competitive with any line of business
               conducted by Employer, NOW, or any of their subsidiaries or
               affiliates;

        (iii)  induce any employee of Employer or NOW, or any of their
               subsidiaries or affiliates to terminate his or her employment
               with Employer, NOW, or any of their subsidiaries or affiliates,
               or hire or assist in the hiring of any such employee by person,
               association, or entity not affiliated with Employer, NOW or any
               of their subsidiaries or affiliates.

These non-competition obligations shall apply during Employee's employment and
for a period of one year after Termination for Cause or Voluntary Termination by
Employee prior to March 31, 2001. After termination of employment as provided
herein these non-competition obligations shall apply only to businesses having
annual revenues in excess of $20 million competitive with any line of business
conducted by Employer, NOW, or any of their subsidiaries having 

<PAGE>   11


annual revenues in excess of $20 million for the last fiscal year prior to the
time of termination. If Employer, NOW, or any of their subsidiaries or
affiliates abandons a particular aspect of its business, that is, ceases such
aspect of its business with the intention to permanently refrain from such
aspect of its business, then this post-employment non-competition covenant shall
not apply to such former aspect of that business.

        6.2. Employee understands that the foregoing restrictions may limit her
ability to engage in certain businesses anywhere in the world during the period
provided for above, but acknowledges that Employee will receive sufficiently
high remuneration and other benefits (e.g., the right to receive compensation
under Section 3.6) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach of
this Article 6 by Employee, and Employer, NOW, or any of their subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach. Such remedies shall not be deemed the exclusive remedies for
a breach of this Article 6, but shall be in addition to all remedies available
at law or in equity to Employer, NOW, or any of their subsidiaries or
affiliates, including, without limitation, the recovery of damages from Employee
and her agents involved in such breach.

        6.3. It is expressly understood and agreed that Employer, NOW and
Employee consider the restrictions contained in this Article 6 to be reasonable
and necessary to protect the proprietary information of Employer, NOW and their
subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions
are found by a court having jurisdiction to be unreasonable, or overly broad as
to geographic area or time, or otherwise unenforceable, the parties intend for
the restrictions therein set forth to be modified by such courts so as to be
reasonable and enforceable and, as so modified by the court, to be fully
enforced.

7.      MISCELLANEOUS:

        7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with NOW
or Employer.

        7.2. Employee shall refrain, both during the employment relationship and
after the employment relationship terminates, from publishing any oral or
written statements about Employer, NOW, or any of their respective subsidiaries'
or affiliates' directors, officers, employees, agents or representatives that
are slanderous, libelous, or defamatory; or that disclose private or
confidential information about Employer, NOW, or any of their respective
subsidiaries' or affiliates' business affairs, officers, employees, agents, or
representatives; or that constitute an intrusion into the seclusion or private
lives of Employer, NOW, or any of their respective subsidiaries' or affiliates'
directors, officers, employees, agents, or representatives; or that give rise to
unreasonable publicity about the 

<PAGE>   12

private lives of Employer, NOW, or any of their respective subsidiaries' or
affiliates' officers, employees, agents, or representatives; or that place
Employer, NOW, or any of their respective subsidiaries' or affiliates' or its
officers, employees, agents, or representatives in a false light before the
public; or that constitute a misappropriation of the name or likeness Employer,
NOW, or any of their respective subsidiaries' or affiliates' or its officers,
employees, agents, or representatives. A violation or threatened violation of
this prohibition may be enjoined.

        7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

        If to Employer or NOW, to:

                National Oilwell, Inc.
                P.O. Box 4888
                Houston, Texas  77210-4888
                Attn: President and Chief Executive Officer

        with a copy to:

                General Counsel

        If to Employee, to the address shown on the first page hereof.


Either Employer, NOW or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.

        7.4. This Agreement shall be governed in all respects by the laws of the
State of Texas, excluding any conflict-of-law rule or principle that might refer
the construction of the Agreement to the laws of another State or country.

        7.5. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

        7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term, provision,
covenant, or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be 

<PAGE>   13

construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.

        7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving NOW, Employer, their
respective subsidiaries and affiliates and Employee (all of which are referred
to herein as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and NOW and their respective
subsidiaries and affiliates. The arbitration proceeding shall be conducted in
Houston, Texas. Judgment upon any award rendered in any such arbitration
proceeding may be entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or state
court. The enforcement of this agreement to arbitrate and all procedural aspects
of this Agreement to arbitrate, including but not limited to, the construction
and interpretation of this agreement to arbitrate, the scope of the arbitrable
issues, allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the
substantive laws of the State of Texas; provided, however, that the Arbitrators
shall have no authority to award treble, exemplary or punitive type damages
under any circumstances regardless of whether such damages may be available
under Texas law, the parties hereby waiving their right, if any, to recover
treble, exemplary or punitive type damages in connection with any such Claims.

<PAGE>   14

        7.8. This Agreement shall be binding upon and inure to the benefit of
Employer, NOW, their subsidiaries and affiliates and any other person,
association, or entity which may hereafter acquire or succeed to all or a
portion of the business or assets of NOW or Employer by any means whether direct
or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights
and obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by Employee
without the prior written consent of NOW and Employer.

        7.9. Except as provided in (1) written company policies promulgated by
Employer or NOW dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer, NOW and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically, but
not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer and Employee is hereby canceled
and Employee hereby irrevocably waives and renounces all of Employee's rights
and claims under any such agreement or arrangement.


IN WITNESS WHEREOF, Employer, NOW and Employee have duly executed this Agreement
in multiple originals to be effective on the date first stated above.


National-Oilwell, Inc.                             National-Oilwell L.P.
                                                   by it general partner
                                                   NOW Oilfield Services, Inc.


By:   /s/ Jerry Gauche                             By:     /s/ Jerry Gauche
    Jerry Gauche                                          Jerry Gauche



                                                     /s/ Honor Guiney
                                                      Honor Guiney





<PAGE>   1

                                                                    Exhibit 21.1


                           SUBSIDIARIES OF THE COMPANY

National Oilwell, L.P.
NOW International, Inc.
     National Oilwell Canada Ltd.
     National Oilwell (U.K.) Limited
     National Oilwell de Venezuela
     National Oilwell Pte. Ltd.
     National Oilwell Pty Ltd.
Dreco Energy Services, Ltd.
     Dreco Inc.
     Vector Oil Tool Ltd.

-----------------





<PAGE>   1
                                                                    Exhibit 23.1



                         CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the following Registration
Statements of National-Oilwell, Inc. and in the related Prospectus of our report
dated March 16, 2000, with respect to the consolidated financial statements of
National-Oilwell, Inc. included in this Annual Report (Form 10-K) for the year
ended December 31, 1999.


Form                                    Description
----                                    ------------     
 S-8    Stock Award and Long Term Incentive Plan, Value Appreciation and
        Incentive Plan A and Value Appreciation and Incentive Plan B (No.
        333-15859)

 S-8    National Oilwell Retirement and Thrift Plan (No. 333-36359)

 S-8    Post Effective Amendment No. 3 to the Registration Statement on Form S-4
        filed on Form S-8 pertaining to the Dreco Energy Services Ltd. Amended
        and Restated 1989 Employee Incentive Stock Option Plan, as amended, and
        Employment and Compensation Arrangements Pursuant to Private Stock
        Option Agreements (No. 333-21191)

 S-3    Post Effective Amendment No. 3 to Form S-4 filed on Form S-3 pertaining
        to the offer to exchange $150,000,000 of 6 7/8% senior notes due 2005
        for $150,000,000 of 6 7/8% senior notes due 2005, Series B. (No.
        333-53717)

 S-3    Registration of 3,000,000 shares of common stock issued to Westburne
        Inc. (No. 333-72509)

 S-3    Registration
 of 500,000 shares of common stock (No. 333-85823)

 S-4    Registration of 8,139,778 shares of common stock issued in connection
        with the acquisition of all of the issued and outstanding shares of
        Hitec ASA (No. 333-91605)



                                                       ERNST & YOUNG LLP

Houston, Texas
March 16, 2000





<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                          12,403
<SECURITIES>                                         0
<RECEIVABLES>                                  191,426
<ALLOWANCES>                                     5,506
<INVENTORY>                                    254,052
<CURRENT-ASSETS>                               478,376
<PP&E>                                         181,669
<DEPRECIATION>                                  72,522
<TOTAL-ASSETS>                                 782,311
<CURRENT-LIABILITIES>                          176,210
<BONDS>                                        196,007
<PREFERRED-MANDATORY>                              582
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                     394,493
<TOTAL-LIABILITY-AND-EQUITY>                   782,311
<SALES>                                        745,215
<TOTAL-REVENUES>                               745,215
<CGS>                                          603,579
<TOTAL-COSTS>                                  603,579
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 3,055
<INTEREST-EXPENSE>                              15,509
<INCOME-PRETAX>                                  4,518
<INCOME-TAX>                                     2,998
<INCOME-CONTINUING>                              1,520
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     1,520
<EPS-BASIC>                                       0.03
<EPS-DILUTED>                                     0.03
        

</TABLE>