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Document and Company Information - USD ($) $ in Billions	12 Months Ended
Document and Company Information - USD ($) $ in Billions	Dec. 31, 2009	Feb. 16, 2010	Jun. 30, 2009
Document and Company Information [Abstract]
Entity Registrant Name	NATIONAL OILWELL VARCO INC
Entity Central Index Key	0001021860
Document Type	10-K
Document Period End Date	Dec. 31, 2009
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 13.7
Entity Common Stock, Shares Outstanding		418,452,756

Consolidated Balance Sheets - USD ($) $ in Millions	12 Months Ended
Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$ 2,622	$ 1,543
Receivables, net	2,187	3,136
Inventories, net	3,490	3,806
Costs in excess of billings	740	618
Deferred income taxes	290	271
Prepaid and other current assets	269	283
Total current assets	9,598	9,657
Property, plant and equipment, net	1,836	1,677
Deferred income taxes	92	126
Goodwill	5,489	5,225
Intangibles, net	4,052	4,300
Investment in unconsolidated affiliate	393	421
Other assets	72	73
Total assets	21,532	21,479
Current liabilities:
Accounts payable	584	852
Accrued liabilities	2,267	2,376
Billings in excess of costs	1,090	2,161
Current portion of long-term debt and short-term borrowings	7	4
Accrued income taxes	226	230
Total current liabilities	4,174	5,623
Long-term debt	876	870
Deferred income taxes	2,091	2,134
Other liabilities	163	128
Total liabilities	$ 7,304	$ 8,755
Commitments and contingencies
Stockholders' equity:
Common stock - par value $.01; 418,451,731 and 417,350,924 shares issued and outstanding at December 31, 2009 and December 31, 2008	$ 4	$ 4
Additional paid-in capital	8,214	7,989
Accumulated other comprehensive income (loss)	90	(161)
Retained earnings	5,805	4,796
Total Company stockholders' equity	14,113	12,628
Noncontrolling interests	115	96
Total stockholders' equity	14,228	12,724
Total liabilities and stockholders' equity	$ 21,532	$ 21,479

Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2009	Dec. 31, 2008
Stockholders' equity:
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	418,451,731	417,350,924
Common stock, shares outstanding	418,451,731	417,350,924

Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Revenue
Sales	$ 10,812	$ 11,162	$ 7,873
Services	1,900	2,269	1,916
Total	12,712	13,431	9,789
Cost of revenue
Cost of sales	7,297	7,784	5,675
Cost of services	1,631	1,575	1,284
Total	8,928	9,359	6,959
Gross profit	3,784	4,072	2,830
Selling, general and administrative	1,322	1,154	786
Intangible asset impairment	147	0	0
Operating profit	2,315	2,918	2,044
Interest and financial costs	(53)	(67)	(50)
Interest income	9	45	53
Equity income in unconsolidated affiliate	47	42	0
Other income (expense), net	(110)	23	(18)
Income before income taxes	2,208	2,961	2,029
Provision for income taxes	735	993	676
Net income	1,473	1,968	1,353
Net income attributable to noncontrolling interests	4	16	16
Net income attributable to Company	$ 1,469	$ 1,952	$ 1,337
Net income attributable to Company per share:
Basic	$ 3.53	$ 4.91	$ 3.77
Diluted	$ 3.52	$ 4.9	$ 3.76
Weighted average shares outstanding:
Basic	416	397	354
Diluted	417	399	355

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Cash flows from operating activities:
Net income	$ 1,473	$ 1,968	$ 1,353
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	490	402	214
Stock-based compensation	68	67	43
Excess tax benefit from the exercise of stock options	(1)	(37)	(23)
Equity income in unconsolidated affiliate	(47)	(42)	0
Dividend from unconsolidated affiliate	86	0	0
Intangible asset impairment	147	0	0
Other	(99)	82	48
Change in operating assets and liabilities, net of acquisitions:
Receivables	1,033	(626)	(465)
Inventories	468	(643)	(758)
Costs in excess of billings	(122)	25	(335)
Prepaid and other current assets	23	230	(144)
Accounts payable	(361)	95	84
Billings in excess of costs	(1,071)	765	832
Other assets/liabilities, net	8	8	339
Net cash provided by operating activities	2,095	2,294	1,188
Cash flows from investing activities:
Purchases of property, plant and equipment	(250)	(379)	(252)
Business acquisitions, net of cash acquired	(573)	(3,008)	(324)
Business divestitures, net of cash disposed	0	801	0
Sale of equity interest, net	251	0	0
Dividend from unconsolidated affiliate	8	113	0
Other, net	12	0	1
Net cash used in investing activities	(552)	(2,473)	(575)
Cash flows from financing activities:
Borrowings against lines of credit and other debt	7	2,731	47
Payments against lines of credit and other debt	(47)	(2,920)	(11)
Dividends paid	(460)	0	0
Excess tax benefits from exercise of stock options	1	37	23
Proceeds from stock options exercised	8	78	91
Net cash provided by (used in) financing activities	(491)	(74)	150
Effect of exchange rates on cash	27	(46)	122
Increase (decrease) in cash equivalents	1,079	(299)	885
Cash and cash equivalents, beginning of period	1,543	1,842	957
Cash and cash equivalents, end of period	2,622	1,543	1,842
Cash payments during the period for:
Interest	56	76	57
Income taxes	$ 929	$ 1,261	$ 703

Consolidated Statements of Stockholders Equity and Comprehensive Income - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Statement [Line Items]
Beginning Balance	$ 12,724	$ 6,724	$ 5,059
Net income	1,473	1,968	1,353
Other comprehensive income:
Currency translation adjustments	100	(176)	136
Derivative financial instruments	160	(160)	18
Change in defined benefit plans	(9)	(20)	(5)
Comprehensive income	1,724	1,612	1,502
Adoption of FIN48			(5)
Adoption of FAS158, net of tax		(2)
Stock issued in acquisition		4,191
Cash dividends, $1.10 per common share	(460)
Acquired noncontrolling interests		25
Dividends to noncontrolling interests	(13)	(8)
Noncontrolling interest contribution	28		11
Gain on sale of equity interest, net of tax	148
Stock-based compensation	68	67	43
Common stock issued	8	78	91
Excess tax benefit of options exercised	1	37	23
Ending Balance	14,228	12,724	6,724
Total Company Stockholders' Equity
Statement [Line Items]
Beginning Balance	12,628	6,661	5,023
Net income	1,469	1,952	1,337
Other comprehensive income:
Currency translation adjustments	100	(176)	136
Derivative financial instruments	160	(160)	18
Change in defined benefit plans	(9)	(20)	(5)
Comprehensive income	1,720	1,596	1,486
Adoption of FIN48			(5)
Adoption of FAS158, net of tax		(2)
Stock issued in acquisition		4,191
Cash dividends, $1.10 per common share	(460)
Gain on sale of equity interest, net of tax	148
Stock-based compensation	68	67	43
Common stock issued	8	78	91
Excess tax benefit of options exercised	1	37	23
Ending Balance	14,113	12,628	6,661
Common Stock
Statement [Line Items]
Beginning Balance	$ 4	$ 3	$ 3
Beginning Balance, shares	417	356	351
Other comprehensive income:
Stock issued in acquisition		$ 1
Stock issued in acquisition, shares		57
Common stock issued, shares	1	4	5
Ending Balance	$ 4	$ 4	$ 3
Ending Balance, shares	418	417	356
Additional Paid in Capital
Statement [Line Items]
Beginning Balance	$ 7,989	$ 3,617	$ 3,460
Other comprehensive income:
Stock issued in acquisition		4,190
Gain on sale of equity interest, net of tax	148
Stock-based compensation	68	67	43
Common stock issued	8	78	91
Excess tax benefit of options exercised	1	37	23
Ending Balance	8,214	7,989	3,617
Accumulated Other Comprehensive Income (Loss)
Statement [Line Items]
Beginning Balance	(161)	195	46
Other comprehensive income:
Currency translation adjustments	100	(176)	136
Derivative financial instruments	160	(160)	18
Change in defined benefit plans	(9)	(20)	(5)
Ending Balance	90	(161)	195
Retained Earnings
Statement [Line Items]
Beginning Balance	4,796	2,846	1,514
Net income	1,469	1,952	1,337
Other comprehensive income:
Adoption of FIN48			(5)
Adoption of FAS158, net of tax		(2)
Cash dividends, $1.10 per common share	(460)
Ending Balance	5,805	4,796	2,846
Noncontrolling Interests
Statement [Line Items]
Beginning Balance	96	63	36
Net income	4	16	16
Other comprehensive income:
Acquired noncontrolling interests		25
Dividends to noncontrolling interests	(13)	(8)
Noncontrolling interest contribution	28		11
Ending Balance	$ 115	$ 96	$ 63

Consolidated Statements of Stockholders Equity and Comprehensive Income (Parenthetical)	12 Months Ended
	Dec. 31, 2009 $ / shares
Statement [Line Items]
Cash dividends, per common share	$ 1.1
Retained Earnings
Statement [Line Items]
Cash dividends, per common share	$ 1.1

Organization and Basis of Presentation	12 Months Ended
Organization and Basis of Presentation	Dec. 31, 2009
Organization and Basis of Presentation [Abstract]
Organization and Basis of Presentation	1. Organization and Basis of Presentation Nature of Business We design, construct, manufacture and sell comprehensive systems, components, and products used in oil and gas drilling and production, provide oilfield services and supplies, and distribute products and provide supply chain integration services to the upstream oil and gas industry. Our revenues and operating results 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, drilling contractors and oilfield service companies, which in turn are affected by current and anticipated prices of oil and gas. Oil and gas prices have been and are likely to continue to be volatile. Basis of Consolidation The accompanying Consolidated Financial Statements include the accounts of National Oilwell Varco, Inc. and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Investments that are not wholly-owned, but where we exercise control, are fully consolidated with the equity held by minority owners and their portion of net income (loss) reflected as noncontrolling interests in the accompanying consolidated financial statements. On January 1, 2009, the Company adopted ASC Topic 810, “Consolidations” and reclassified noncontrolling interests in the amount $96 million from the mezzanine section to equity in the December 31, 2008 balance sheet. Investments in unconsolidated affiliates, over which we exercise significant influence, but not control, are accounted for by the equity method. The Company has evaluated subsequent events for potential recognition or disclosure in the Consolidated Financial Statements included through February 25, 2010.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2009

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, receivables, and payables approximated fair value because of the relatively short maturity of these instruments. Cash equivalents include only those investments having a maturity date of three months or less at the time of purchase. The carrying values of other financial instruments approximate their respective fair values.

Derivative Financial Instruments

The Financial Accounting Standards Board (“FASB”) issued ASC Topic 815, “Derivatives and Hedging”. (“ASC Topic 815”) This Standard requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk, and interest rate risk. Forward contracts against various foreign currencies are entered into to manage the foreign currency exchange rate risk on forecasted revenue and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). Other forward exchange contracts against various foreign currencies are entered into to manage the foreign currency exchange rate risk associated with certain firm commitments denominated in currencies other than the functional currency of the operating unit (fair value hedge). In addition the Company will enter into non-designated forward contracts against various foreign currencies to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge). Interest rate swaps are entered into to manage interest rate risk associated with the Company’s fixed and floating-rate borrowings.

The Company records all derivative financial instruments at their fair value in our consolidated balance sheet. Except for certain non-designated hedges discussed below, all derivative financial instruments we hold are designated as either cash flow or fair value hedges and are highly effective in offsetting movements in the underlying risks. Such arrangements typically have terms between two and 24 months, but may have longer terms depending on the underlying cash flows being hedged, typically related to the projects in our backlog. We may also use interest rate contracts to mitigate our exposure to changes in interest rates on anticipated long-term debt issuances.

At December 31, 2009, the Company has determined that its financial assets of $104 million and liabilities of $55 million (primarily currency related derivatives) are level 2 in the fair value hierarchy. At December 31, 2009, the fair value of the Company’s foreign currency forward contracts totaled $49 million.

As of December 31, 2009, the Company did not have any interest rate swaps and our financial instruments do not contain any credit-risk-related or other contingent features that could cause accelerated payments when our financial instruments are in net liability positions. We do not use derivative financial instruments for trading or speculative purposes.

Cash Flow Hedging Strategy

For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is subject to a particular currency risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are cash flows associated with forecasted revenues). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded from the assessment of effectiveness, are recognized in the Consolidated Statements of Income during the current period.

As of December 31, 2009, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge nonfunctional currency cash flows from forecasted revenues and costs:


	Currency
Foreign Currency	Denomination
	(in millions)
British Pound Sterling	£	39
Danish Krone	DKK	180
Euro	€	199
Norwegian Krone	NOK	6,097
U.S. Dollar	$	224
Korean Won	KRW	2,317

Fair Value Hedging Strategy

For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is subject to a particular risk), the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the same line item associated with the hedged item in current earnings (e.g., in “revenue” when the hedged item is a contracted sale).

The Company enters into forward exchange contracts to hedge certain firm commitments of revenue and costs that are denominated in currencies other than the functional currency of the operating unit. The purpose of the Company’s foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to customers will be adversely affected by changes in the exchange rates.

As of December 31, 2009, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge nonfunctional currency fair values of firm commitments of revenues and costs:


	Currency
Foreign Currency	Denomination
	(in millions)
U.S. Dollar	$	52

Non-designated Hedging Strategy

For derivative instruments that are non-designated, the gain or loss on the derivative instrument is recognized in the same line item associated with the hedged item in current earnings.

The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The purpose of the Company’s foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the nonfunctional currency monetary accounts will be adversely affected by changes in the exchange rates.

As of December 31, 2009, the Company had the following outstanding foreign currency forward contracts that hedge the fair value of nonfunctional currency monetary accounts:


	Currency
Foreign Currency	Denomination
	(in millions)
British Pound Sterling	£	10
Danish Krone	DKK	77
Euro	€	106
Norwegian Krone	NOK	3,096
Swedish Krone	SEK	5
U.S. Dollar	$	501
Korean Won	KRW	2,812

As of December 31, 2009, the Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):


	December 31, 2009
	Asset Derivatives			Liability Derivatives
	Balance Sheet	Fair		Balance Sheet	Fair
	Location	Value		Location	Value
Derivatives designated as hedging instruments under ASC Topic 815
Foreign exchange contracts	Prepaid and other current assets	$	56	Accrued liabilities	$	39
Foreign exchange contracts	Other Assets		17	Other Liabilities		7


Total derivatives designated as hedging instruments under ASC Topic 815		$	73		$	46


Derivatives not designated as hedging instruments under ASC Topic 815

Foreign exchange contracts	Prepaid and other current assets	$	30	Accrued liabilities	$	8
Foreign exchange contracts	Other Assets		1	Other Liabilities		1


Total derivatives not designated as hedging instruments under ASC Topic 815		$	31		$	9


Total derivatives		$	104		$	55

Location of Gain (Loss)

Recognized in Income on

Amount of Gain (Loss)

Location of Gain (Loss)

Derivative (Ineffective

Recognized in Income on

Reclassified from

Amount of Gain (Loss)

Portion and Amount

Derivative (Ineffective

Derivatives in ASC Topic 815

Amount of Gain (Loss)

Accumulated OCI into

Reclassified from

Excluded from

Portion and Amount

Cash Flow Hedging

Recognized in OCI on

Income

Accumulated OCI into

Effectiveness

Excluded from

Relationships

Derivative (Effective Portion) (a)

(Effective Portion)

Income (Effective Portion)

Testing)

Effectiveness Testing) (b)

December 31, 2009

Revenue

Foreign exchange contracts

164

Cost of revenue

(42

)

Other income (expense), net

(24

)

Total

164

(16

)

(24

)

Derivatives in ASC Topic 815

Location of Gain (Loss)

Amount of Gain (Loss)

ASC Topic 815

Location of Gain (Loss)

Recognized in Income on

Fair Value

Recognized in Income

Recognized in Income on

Fair Value Hedge

Recognized in Income on

Related Hedged

Hedging Relationships

on Derivative

Derivative

Relationships

Related Hedged Item

Items

December 31, 2009

Foreign exchange contracts

Revenue

Firm commitments

Revenue

)

Foreign exchange contracts

Cost of revenue

(13

)

Firm commitments

Cost of revenue

Total

)


Derivatives Not Designated as	Location of Gain (Loss)	Amount of Gain (Loss)
Hedging Instruments under	Recognized in Income	Recognized in Income on
ASC Topic 815	on Derivative	Derivative
Foreign exchange contracts	Other income (expense), net		3

Total			3


(a)		The Company expects that $(18) million of the Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings within the next twelve months with an offset by gains from the underlying transactions resulting in no impact to earnings or cash flow.

(b)		The amount of gain (loss) recognized in income represents $(24) million related to the ineffective portion of the hedging relationships for the year ended December 31, 2009 and $4 million related to the amount excluded from the assessment of the hedge effectiveness for the year ended December 31, 2009.

We assess the functional currencies of our operating units to ensure that the appropriate currencies are utilized in accordance with the guidance of ASC Topic 830 “Foreign Currency Matters” (“ASC Topic 830”). Effective January 1, 2008, we changed the functional currency of our Rig Technology unit in Norway from the Norwegian krone to the U.S. dollar to more appropriately reflect the primary economic environment in which they operate. This change was precipitated by significant changes in the economic facts and circumstances, including the increased order rate for large drilling platforms and components technology, the use of our Norway unit as our preferred project manager of these projects, increasing revenue and cost base in U.S. dollars, and the implementation of an international cash pool denominated in U.S. dollars. As a Norwegian krone functional unit, Norway was subject to increasing foreign currency exchange risk as a result of these changes in its economic environment and was dependent upon significant hedging transactions to offset its nonfunctional currency positions.

At December 31, 2007, our Norway operations had foreign currency forward contracts with notional amounts aggregating $2,551 million with a fair value of $91 million to mitigate foreign currency exchange risk against the U.S. dollar, our reporting currency. Effective with the change in the functional currency, the Company terminated these hedges. The related net gain position of $109 million associated with the terminated hedges was deferred and is being recognized into earnings in the future period(s) the forecasted transactions affect earnings, of which $10 million remains to be recognized into future earnings at December 31, 2009. The Company has, subsequent to January 1, 2008, entered into new hedges to cover the exposures as a result of the change to U.S. dollar functional. At December 31, 2009, our Norway operations had derivatives with $2,024 million in notional value with a fair value asset of $58 million.

Inventories

Inventories consist of raw materials, work-in-process and oilfield and industrial finished products, manufactured equipment and spare parts. Inventories are stated at the lower of cost or market using the first-in, first-out or average cost methods. Allowances for excess and obsolete inventories are determined based on our historical usage of inventory on-hand as well as our future expectations related to our installed base and the development of new products. The allowance, which totaled $206 million and $123 million at December 31, 2009 and 2008, respectively, is the amount necessary to reduce the cost of the inventory to its estimated realizable value.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Expenditures for major improvements that 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 over the estimated useful lives of individual items. Depreciation expense was $249 million, $222 million and $153 million for the years ended December 31, 2009, 2008 and 2007, respectively. The estimated useful lives of the major classes of property, plant and equipment are included in Note 6 to the consolidated financial statements.

Long-lived Assets

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying value of assets used in operations that is not recoverable is reduced to fair value if lower than carrying value. In determining the fair market value of the assets, we consider market trends and recent transactions involving sales of similar assets, or when not available, discounted cash flow analysis.

Intangible Assets

The Company has approximately $5.5 billion of goodwill and $4.1 billion of identified intangible assets as of December 31, 2009. Generally accepted accounting principles require the Company to test goodwill and other indefinite-lived intangible assets for impairment at least annually or more frequently whenever events or circumstances occur indicating that such assets might be impaired.

Goodwill is identified by segment as follows (in millions):


				Petroleum
	Rig			Services &			Distribution
	Technology			Supplies			Services			Total
Balance at December 31, 2007	$	1,231		$	1,175		$	39		$	2,445

Reorganization of segments		232			(256	)		24			—
Goodwill acquired during period		—			2,812			3			2,815
Translation adjustments		(5	)		(26	)		(4	)		(35	)


Balance at December 31, 2008		1,458			3,705			62			5,225
Goodwill acquired during period		97			143			—			240
Translation and other adjustments		12			7			5			24


Balance at December 31, 2009	$	1,567		$	3,855		$	67		$	5,489

Identified intangible assets with determinable lives consist primarily of customer relationships, trademarks, trade names, patents, and technical drawings acquired in acquisitions, and are being amortized on a straight-line basis over the estimated useful lives of 2-30 years. Amortization expense of identified intangibles is expected to be approximately $250 million in each of the next five years. Included in intangible assets are approximately $643 million of indefinite-lived trade names.

Identified intangible assets are identified by segment as follows (in millions):


				Petroleum
	Rig			Services &			Distribution
	Technology			Supplies			Services			Total
Balance at December 31, 2007	$	289		$	483		$	2		$	774

Reorganization of segments		97			(105	)		8			—
Additions to intangible assets		7			3,716			—			3,723
Amortization		(31	)		(147	)		(1	)		(179	)
Translation		(1	)		(14	)		(3	)		(18	)


Balance at December 31, 2008		361			3,933			6			4,300

Additions to intangible assets		86			37			—			123
Asset impairment		—			(147	)		—			(147	)
Amortization		(36	)		(204	)		(1	)		(241	)
Translation		5			11			1			17


Balance at December 31, 2009	$	416		$	3,630		$	6		$	4,052

Identified intangible assets by major classification consist of the following (in millions):


			Accumulated			Net Book
	Gross		Amortization			Value
December 31, 2008:

Customer relationships	$	2,751	$	(210	)	$	2,541
Trademarks		584		(40	)		544
Indefinite-lived trade names		790		—			790
Other		494		(69	)		425


Total identified intangibles	$	4,619	$	(319	)	$	4,300


December 31, 2009:

Customer relationships	$	2,819	$	(366	)	$	2,453
Trademarks		619		(73	)		546
Indefinite-lived trade names		643		—			643
Other		531		(121	)		410


Total identified intangibles	$	4,612	$	(560	)	$	4,052

Asset Impairment

During the second quarter of 2009, the worldwide average rig count was 2,009 rigs, down 41% from the fourth quarter 2008 average of 3,395 and down 25% from the first quarter 2009 average of 2,681. The second quarter 2009 average rig count represented the lowest quarterly average in the past six years. In addition, the Company’s updated forecast was behind the Company’s previous forecast completed at the beginning of 2009. While operating profit for the first quarter of 2009 was in line with the Company’s first quarter 2009 operating profit forecast, the Company’s consolidated operating profit for the second quarter of 2009 was below its second quarter 2009 forecast. As a result of the substantial decline in the worldwide rig count, and the decline in actual/forecasted results compared to the original 2009 forecast, the Company concluded that events or circumstances had occurred indicating that goodwill and other indefinite-lived intangible assets might be impaired as described in ASC Topic 350, “Intangibles — Goodwill and Other” (“ASC Topic 350”).

Therefore, the Company performed its interim impairment test of goodwill for its reporting units at the end of the second quarter of 2009. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of that reporting unit as a whole. Fair value of the reporting units is determined in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”), using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts and judgments, using a combination of three methods: discounted cash flow, comparable companies, and representative transactions. While the Company primarily uses the discounted cash flow method to assess fair value, the Company uses the comparable companies and representative transaction methods to validate the discounted cash flow analysis and further support management’s expectations, where possible.

The discounted cash flow is based on management’s short-term and long-term forecast of operating performance for each reporting unit. The two main assumptions used in measuring goodwill impairment, which bear the risk of change and could impact the Company’s goodwill impairment analysis, include the cash flow from operations from each of the Company’s individual business units and the weighted average cost of capital. The starting point for each of the reporting unit’s cash flow from operations is the detailed annual plan or updated forecast. The detailed planning and forecasting process takes into consideration a multitude of factors including worldwide rig activity, inflationary forces, pricing strategies, customer analysis, operational issues, competitor analysis, capital spending requirements, working capital needs, customer needs to replace aging equipment, increased complexity of drilling, new technology, and existing backlog among other items which impact the individual reporting unit projections. Cash flows beyond the specific operating plans were estimated using a terminal value calculation, which incorporated historical and forecasted financial cyclical trends for each reporting unit and considered long-term earnings growth rates. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. During times of volatility, significant judgment must be applied to determine whether credit changes are a short-term or long-term trend.

Projections for the remainder of 2009 also reflected declines compared to the original 2009 annual forecast. The Company updated its 2009 operating forecast, long-term forecast, and discounted cash flows based on this information. The goodwill impairment analysis that we performed during the second quarter of 2009 did not result in goodwill impairment as of June 30, 2009.

Other indefinite-lived intangible assets, representing trade names management intends to use indefinitely, were valued using significant unobservable inputs (level 3) and are tested for impairment using the Relief from Royalty Method, a form of the Income Approach. An impairment is measured and recognized based on the amount the book value of the indefinite-lived intangible assets exceeds its estimated fair value as of the date of the impairment test. Included in the impairment test are assumptions, for each trade name, regarding the related revenue streams attributable to the trade names, which are determined in a manner consistent with the forecasting process described above, the royalty rate, and the discount rate applied. Based on the Company’s indefinite-lived intangible asset impairment analysis performed during the second quarter of 2009, the Company incurred an impairment charge of $147 million in the Petroleum Services & Supplies segment related to a partial impairment of the Company’s Grant Prideco trade name. The impairment charge was primarily the result of the substantial decline in worldwide rig counts through June 2009, declines in forecasts in rig activity for the remainder of 2009, 2010, and 2011 compared to rig count forecast at the beginning of 2009, and a decline in the revenue forecast for the drill pipe business unit for the remainder of 2009, 2010, and 2011.

The Company performed its annual impairment analysis for its goodwill and indefinite-lived assets during the fourth quarter of 2009 which resulted in no further impairment. The valuation techniques used in the annual test were consistent with the methodologies described above. The inputs used in the annual test were updated for current market conditions and forecasts.

Foreign Currency

The functional currency for most of our foreign 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 (loss). Revenues and expenses are translated at average exchange rates in effect during the period. Certain other foreign operations use the U.S. dollar as the functional currency. Accordingly, financial statements of these foreign subsidiaries are remeasured to U.S. dollars for consolidation purposes using current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets and related elements of expense. Revenue and expense elements are remeasured at rates that approximate the rates in effect on the transaction dates. For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in income. Net foreign currency transaction gains (losses) were ($79) million, $50 million and ($7) million for the years ending December 31, 2009, 2008 and 2007, respectively, and are included in other income (expense) in the accompanying statement of operations.

As previously discussed, effective January 1, 2008, we changed the functional currency of our Rig Technology unit in Norway from the Norwegian krone to the U.S. dollar to more appropriately reflect the primary economic environment in which they currently operate.

Revenue Recognition

The Company’s products and services are sold based upon purchase orders or contracts with the customer that include fixed or determinable prices and that do not generally include right of return or other similar provisions or other significant post delivery obligations. Except for certain construction contracts and drill pipe sales described below, the Company records revenue at the time its manufacturing process is complete, the customer has been provided with all proper inspection and other required documentation, title and risk of loss has passed to the customer, collectability is reasonably assured and the product has been delivered. Customer advances or deposits are deferred and recognized as revenue when the Company has completed all of its performance obligations related to the sale. The Company also recognizes revenue as services are performed. The amounts billed for shipping and handling cost are included in revenue and related costs are included in cost of sales.

Revenue Recognition under Long-term Construction Contracts

The Company uses the percentage-of-completion method to account for certain long-term construction contracts in the Rig Technology segment. These long-term construction contracts include the following characteristics:

	•		the contracts include custom designs for customer specific applications;

	•		the structural design is unique and requires significant engineering efforts; and

	•		construction projects often have progress payments.

This method requires the Company to make estimates regarding the total costs of the project, progress against the project schedule and the estimated completion date, all of which impact the amount of revenue and gross margin the Company recognizes in each reporting period. The Company prepares detailed cost estimates at the beginning of each project. Significant projects and their related costs and profit margins are updated and reviewed at least quarterly by senior management. Factors that may affect future project costs and margins include shipyard access, weather, production efficiencies, availability and costs of labor, materials and subcomponents and other factors. These factors can impact the accuracy of the Company’s estimates and materially impact the Company’s current and future reported earnings.

The asset, “Costs in excess of billings,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs,” represents billings in excess of revenues recognized.

Drill Pipe Sales

For drill pipe sales, if requested in writing by the customer, delivery may be satisfied through delivery to the Company’s customer storage location or to a third-party storage facility. For sales transactions where title and risk of loss have transferred to the customer but the supporting documentation does not meet the criteria for revenue recognition prior to the products being in the physical possession of the customer, the recognition of the revenues and related inventory costs from these transactions are deferred until the customer takes physical possession.

Service and Product Warranties

The Company provides service and warranty policies on certain of its products. The Company accrues liabilities under service and warranty policies based upon specific claims and a review of historical warranty and service claim experience in accordance with ASC Topic 450 “Contingencies” (“ASC Topic 450”). Adjustments are made to accruals as claim data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues and accrues for them when they are encountered.

The changes in the carrying amount of service and product warranties are as follows (in millions):


Balance at December 31, 2007	$	92


Net provisions for warranties issued during the year		77
Amounts incurred		(54	)
Foreign currency translation		(1	)


Balance at December 31, 2008	$	114


Net provisions for warranties issued during the year		144
Amounts incurred		(62	)
Foreign currency translation and other		21


Balance at December 31, 2009	$	217

Income Taxes

The liability method is used to account for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized.

Concentration of Credit Risk

We grant credit to our customers, which operate primarily in the oil and gas industry. Concentrations of credit risk are limited because we have a large number of geographically diverse customers, thus spreading trade credit risk. We control credit risk through credit evaluations, credit limits and monitoring procedures. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral, but may require letters of credit for certain international sales. Credit losses are provided for in the financial statements. Allowances for doubtful accounts are determined based on a continuous process of assessing the Company’s portfolio on an individual customer basis taking into account current market conditions and trends. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, and financial condition of the Company’s customers. Based on a review of these factors, the Company will establish or adjust allowances for specific customers. Accounts receivable are net of allowances for doubtful accounts of approximately $95 million and $73 million at December 31, 2009 and 2008, respectively.

Stock-Based Compensation

Compensation expense for the Company’s stock-based compensation plans is measured using the fair value method required by ASC Topic 718 “Compensation — Stock Compensation” (“ASC Topic 718”). Under this guidance the fair value of stock option grants and restricted stock is amortized to expense using the straight-line method over the shorter of the vesting period or the remaining employee service period.

The Company provides compensation benefits to employees and non-employee directors under share-based payment arrangements, including various employee stock option plans.

Total compensation cost that has been charged against income for all share-based compensation arrangements was $68 million, $61 million and $43 million for 2009, 2008 and 2007, respectively. The total income tax benefit recognized in the income statement for all share-based compensation arrangements was $21 million, $19 million and $13 million for 2009, 2008 and 2007, respectively.

Environmental Liabilities

When environmental assessments or remediations are probable and the costs can be reasonably estimated, remediation liabilities are recorded on an undiscounted basis and are adjusted as further information develops or circumstances change.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Such estimates include but are not limited to, estimated losses on accounts receivable, estimated costs and related margins of projects accounted for under percentage- of-completion (“POC”), estimated realizable value on excess and obsolete inventory, contingencies, estimated liabilities for litigation exposures and liquidated damages, estimated warranty costs, estimates related to tocpension accounting, estimates related to the fair value of reporting units for purposes of assessing goodwill and other indefinite-lived intangible assets for impairment and estimates related to deferred tax assets and liabilities, including valuation allowances on deferred tax assets. Actual results could differ from those estimates.

Contingencies

The Company accrues for costs relating to litigation claims and other contingent matters, including liquidated damage liabilities, when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties or on management’s judgment, as appropriate. Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect the Company’s previous judgments with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of contingent liabilities may be materially different from previous estimates and could require adjustments to the estimated reserves to be recognized in the period such new information becomes known.

In circumstances where the most likely outcome of a contingency can be reasonably estimated, we accrue a liability for that amount. Where the most likely outcome cannot be estimated, a range of potential losses is established and if no one amount in that range is more likely than others, the low end of the range is accrued.

Net Income Per Share

The following table sets forth the computation of weighted average basic and diluted shares outstanding (in millions, except per share data):


	Years Ended December 31,
	2009		2008		2007
Numerator:
Net income	$	1,469	$	1,952	$	1,337

Denominator:
Basic—weighted average common shares outstanding		416		397		354
Dilutive effect of employee stock options and other unvested stock awards		1		2		1

Diluted outstanding shares		417		399		355


Basic earnings per share	$	3.53	$	4.91	$	3.77

Diluted earnings per share	$	3.52	$	4.90	$	3.76

Cash dividends per share	$	1.10	$	—	$	—

In addition, we had stock options outstanding that were anti-dilutive totaling 4.0 million, 0.4 million, and 0.1 million at December 31, 2009, 2008 and 2007, respectively.

Recently Issued Accounting Standards

In April 2009 the FASB issued ASC Topic 805, “Business Combinations” (“ASC Topic 805”). ASC Topic 805 amends the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. ASC Topic 805 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company expects ASC Topic 805 will have a future impact on its consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, term and size of the acquired contingencies.

In April 2009, the FASB issued ASC Topic 825, “Financial Instruments” (“ASC Topic 825”). ASC Topic 825 extends the annual disclosure requirements regarding the fair value of financial instruments to interim financial statements of publicly traded companies. ASC Topic 825 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. On June 1, 2009, the Company adopted ASC Topic 825. There was no significant impact to the Company’s Consolidated Financial Statements from the adoption of ASC Topic 825.

In May 2009, the FASB issued ASC Topic 855, “Subsequent Events” (“ASC Topic 855”). ASC Topic 855 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. ASC Topic 855 is effective for fiscal years and interim periods ending after June 15, 2009. On June 1, 2009, the Company adopted ASC Topic 855. There was no significant impact to the Company’s Consolidated Financial Statements from the adoption of ASC Topic 855.

In June 2009, the FASB issued ASC Topic 105, “Generally Accepted Accounting Standards” (“ASC Topic 105”). The ASC is now the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date, ASC Topic 105 superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the ASC has become non-authoritative. ASC Topic 105 became effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Grant Prideco Merger

12 Months Ended

Dec. 31, 2009

Grant Prideco Merger [Abstract]

Grant Prideco Merger

3. Grant Prideco Merger

Pursuant to the Agreement and Plan of Merger with Grant Prideco, Inc. (“Grant Prideco”) (the “Merger”), a Delaware Corporation, effective December 16, 2007 (the “Agreement Date”), the Company issued .4498 shares of National Oilwell Varco, Inc. common stock and $23.20 in cash (the “Exchange Ratio”) for each Grant Prideco common share outstanding on April 21, 2008 (the “Merger Date”) totaling approximately 57 million shares and $2.9 billion in cash. The Company has included the financial results of Grant Prideco in its Consolidated Financial Statements beginning on the Merger Date, the date Grant Prideco common shares were exchanged for National Oilwell Varco common shares and cash. The Grant Prideco operations are included in the Petroleum Services & Supplies segment.

Prior to its acquisition, Grant Prideco was a world leader in drill stem technology development and drill pipe manufacturing, sales and service and a global leader in drill bit and specialty tools, manufacturing, sales and service. The Company believes the Merger with Grant Prideco advanced its strategic goal of providing more products and services to its customers and that Grant Prideco’s product range added new growth opportunities to the Company and benefited its customers’ needs worldwide.

The Merger was accounted for as a purchase business combination. Assets acquired and liabilities assumed were recorded at their fair values as of April 21, 2008. The fair value of shares issued was determined using an average price of $72.74, which represents the average closing price of the Company’s common stock for a five-day period beginning two available trading days before the public announcement of the transaction. The total purchase price is $7,199 million, including Grant Prideco stock options assumed and acquisition related transaction costs and is comprised of (in millions):


Shares issued totaled approximately 57 million shares at $72.74 per share	$	4,135
Cash paid at $23.20 per share		2,932
Grant Prideco stock options assumed		56
Merger related transaction costs		76

Total purchase price	$	7,199

For all Grant Prideco stock options and restricted stock granted prior to 2008, vesting was accelerated under the terms of the stock option and restricted stock agreements; therefore, there was no modification of the awards as defined under SFAS 123(R). For stock options and restricted stock granted by Grant Prideco in 2008, 320,500 Grant Prideco stock options and 388,000 shares of restricted stock were replaced with 250,402 National Oilwell Varco stock options and 303,212 shares of National Oilwell Varco restricted stock, respectively. For the 2008 Grant Prideco grants, vesting was not accelerated in connection with the Merger, under the terms of the stock option and restricted stock agreements, except for certain recipients of the 2008 Grant Prideco restricted stock grant.

Merger related costs of $76 million include severance and other external costs directly related to the Merger.

Transaction costs of $11 million for the year ending December 31, 2008 were comprised of $6 million for accelerated vesting of stock-based compensation, $4 million for bridge loan fees and $1 million of other costs and are included in selling, general and administrative expense in the Consolidated Statements of Income.

Purchase Price Allocation

Under the purchase method of accounting, the total purchase price was allocated to Grant Prideco’s net tangible and identifiable intangible assets based on their fair values as of April 21, 2008. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. The following table, set forth below, displays the total purchase price allocated to Grant Prideco’s net tangible and identifiable intangible assets based on their fair values as of April 21, 2008 (in millions):


Cash and cash equivalents	$	171
Receivables		420
Assets held for sale, net		784
Inventories		611
Prepaid and other current assets		210
Property, plant and equipment		392
Goodwill		2,775
Intangibles		3,696
Investment in unconsolidated affiliate		512
Other assets		98
Accounts payable and accrued liabilities		(316	)
Accrued income taxes		(627	)
Long-term debt		(176	)
Deferred income taxes		(1,305	)
Minority interest		(25	)
Other liabilities		(21	)

Total purchase price	$	7,199

Under purchase accounting, a fair value step up adjustment of $89 million was made to inventory and was charged to “Cost of sales” as the applicable inventory sold. Cost of sales included $89 million of these inventory charges for the year ended December 31, 2008.

Additionally, the Company identified other intangible assets associated with tradenames, patents, and customer relationships, and the fair values assigned were $1.2 billion, $0.3 billion, and $2.2 billion, respectively. The initial range of useful lives associated with trade names, patents, and customer relationships were 40 years to an indefinite life, 5 to 15 years and 16 to 17 years, respectively. Of the $1.2 billion associated with trade names, $0.8 billion was initially identified as having an indefinite life.

Disposition of Certain Grant Prideco Businesses

Prior to the Merger, Grant Prideco had entered into a definitive Purchase and Sale Agreement with Vallourec S.A. and Vallourec & Mannesman Holdings, Inc. (collectively referred to as “Vallourec”) to sell four of its tubular businesses for approximately $800 million in cash, subject to final working capital adjustments and standard closing conditions (including regulatory approval). The transaction closed May 16, 2008. The amount included in “Assets held for sale, net” included in the preliminary purchase price allocation above, relates to this disposition. Additionally, $256 million is included above in “Accrued income taxes” for taxes related to the disposition.

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of National Oilwell Varco and Grant Prideco, on a pro forma basis, as though the companies had been combined as of the beginning of 2008. The pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the merger had taken place at the beginning of 2008. The pro forma financial information for the year ended December 31, 2008 includes the business combination accounting effect on historical Grant Prideco revenues, adjustments to depreciation on acquired property, amortization charges from acquired intangible assets, financing costs on new debt in connection with the merger and related tax effects for the year ended December 31, 2008 (in millions, except per share data):


Total revenues	$	14,035

Net income attributable to Company	$	2,080

Basic net income attributable to Company per share	$	5.02

Diluted net income attributable to Company per share	$	4.99

Other Acquisitions and Investments

12 Months Ended

Dec. 31, 2009

Other Acquisitions and Investments [Abstract]

Other Acquisitions and Investments

4. Other Acquisitions and Investments

2009

The Company completed nine acquisitions for an aggregate purchase price of $573 million, net of cash acquired. These acquisitions included:

	•		The shares of ASEP Group Holding B.V., a Netherlands-based manufacturer of well service equipment.

	•		The shares of ANS (1001) Ltd. (“Anson”), a U.K.-based manufacturer of pumps and fluid expendibles.

	•		The business and assets of Spirit Drilling Fluids Ltd., a U.S.-based company that provides drilling fluids and related well-site services to exploration and production companies.

	•		The business and assets of Spirit Minerals L.P., a U.S.-based company that mines, processes and distributes barite to the oil and gas drilling fluid industry.

	•		The shares of South Seas Inspection (S) Pte. Ltd., a Singapore-based inspection, repair and maintenance provider to the oil and gas industry.

	•		The shares of Hochang Machinery Industries Co., Ltd., a South Korean-based manufacturing and fabrication business.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition of the 2009 acquisitions (in millions):


Current assets, net of cash acquired	$	404
Property, plant and equipment		149
Intangible assets		115
Goodwill		198
Other assets		5


Total assets acquired		871


Current liabilities		242
Long-term debt		48
Other liabilities		8


Total liabilities		298


Cash consideration, net of cash acquired	$	573

The Company allocated $115 million to intangible assets (11 year weighted-average life), comprised of: $60 million of customer relationships (9 year weighted-average life), $46 million of trademarks (18 year weighted-average life), and $9 million of other intangible assets (7 year weighted-average life).

In September 2009, the Company sold 45% of certain of its IntelliServ operations and created the IntelliServ Joint Venture (“IntelliServ”). IntelliServ provides drilling technology that enables downhole drilling conditions to be measured, evaluated and monitored.

2008

In addition to the Grant Prideco Merger, the Company completed nine acquisitions for an aggregate purchase price of $171 million net of cash acquired. These acquisitions included:

	•		Welch Power Source, L.L.C., a Louisiana-based manufacturer of power generation equipment.

	•		CKS, a France-based solids control company.

	•		Mid-South Machine, Inc., a Louisiana-based machine shop.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of the 2008 acquisitions (in millions):


Current assets, net of cash acquired	$	33
Property, plant and equipment		61
Intangible assets		38
Goodwill		76


Total assets acquired		208


Current liabilities		11
Long-term debt		26


Total liabilities		37


Cash consideration, net of cash acquired	$	171

The Company allocated $38 million to intangible assets (9 year weighted-average life), comprised of: $30 million of customer relationships (15 year weighted-average life), $1 million of trademarks (16 year weighted-average life), and $7 million of other intangible assets (4 year weighted-average life).

2007

The Company completed eight acquisitions for an aggregate purchase price of $287 million consisting of cash of $286 million and notes payable of $1 million. These acquisitions included:

	•		Gammaloy Holdings, L.P., a Texas-based manufacturer of downhole tools.

	•		Kreiter Geartech, a Texas-based manufacturer of gearing products.

	•		Sara Services and Engineers Pvt. Ltd., an India-based manufacturer of oil field equipment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of the 2007 acquisitions (in millions):


Current assets, net of cash acquired	$	50
Property, plant and equipment		49
Intangible assets		114
Goodwill		142


Total assets acquired		355


Current liabilities		38
Long-term debt		20


Total liabilities		58


Minority interest		11


Cash consideration, net of cash acquired	$	286

Based on independent third-party valuations, the Company allocated $114 million to intangible assets (13 year weighted-average life), comprised of: $94 million of customer relationships (13 year weighted-average life), $9 million of trademarks (9 year weighted-average life), and $11 million of other intangible assets (20 year weighted-average life).

In January 2007, the Company also acquired the remaining 13% of NQL Energy Services, Inc.’s outstanding shares for $38 million.

Each of the acquisitions were accounted for using the purchase method of accounting and, accordingly, the results of operations of each business are included in the consolidated results of operations from the date of acquisition. Excluding the Grant Prideco merger, a summary of the acquisitions follows (in millions):


	Years Ended December 31,
	2009			2008			2007
Fair value of assets acquired, net of cash acquired	$	871		$	208		$	355
Cash paid, net of cash acquired		(573	)		(171	)		(286	)

Liabilities assumed, debt issued and minority interest	$	298		$	37		$	69


Excess purchase price over fair value of net assets acquired	$	198		$	76		$	142

Inventories, net

12 Months Ended

Dec. 31, 2009

Inventories, net [Abstract]

Inventories, net

5. Inventories, net

Inventories consist of (in millions):


	December 31,
	2009		2008
Raw materials and supplies	$	704	$	739
Work in process		1,307		1,326
Finished goods and purchased products		1,479		1,741

Total	$	3,490	$	3,806

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2009

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

6. Property, Plant and Equipment

Property, plant and equipment consist of the following (in millions):


	Estimated	December 31,
	Useful Lives	2009			2008
Land and buildings	5-35 Years	$	678		$	544
Operating equipment	3-15 Years		1,429			1,259
Rental equipment	3-12 Years		594			527

			2,701			2,330
Less: Accumulated Depreciation			(865	)		(653	)

		$	1,836		$	1,677

Accrued Liabilities

12 Months Ended

Dec. 31, 2009

Accrued Liabilities [Abstract]

Accrued Liabilities

7. Accrued Liabilities

Accrued liabilities consist of (in millions):


	December 31,
	2009		2008
Compensation	$	272	$	258
Customer prepayments and billings		500		912
Warranty		217		114
Interest		11		11
Taxes (non income)		95		76
Insurance		58		50
Accrued vendor costs		853		688
Fair value of derivatives		61		59
Other		200		208

Total	$	2,267	$	2,376

Costs and Estimated Earnings on Uncompleted Contracts

12 Months Ended

Dec. 31, 2009

Costs and Estimated Earnings on Uncompleted Contracts [Abstract]

Costs and Estimated Earnings on Uncompleted Contracts

8. Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts consist of (in millions):


	December 31,
	2009			2008
Costs incurred on uncompleted contracts	$	6,276		$	4,397
Estimated earnings		3,735			2,183

		10,011			6,580
Less: Billings to date		10,361			8,123

	$	(350	)	$	(1,543	)


Costs and estimated earnings in excess of billings on uncompleted contracts	$	740		$	618
Billings in excess of costs and estimated earnings on uncompleted contracts		(1,090	)		(2,161	)

	$	(350	)	$	(1,543	)

Long-Term Debt

12 Months Ended

Dec. 31, 2009

Long-Term Debt [Abstract]

Long-Term Debt

9. Long-Term Debt

Debt consists of (in millions):


	December 31,
	2009		2008
Senior Notes, interest at 6.5% payable semiannually, principal due on March 15, 2011	$	150	$	150

Senior Notes, interest at 7.25% payable semiannually, principal due on May 1, 2011		205		208

Senior Notes, interest at 5.65% payable semiannually, principal due on November 15, 2012		200		200

Senior Notes, interest at 5.5% payable semiannually, principal due on November 19, 2012		151		151

Senior Notes, interest at 6.125% payable semiannually, principal due on August 15, 2015		151		151

Other		26		14

Total debt		883		874
Less current portion		7		4

Long-term debt	$	876	$	870

Principal payments of debt for years subsequent to 2009 are as follows (in millions):


2010	$	7
2011		362
2012		355
2013		5
2014		1
Thereafter		153

	$	883

Senior Notes

In connection with the merger of Grant Prideco, the Company completed an exchange offer relative to the $175 million of 6.125% Senior Notes due 2015 previously issued by Grant Prideco. On April 21, 2008, $151 million of Grant Prideco Senior Notes were exchanged for National Oilwell Varco Senior Notes. The National Oilwell Varco Senior Notes have the same interest rate, interest payment dates, redemption terms and maturity as the Grant Prideco Senior Notes. In November 2008, the Company repurchased $23 million of the unexchanged Grant Prideco Senior Notes.

Revolving Credit Facilities

On April 21, 2008, the Company replaced its existing $500 million unsecured revolving credit facility with an aggregate of $3 billion of unsecured credit facilities and borrowed $2 billion to finance the cash portion of the Grant Prideco acquisition. These facilities consisted of a $2 billion, five-year revolving credit facility and a $1 billion, 364-day revolving credit facility which was terminated early in February 2009. At December 31, 2009, there were no borrowings against the remaining credit facility, and there were $588 million in outstanding letters of credit issued under this facility, resulting in $1,412 million of funds available under this revolving credit facility. Interest under this multicurrency facility is based upon LIBOR, NIBOR or EURIBOR plus 0.26% subject to a ratings-based grid, or the prime rate.

The Company also had $2,073 million of additional outstanding letters of credit at December 31, 2009, primarily in Norway, that are essentially under various bilateral committed letter of credit facilities. Other letters of credit are issued as bid bonds and performance bonds. The Senior Notes contain reporting covenants and the credit facility contains a financial covenant regarding maximum debt to capitalization. The Company was in compliance with all covenants at December 31, 2009.

Other

Other debt includes approximately $3 million in promissory notes due to former owners of businesses acquired who remain employed by the Company.

Employee Benefit Plans

12 Months Ended

Dec. 31, 2009

Employee Benefit Plans [Abstract]

Employee Benefit Plans

10. Employee Benefit Plans

We have benefit plans covering substantially all of our employees. Defined-contribution benefit plans cover most of the U.S. and Canadian employees, and benefits are based on years of service, a percentage of current earnings and matching of employee contributions. Employees in our Norwegian operations can elect to participate in a defined-contribution plan in lieu of a local defined benefit plan. For the years ended December 31, 2009, 2008 and 2007, expenses for defined-contribution plans were $39 million, $37 million, and $31 million, respectively, and all funding is current.

Certain retired or terminated employees of predecessor or acquired companies participate in a defined benefit plan in the United States. None of the participants in this plan are eligible to accrue benefits. In addition, approximately 777 U.S. retirees and spouses participate in defined benefit health care plans of predecessor or acquired companies that provide postretirement medical and life insurance benefits. Active employees are ineligible to participate in any of these defined benefit plans. Our subsidiaries in the United Kingdom and Norway also have defined benefit pension plans covering virtually all of their employees.

Net periodic benefit cost for our defined benefit plans aggregated $12 million, $7 million and $8 million for the years ended December 31, 2009, 2008 and 2007, respectively.

The change in benefit obligation, plan assets and the funded status of the defined benefit pension plans in the United States, United Kingdom, and Norway and defined postretirement plans in the United States, using a measurement date of December 31, 2009 and December 31, 2008, is as follows (in millions):


	Pension benefits						Postretirement benefits
At year end	2009			2008			2009			2008
Benefit obligation at beginning of year	$	214		$	246		$	20		$	14
Service cost		5			5			—			—
Interest cost		14			12			2			1
Actuarial loss (gain)		19			(6	)		1			5
Benefits paid		(10	)		(13	)		(2	)		(2	)
Participants contributions		1			1			—			—
Exchange rate loss (gain)		19			(50	)		18			—
Acquisitions/divestitures, net		—			17			—			—
Other		—			2			—			2

Benefit obligation at end of year	$	262		$	214		$	39		$	20


Accumulated benefit obligation at end of year		244			198

Fair value of plan assets at beginning of year		154			206			—			—
Actual return		21			(23	)		—			—
Benefits paid		(11	)		(13	)		(2	)		(2	)
Company contributions		12			17			2			2
Participants contributions		1			1			—			—
Exchange rate (loss) gain		16			(50	)		—			—
Acquisitions/divestitures, net		—			16			—			—
Other		—			(1	)		—			—

Fair value of plan assets at end of year	$	193		$	153		$	—		$	—


Funded status		(69	)		(61	)		(39	)		(20	)
Unrecognized actuarial net loss		63			52			7			6
Prior service costs not yet recognized		1			1			(1	)		(1	)

Accrued benefit cost	$	(5	)	$	(8	)	$	(33	)	$	(15	)

Defined Benefit Pension Plans

Assumed long-term rates of return on plan assets, discount rates and rates of compensation increases vary for the different plans according to the local economic conditions. The assumption rates used for benefit obligations are as follows:


	Years Ended December 31,
	2009		2008
Discount rate:
United States plan		5.26%		6.23%
International plans		5.25% – 5.75%		5.75% – 6.50%

Salary increase:
United States plan		N/A		N/A
International plans		2.50% – 4.25%		2.50% – 4.50%

The assumption rates used for net periodic benefit costs are as follows:

Years Ended December 31,

2009

2008

2007

Discount rate:

United States plan

6.23%

6.34%

5.97%

International plans

5.75% – 6.50%

5.50% – 5.75%

4.75% – 5.25%

Salary increase:

United States plan

N/A

International plans

2.50% – 4.50%

2.25% – 3.00%

Expected return on assets:

United States plan

7.75%

International plans

6.00% – 6.85%

5.50% – 6.86%

5.17% – 6.86%

In determining the overall expected long-term rate of return for plan assets, the Company takes into consideration the historical experience as well as future expectations of the asset mix involved. As different investments yield different returns, each asset category is reviewed individually and then weighted for significance in relation to the total portfolio.

The majority of our plans have projected benefit obligations in excess of plan assets.

The Company expects to pay future benefit amounts on its defined benefit plans ranging from $15 million to $20 million for each of the next five years and aggregate payments of $152 million.

Plan Assets

The Company and its investment advisers collaboratively reviewed market opportunities using historic and statistical data, as well as the actuarial valuation reports for the plans, to ensure that the levels of acceptable return and risk are well-defined and monitored. Currently, the Company’s management believes that there are no significant concentrations of risk associated with plan assets. Our pension investment strategy worldwide prohibits a direct investment in our own stock.

The following table presents information about the plan assets measured at fair value as of December 31, 2009, aggregated by the level in the fair value hierarchy within which those measurements fall (in millions):


	Fair Value Measurements
Asset Category	Total		Level 1		Level 2		Level 3
Equity securities	$	70	$	—	$	70	$	—
Bonds		53		—		53		—
Mutual funds		36		16		20		—
Other (insurance contracts)		32		—		—		32

		191		16		143		32
Cash		2		—		2		—


Total	$	193	$	16	$	145	$	32

The following table outlines the rollforward of the fair value measurement Company’s Level 3 plan assets using significant unobservable inputs for the year ended December 31, 2009 (in millions):


	Level 3
	Plan
	Assets
Beginning balance as of January 1, 2009	$	24
Actual return on plan assets still held at reporting date		2
Purchases, sales and settlements		1
Currency impact		5


Ending balance as of December 31, 2009	$	32

Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2009

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

11. Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows (in millions):


				Cumulative
	Change in			Currency			Derivative
	Defined			Translation			Financial
	Benefit Plans			Adjustment			Instruments			Total
Balance at December 31, 2006	$	(15	)	$	60		$	1		$	46


Current period activity		(8	)		211			25			228
Tax effect		3			(75	)		(7	)		(79	)


Balance at December 31, 2007	$	(20	)	$	196		$	19		$	195


Current period activity		(30	)		(265	)		(241	)		(536	)
Tax effect		10			89			81			180


Balance at December 31, 2008	$	(40	)	$	20		$	(141	)	$	(161	)


Current period activity		(14	)		150			223			359
Tax effect		5			(50	)		(63	)		(108	)


Balance at December 31, 2009	$	(49	)	$	120		$	19		$	90

Commitments and Contingencies

12 Months Ended

Dec. 31, 2009

Commitments and Contingencies [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

We are 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, 2009 cannot be determined; however, in our opinion, any ultimate liability, to the extent not otherwise provided for, will not materially affect our financial position, cash flow or results of operations.

Our 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 our business. Although we have not incurred material costs in connection with our compliance with such laws, there can be no assurance that other developments, such as new environmental laws, regulations and enforcement policies hereunder may not result in additional, presently unquantifiable, costs or liabilities to us.

We have received federal grand jury subpoenas and subsequent inquiries from governmental agencies requesting records related to our compliance with export trade laws and regulations. We have cooperated fully with agents from the Department of Justice, the Bureau of Industry and Security, the Office of Foreign Assets Control, and U.S. Immigration and Customs Enforcement in responding to the inquiries, and we have conducted our own internal review of this matter. At the conclusion of our internal review in the fourth quarter of 2009, we identified possible areas of concern and discussed these areas of concern with the relevant agencies. We are currently negotiating a potential resolution with the agencies involved related to these matters. We currently anticipate that any administrative fine or penalty agreed to as part of a resolution would be within established accruals, and would not have a material effect on our financial position or results of operations. To the extent a resolution is not negotiated as anticipated, we cannot predict the timing or effect that any resulting government actions may have on our financial position or results of operations. As a result of our internal review and in an effort to prevent any future compliance issues of this nature, we have reviewed and are in the process of enhancing our compliance procedures and training.

The Company leases certain facilities and equipment under operating leases that expire at various dates through 2066. These leases generally contain renewal options and require the lessee to pay maintenance, insurance, taxes and other operating expenses in addition to the minimum annual rentals. Rental expense related to operating leases approximated $199 million, $184 million, and $128 million in 2009, 2008 and 2007, respectively.

Future minimum lease commitments under noncancellable operating leases with initial or remaining
terms of one year or more at December 31, 2009 are payable as follows (in millions):


2010	$	122
2011		88
2012		68
2013		52
2014		44
Thereafter		179

Total future lease commitments	$	553

Common Stock

12 Months Ended

Dec. 31, 2009

Common Stock [Abstract]

Common Stock

13. Common Stock

National Oilwell Varco has authorized 500 million shares of $.01 par value common stock. We also have authorized 10 million shares of $.01 par value preferred stock, none of which is issued or outstanding.

On November 11, 2009 National Oilwell Varco’s Board of Directors approved a special one-time cash dividend of $1.00 per share of common stock along with the commencement of a regular quarterly dividend of $0.10 per share. The special cash dividend and the first quarterly dividend was paid on December 16, 2009 to each stockholder of record on December 2, 2009. The declaration and payment of future dividends is at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s results of operations, financial condition, capital requirements and other factors deemed relevant by the Board of Directors.

On August 22, 2007, the Company’s Board of Directors approved a two-for-one stock split in the form of a stock dividend to the Company’s stockholders of record on September 7, 2007, with distribution of shares on September 28, 2007. The total number of authorized common stock shares and associated par value were unchanged by this action. All per-share amounts in the financial statements reflect the stock split for all periods presented unless indicated otherwise.

Stock Options

Under the terms of National Oilwell Varco’s Long-Term Incentive Plan, as amended, 25.5 million shares of common stock are authorized for the grant of options to officers, key employees, non-employee directors and other persons. Options granted under our stock option plan generally vest over a three-year period starting one year from the date of grant and expire ten years from the date of grant. The purchase price of options granted may not be less than the closing market price of National Oilwell Varco common stock on the date of grant. At December 31, 2009, approximately 12 million shares were available for future grants.

We also have inactive stock option plans that were acquired in connection with the acquisitions of Varco International, Inc. in 2005 and Grant Prideco in 2008. We converted the outstanding stock options under these plans to options to acquire our common stock and no further options are being issued under these plans. Stock option information summarized below includes amounts for the National Oilwell Varco Long-Term Incentive Plan and stock plans of acquired companies. Options outstanding at December 31, 2009 under the stock option plans have exercise prices between $8.83 and $73.98 per share, and expire at various dates from January 25, 2010 to May 13, 2019.

The following summarizes options activity:


	Years Ended December 31,
	2009					2008					2007
	Number			Average		Number			Average		Number			Average
	of			Exercise		of			Exercise		of			Exercise
	Shares			Price		Shares			Price		Shares			Price
Shares under option at beginning of year		7,547,822		$	37.24		7,903,832		$	29.12		10,559,862		$	23.28
Granted		3,234,400			26.03		2,993,000			48.59		2,381,300			35.55
Cancelled		(156,356	)		29.79		(218,560	)		30.90		(301,608	)		30.55
Exercised		(369,884	)		40.86		(3,130,450	)		27.08		(4,735,722	)		19.28


Shares under option at end of year		10,255,982		$	34.19		7,547,822		$	37.24		7,903,832		$	29.12


Exercisable at end of year		5,308,465		$	33.14		3,110,462		$	26.17		1,619,374		$	19.55

The following summarizes information about stock options outstanding as of December 31, 2009:


	Weighted-Avg		Options Outstanding				Options Exercisable
	Remaining				Weighted-Avg				Weighted-Avg
Range of Exercise Price	Contractual Life		Shares		Exercise Price		Shares		Exercise Price
8.33 – 15.00		3.75		549,519	$	11.53		549,519	$	11.53
15.92 – 33.29		8.20		4,028,199		24.69		853,599		19.97
33.57 – 73.98		7.01		5,678,264		43.12		3,905,347		39.06


Total		7.30		10,255,982	$	34.19		5,308,465	$	33.14

The weighted-average fair value of options granted during 2009, 2008 and 2007 was approximately $11.89, $22.16 and $11.99 (excluding options assumed in the Grant Prideco merger) per share, respectively, as determined using the Black-Scholes option-pricing model. The total intrinsic value of options exercised during 2009 and 2008 was $6 million and $155 million, respectively.

Upon adoption of ASC Topic 718, we began recording expense related to the value of employee stock options on the date of grant using the Black Scholes model. Prior to the adoption of ASC Topic 718, the value of each employee stock option was estimated on the date of grant using the Black-Scholes model for the purpose of the pro forma financial information in accordance with ASC Topic 718. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise activity. The use of the Black Scholes model requires the use of extensive actual employee exercise activity data and the use of a number of complex assumptions including expected volatility, risk-free interest rate, expected dividends and expected term.


	Years Ended December 31,
	2009			2008			2007
Valuation Assumptions:
Expected volatility		63.5	%		41.8	%		38.6	%
Risk-free interest rate		1.8	%		2.9	%		4.6	%
Expected dividends	$	—		$	—		$	—
Expected term (in years)		3.4			3.6			3.5

We used the actual volatility for traded options for the past 10 years prior to option date as the expected volatility assumption required in the Black Scholes model.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on the history and expectation of dividend payouts. The estimated expected term is based on actual employee exercise activity for the past ten years.

As stock-based compensation expense recognized in the Consolidated Statement of Income in 2009 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

The following summary presents information regarding outstanding options as of December 31, 2009 and changes during 2009 with regard to options under all stock option plans:


						Weighted
				Weighted-		Remaining
				Average		Contractual
				Exercise		Term		Aggregate
	Shares			Price		(years)		Intrinsic Value
Outstanding at December 31, 2008		7,547,822		$	37.24
Granted		3,234,400		$	26.05
Exercised		(369,884	)	$	40.86
Cancelled		(156,356	)	$	29.79


Outstanding at December 31, 2009		10,255,982		$	34.19		7.30	$	134,531,875


Vested or expected to vest		9,930,867		$	34.19		7.30	$	130,267,214


Exercisable at December 31, 2009		5,308,465		$	33.14		6.05	$	70,499,357

As of December 31, 2009, total unrecognized compensation cost related to nonvested stock options was $40 million. This cost is expected to be recognized over a weighted-average period of two years. The total fair value of stock options vested in 2009, 2008 and 2007 was approximately $40 million, $43 million and $34 million, respectively. Cash received from option exercises for 2009, 2008 and 2007 was $8 million, $78 million and $91 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2 million, $46 million and $34 million for 2009, 2008 and 2007, respectively. Cash used to settle equity instruments granted under all share-based payment arrangements for 2009, 2008 and 2007 was not material for any period.

Restricted Shares

The Company issues restricted stock awards (“RSA”) with no exercise price to officers and key employees in addition to stock options. The Company granted 434,400 restricted shares valued at $25.96 to key employees on February 20, 2009. These shares will not vest until the third anniversary of the date of the grant, at which time they will be 100% vested. The Company also granted 309,000 performance-based restricted shares valued at $25.96 to senior management and officers on February 20, 2009. These shares will not vest until the third anniversary of the date of the grant, at which time they will be 100% vested, with a performance condition of the Company’s operating income level growth from January 1, 2009 to December 31, 2011 needing to exceed the median operating income level growth of a designated peer group over the same period. The estimated forfeiture rate of RSA’s is factored into the share-based compensation expense the Company recognizes.

The following summary presents information regarding outstanding restricted shares as of December 31, 2009, 2008 and 2007, and changes during 2009 and 2008:


				Weighted-Average
				Grant Date
Restricted Shares	Units			Fair Value
Nonvested at December 31, 2007		1,061,002		$	36.56
Granted		755,535		$	64.33
Vested		(307,905	)	$	68.12
Forfeited		(48,136	)	$	42.32


Nonvested at December 31, 2008		1,460,496		$	47.34

Granted		762,692		$	26.02
Vested		(7,322	)	$	36.05
Forfeited		(34,622	)	$	41.52


Nonvested at December 31, 2009		2,181,244		$	40.51

The weighted-average grant day fair value of RSA’s granted during the years ended 2009, 2008 and 2007 was $26.02, $64.16 and $37.06 (excluding RSA’s assumed in the Grant Prideco merger) per share, respectively. There were 7,322, 307,905 and nil RSA’s that vested during 2009, 2008 and 2007, respectively. As of December 31, 2009, there was $27 million of unrecognized compensation cost related to nonvested RSA’s, which is expected to be recognized over a weighted-average period of two years.

Income Taxes

12 Months Ended

Dec. 31, 2009

Income Taxes [Abstract]

Income Taxes

14. Income Taxes

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


	Years Ended December 31,
	2009		2008		2007
Domestic	$	761	$	1,577	$	1,244
Foreign		1,447		1,384		785

	$	2,208	$	2,961	$	2,029

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


	Years Ended December 31,
	2009			2008			2007
Current:
Federal	$	526		$	691		$	490
State		35			55			39
Foreign		348			280			136

Total current income tax provision		909			1,026			665


Deferred:
Federal		(249	)		(93	)		(66	)
State		(5	)		(2	)		(3	)
Foreign		80			62			80

Total deferred income tax provision		(174	)		(33	)		11


Total income tax provision	$	735		$	993		$	676

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 millions):


	Years Ended December 31,
	2009			2008			2007
Federal income tax at U.S. statutory rate	$	773		$	1,037		$	710
Foreign income tax rate differential		(120	)		(125	)		(66	)
State income tax, net of federal benefit		18			34			23
Nondeductible expenses		30			12			10
Tax benefit of manufacturing deduction		(17	)		(17	)		(11	)
Foreign dividends net of foreign tax credits		10			46			9
Change in deferred tax valuation allowance		—			—			3
Other		41			6			(2	)

Total income tax provision	$	735		$	993		$	676

Significant components of our deferred tax assets and liabilities were as follows (in millions):


	December 31,
	2009			2008			2007
Deferred tax assets:
Allowances and operating liabilities	$	343		$	364		$	152
Net operating loss carryforwards		7			6			8
Postretirement benefits		12			12			17
Capital loss carryforwards		—			3			7
Other		28			22			17

Total deferred tax assets		390			407			201

Valuation allowance for deferred tax assets		(8	)		(10	)		(14	)

		382			397			187


Deferred tax liabilities:
Tax over book depreciation		168			146			95
Intangible assets		1,413			1,542			218
Deferred income		363			215			166
Other		147			231			85

Total deferred tax liabilities		2,091			2,134			564


Net deferred tax liability	$	1,709		$	1,737		$	377

ASC Topic 740 “Income Taxes” (ASC Topic 740) prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a return. Under ASC Topic 740, the impact of an uncertain income tax position, in management’s opinion, on the income tax return must be recognized at the largest amount that is more-likely-than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has a less than 50% likelihood of being sustained. Additionally, ASC Topic 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure. The balance of unrecognized tax benefits at December 31, 2009 and 2008 are $58 million and $61 million, respectively. These unrecognized tax benefits, if recognized in future periods, would impact the Company’s effective tax rate. Included in the change in the balance of unrecognized tax benefits for the period ended December 31, 2009 was an increase of $10 million of unrecognized tax benefits associated with potential challenges to intercompany pricing and certain operating expenses that may not be deductible in foreign jurisdictions and a $13 million reduction in the balance of unrecognized tax benefits resulting primarily from the completion in the U.S. of prior year audits and appeals. This net decrease of $3 million in the balance of unrecognized tax benefits impacted the Company’s effective tax rate in the current year. These unrecognized tax benefits are included in the balance of Accrued Income Taxes in the balance sheet as of December 31, 2009.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):


	2009			2008			2007
Unrecognized tax benefit at beginning of year	$	61		$	47		$	55

Additions based on tax positions related to the current year		10			9			2
Additions for tax positions of prior years		—			9			1
Reductions for tax positions of prior years		(12	)		(4	)		(10	)
Settlements		—			—			(1	)
Reductions for lapse of applicable statutes of limitations		(1	)		—			—


Unrecognized tax benefit at end of year	$	58		$	61		$	47

The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within 12 months of this reporting date.

To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been classified as a component of income tax expense in the financial statements. This is an accounting policy election made by the Company that is a continuation of the Company’s historical policy and will continue to be consistently applied in the future. During the year ended December 31, 2009, the Company recognized $3 million of additional interest and penalties related to uncertain tax positions as part of income tax expense. As of December 31, 2009, the Company has accrued approximately $11 million of interest and penalties relating to unrecognized tax benefits. These interest and penalties are included in the balance of Accrued Income Taxes in the balance sheet as of December 31, 2009.

The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, Canada, the United Kingdom, the Netherlands and Norway. Tax years that remain subject to examination by major tax jurisdictions vary by legal entity, but are generally open in the U.S. for the tax years ending after 2005 and outside the U.S. for the tax years ending after 2003.

In the United States, the Company has $19 million of net operating loss carryforwards as of December 31, 2009, which expire at various dates through 2029. The potential benefit of $7 million has been recorded with a $7 million valuation allowance. Future income tax payments will be reduced when the Company ultimately realizes the benefit of these net operating losses. If the Company ultimately realizes the benefit of these net operating loss carryforwards, the valuation allowance of $7 million would reduce future income tax expense.

Also in the United States, the Company has $1 million of excess foreign tax credits as of December 31, 2009, which expire at various dates through 2017. These credits have been allotted a full valuation allowance and would be realized as a reduction of future income tax payments. If the Company ultimately realizes the benefit of these excess foreign tax credits, the valuation allowance of $1 million would reduce future income tax expense.

The deferred tax valuation allowance decreased $2 million for the period ending December 31, 2009 and was recorded as a decrease in deferred tax assets.

During 2008, the Company recorded $1,480 million in net deferred tax liabilities with a corresponding increase in goodwill related to Grant Prideco purchase accounting.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $2,764 million and $2,255 million at December 31, 2009 and 2008, 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 could result in either 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 $126 million would be payable upon remittance of all previously unremitted earnings at December 31, 2009.

Because of the number of tax jurisdictions in which the Company operates, its effective tax rate can fluctuate as operations and the local country tax rates fluctuate. The Company is also subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, we believe that none of these matters will have a material adverse effect on the results of operations or financial condition of the Company.

Business Segments and Geographic Areas

12 Months Ended

Dec. 31, 2009

Business Segments and Geographic Areas [Abstract]

Business Segments and Geographic Areas

15. Business Segments and Geographic Areas

The Company’s operations consist of three reportable segments: Rig Technology, Petroleum Services & Supplies and Distribution Services.

Rig Technology: Our Rig Technology segment designs, manufactures, sells and services complete systems for the drilling, completion, and servicing of oil and gas wells. The segment offers a comprehensive line of highly-engineered equipment that automates complex well construction and management operations, such as offshore and onshore drilling rigs; derricks; pipe lifting, racking, rotating and assembly systems; rig instrumentation systems; coiled tubing equipment and pressure pumping units; well workover rigs; wireline winches; and cranes.

Petroleum Services & Supplies: Our Petroleum Services & Supplies segment provides a variety of consumable goods and services used to drill, complete, remediate and workover oil and gas wells and service flowlines and other oilfield tubular goods. The segment manufactures, rents and sells a variety of products and equipment used to perform drilling operations, including drill pipe, transfer pumps, solids control systems, drilling motors, drill bits, reamers and other downhole tools, and mud pump consumables.

Distribution Services: Our Distribution Services segment provides maintenance, repair and operating supplies and spare parts to drill site and production locations worldwide. In addition to its comprehensive network of field locations supporting land drilling operations throughout North America, the segment supports major offshore drilling contractors through locations in Mexico, the Middle East, Europe, Southeast Asia and South America. Distribution Services employs advanced information technologies to provide complete procurement, inventory management and logistics services to its customers around the globe.

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. During the second quarter of 2008, certain products previously reported in the Petroleum Services & Supplies segment were transferred to the Company’s other two segments, due to a realignment of management responsibilities. Prior periods have not been restated for this change as the impact of the change was not material to any of the Company’s segments.

The Company had revenues of 16.6% of total revenue from one of its customers for the year ended December 31, 2009. This customer is a shipyard acting as a general contractor for its customers, who are drillship owners and drilling contractors. This shipyard’s customers have specified that the Company’s drilling equipment be installed on their drillships and have required the shipyard to issue contracts to the Company.

Geographic Areas:

The following table presents consolidated revenues by country based on sales destination of the use of the products or services (in millions):


	Years Ended December 31,
	2009		2008		2007
United States	$	3,444	$	4,369	$	3,983
South Korea		2,830		291		—
Singapore		801		856		562
Norway		629		603		677
United Kingdom		578		497		348
Canada		550		751		619
Other Countries		3,880		6,064		3,600

Total	$	12,712	$	13,431	$	9,789

The following table presents long-lived assets by country based on the location (in millions):


	December 31,
	2009		2008
United States	$	1,082	$	1,050
Canada		116		107
Norway		41		44
United Kingdom		110		89
Other Countries		487		387

Total	$	1,836	$	1,677

Business Segments:


			Petroleum
	Rig		Services &		Distribution		Unallocated/
	Technology		Supplies		Services		Eliminations			Total
December 31, 2009
Revenues	$	8,093	$	3,745	$	1,350	$	(476	)	$	12,712
Operating profit		2,283		301		50		(319	)		2,315
Capital expenditures		61		161		3		25			250
Depreciation and amortization		90		374		8		18			490
Goodwill		1,567		3,855		67		—			5,489
Total assets		7,203		11,601		781		1,947			21,532

December 31, 2008
Revenues	$	7,528	$	4,651	$	1,772	$	(520	)	$	13,431
Operating profit		1,970		1,044		130		(226	)		2,918
Capital expenditures		79		272		4		24			379
Depreciation and amortization		90		290		9		13			402
Goodwill		1,458		3,705		62		—			5,225
Total assets		9,048		11,153		650		628			21,479

December 31, 2007
Revenues	$	5,745	$	3,061	$	1,424	$	(441	)	$	9,789
Operating profit		1,394		732		94		(176	)		2,044
Capital expenditures		64		160		6		22			252
Depreciation and amortization		54		148		5		7			214
Goodwill		1,231		1,175		39		—			2,445
Total assets		7,097		3,965		652		401			12,115

The Company’s 2008 financial statements include Grant Prideco from April 21, 2008, the Merger Date, which includes additional amortization and depreciation of $114 million from the step up to fair market value of Grant Prideco’s assets and liabilities for the year ended December 31, 2008. The Grant Prideco product lines are reported within the Petroleum Services & Supplies segment.

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2009

Quarterly Financial Data (Unaudited) [Abstract]

Quarterly Financial Data (Unaudited)

16. Quarterly Financial Data (Unaudited)

Summarized quarterly results, were as follows (in millions, except per share data). The 2008 results include Grant Prideco operations from the Merger Date:


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Year ended December 31, 2009
Revenues	$	3,481	$	3,010	$	3,087	$	3,134
Gross profit		1,039		875		891		979
Net income attributable to Company		470		220		385		394
Net income attributable to Company per basic share		1.13		0.53		0.93		0.95
Net income attributable to Company per diluted share		1.13		0.53		0.92		0.94
Cash dividends per share		—		—		—		1.10

Year ended December 31, 2008
Revenues	$	2,685	$	3,325	$	3,611	$	3,810
Gross profit		797		981		1,100		1,194
Net income attributable to Company		398		421		548		585
Net income attributable to Company per basic share		1.12		1.05		1.32		1.41
Net income attributable to Company per diluted share		1.11		1.04		1.31		1.40
Cash dividends per share		—		—		—		—

Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2009

Valuation and Qualifying Accounts [Abstract]

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II
NATIONAL OILWELL VARCO, INC.
VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2009, 2008 and 2007
(in millions)


			Additions
			(Deductions)
	Balance		charged to		Charge			Balance
	beginning		costs and		off’s and			end of
	of year		expenses		other			year
Allowance for doubtful accounts:
2009	$	73	$	53	$	(31	)	$	95
2008		45		25		3			73
2007		30		16		(1	)		45

Allowance for excess and obsolete inventories:
2009	$	123	$	100	$	(17	)	$	206
2008		99		27		(3	)		123
2007		86		34		(21	)		99

Valuation allowance for deferred tax assets:
2009	$	10	$	—	$	(2	)	$	8
2008		14		—		(4	)		10
2007		7		3		4			14

Warranty reserve:
2009	$	114	$	144	$	(41	)	$	217
2008		92		81		(59	)		114
2007		57		78		(43	)		92