Businessmodel of National Oilwell Varco

Customer Segments

NOV provides a broad range of services to customers across the oil and gas industry. The Company’s customers can be organised into groups according to the Company’s operating segments and services provided. This includes:

• Rig Systems and Rig Aftermarket Customers, which principally comprise multinational, national, and independent oil and gas companies that are engaged in land and offshore drilling operations;
• Wellbore Technologies Customers, which principally comprises full-service oil and gas companies, drilling contractors, oilfield service companies, and oilfield equipment rental companies; and
• Completion and Production Solutions Customers, which comprises oilfield service companies, and full-service oil and gas companies. NOV serves an international customer base. It largest market remains the US, which account for the largest portion of its sales, followed by South Korea, China, Singapore, the UK, Brazil, Norway, and Canada. The Company serves customers in other markets across the Americas, Asia Pacific, the Middle East, and Africa.

Value Propositions

NOV provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company recognised as a reliable and effective provider of products to the oil and gas sector, having established a positive track record over many years in operations;
• Its international operational reach, with the Company providing abroad range of products and services to customers across the Americas, Europe, Asia Pacific, the Middle East, and Africa;
• Its commitment to innovation, with the Company dedicating significant fund to research and development activity, and having a tradition of pioneering innovations which improve the cost-effectiveness, efficiency, safety and environmental impact of oil and gas operations;
• Its extensive manufacturing infrastructure, with the Company owning and operating a network of manufacturing, machining, welding and fabrication, heat treating, and assembly facilities across the world, enabling it to serve customers quickly and efficiently; and
• Its industry expertise and experience, with the Company employing specialist personnel across its four operating segments, as well as a team of experienced industry executives. ### Channels

NOV operates a website at www.nov.com, through which it provides information on its various products, services, and locations. The Company also operates an online customer portal under the name MyNOV, which allows customers to access technical information, tools, and production specific applications.

NOV’s Rig Systems capital equipment and Rig Aftermarket spare parts sales, and a large portion of its smaller pumps and parts sales, are made through the Company’s own in-house direct sales force, which operates out of the Company’s offices across its various operating regions. The Company’s Wellbore Technologies and Completion and Production Solutions segments rent and sell products and services worldwide through their own dedicated sales force and through commissioned representatives. The Company’s sales in and to foreign jurisdictions are often made through joint ventures, license arrangements, and other business agreements with local nationals.

NOV also operates its own manufacturing and distribution infrastructure. This includes a network of machining, welding and fabrication, heat treating, assembly, testing, and distribution and service centre facilities, based principally in the US, South Korea, the UK, Singapore, Dubai, Mexico, Brazil, and Malaysia.

Customer Relationships

NOV provides a range of tools and resources to its customers on a self-service basis through its MyNOV customer portal. This channel enables customers to use various applications, and access technical information and tools without interacting with members of NOV’s sales and service teams.

NOV’s sales teams, which are organised by segment and geographic region, work closely with customers to ascertain their specific individual needs and circumstances. The Company seeks to establish long-term relationship with its customers, providing support through dedicated customer relationship and support personnel.

NOV provides ongoing customer support to its customers, who are able to access personalised assistance over the phone and online. The Company also provides various online resources, such as news articles, as well as information on its upcoming events, where it can interact with customers in-person. Additionally, NOV operates social media accounts with Facebook, LinkedIn, Twitter, YouTube, and Instagram, through which it is able to interact with clients directly.

Key Activities

NOV is engaged in the design, manufacture and sale of equipment and components used in oil and gas drilling, completion and production operations.

The Company aligns its activities into four business segments: Rig Systems, which manufactures and maintains equipment and integrated systems used in drilling oil and gas wells on land and offshore; Rig Aftermarket, which provides a range of aftermarket products and services to support land and offshore rigs; Wellbore Technologies, which sells and rents solids control equipment, and provides solids control, waste management and drilling fluids services; and Completion and Production Solutions, which provides technologies for well completions and oil and gas production.

NOV additionally provides certain oilfield services to customers in the upstream oil and gas industry. The Company operates globally, serving customers primarily across the Americas, Asia Pacific, and Europe.

Key Partners

NOV works closely with a network of partner companies and organisations across its manufacturing and distribution operations. These partnerships can be categorised broadly as:

• Supplier and Procurement Partners, comprising suppliers of raw materials, tools, and equipment that support the Company’s manufacturing operations, as well as suppliers of services and technologies that are utilised more broadly across the Company’s four operating segments;
• Channel and Distribution Partners, comprising the Company’s network of license partners, distributors, and independent sales representatives that extend the Company’s sales and marketing reach, and facilitate business in foreign jurisdictions;
• Joint Venture Partners, comprising various manufacturing and distribution companies within the oil and gas sector, with which the Company jointly produces and distributes products through mutually owned entities; and
• Strategic and Alliance Partners, comprising companies from multiple business sectors, with which the Company shares resources and collaborates on joint projects. NOV has a number of partnerships in place. This includes a tie-up with GE Oil and Gas to provide integrated solutions for floating production storage and offloading projects, and a deal with Global Industrial Water to market innovative technology products.

Key Resources

NOV’s key resources are its technologies and intellectual properties, its materials and supply chain, its manufacturing and other industrial facilities, its IT and communications infrastructure, its sales and distribution networks, its partnerships, and its personnel.

NOV owns a number owns a substantial number of US and foreign patents that are utilised in the manufacture of its products. Searches of records published by the US Patent and Trademark Office identified numerous patent applications filed in NOV’s name, including applications entitled ‘Radial valves and pumps including radial valves’, ‘System and method for controlling a downhole tool’ and ‘Rotary steerable push-the-bit drilling apparatus with self-cleaning fluid filter’.

NOV owns and or leases approximately 835 facilities worldwide, including its key manufacturing, service, distribution and administrative facilities across the US, South Korea, Singapore, the UK, Mexico, the United Arab Emirates, Denmark, Brazil, and Malaysia.

Cost Structure

NOV incurs costs in relation to the development of its products and technologies, the procurement of supplies and materials, the operation of its manufacturing facilities, the maintenance of its IT and communications infrastructure, the operation of its sales and distribution channels, the implementation of advertising and marketing campaigns, the management of its partnerships, and the retention of its employees.

In 2015 NOV recorded total cost of revenue in the amount of $11.69 billion, comprising $9.36 billion in cost of sales and $2.33 in cost of services. The Company accrued selling, general, and administrative costs – including the payment of salaries and benefits to its international workforce of 50,197 employees – totalling $1.76 billion for the year.

Revenue Streams

NOV generates revenue through the manufacture, marketing, and sale of various products and services related to oil and gas drilling projects around the world. The Company’s products include pressure pumping trucks and pumps, blenders, sanders, hydration units, injection units, flowline, and manifolds and wellheads.

In 2015 NOV generated annual total revenue of $14.76 billion, down considerably on the $21.44 billion recorded by the Company in 2014. This 31% drop in revenue was attributed to declining oil and gas prices resulting in reduced drilling activity and demand for oilfield equipment and services. The Company’s largest revenue generator was its Rig Systems segment, which alone recorded revenue for the year of $6.96 billion. This Company’s Wellbore Technologies, Completion and Production Solutions, and Rig Aftermarket segments recorded revenue of $3.72 billion, $3.37 billion, and $2.52 billion respectively.