INITIATING COVERAGE REPORT

William C. Dunkelberg Owl Fund

April 30, 2014

Michael Kollar: Lead Analyst
mkollar@theowlfund.com
Maxime Berin: Associate Analyst
mberin@theowlfund.com
Shady Botros: Associate Analyst
sbotros@theowlfund.com

COMPANY OVERVIEW

NOV is an oil & gas equipment & service company that
provides a cornucopia of diversified and comprehensive
products to the upstream energy sector. NOVs three revenue
segments are: Rig Technology (48.6% of FY2013 sales);
Petroleum Services & Supplies (30%); and Distribution &
Transmission (21.4%). NOV has 64,000 employees who
operate more than 800 manufacturing and sales centers across
the globe. NOV is truly diversified geographically with revenue
generated from the United States (35% of FY2013 sales),
Other (20.9%), South Korea (14.1%), Singapore (8.1%),
Canada (6.1%), Norway (4.8%), China (4.4%), Brazil (3.5%),
and the UK (3.1%).
INVESTMENT THESIS

While NOVs EV/EBITDA multiple historically trades at an
average discount of 9.4% to the index of its peers on a three-
year basis. This discount has recently expanded to ~20%
because of: 1) Declining margins across its revenue segments;
2) Investors awaiting the completion of the spin-off of NOVs
Distribution & transmission segment; and 3) draconian market
reaction to its recent earnings announcement and
accompanying guidance for short-term decline in rig
technology backlog, which sent shares down 7.4% on the day.
This pull-back provides the Owl Fund with an attractive entry
point to invest in NOV, the largest and most experienced
equipment provider to the Oil & Gas industry. NOV
maintains a wide economic moat derived through brand equity,
economies of scale and scope across the energy sector value
chain, and a successful M&A track record. As an Equipment &
Service provider, NOV earns its revenue free from direct
commodity price volatility and possesses long-term industry
tailwinds in global deepwater E&P spending and shale gas
development. NOV will witness modest multiple expansion in
the short-term as the spin-off of its Distribution &
Transmission segment focuses NOV into a higher margin
business overall and the company distributes cash raised to
shareholders. NOV also expects to realize the first revenues
from its flexible plant in Brazil in 2Q2014 which had seen
challenges becoming operational. Based on the
aforementioned catalysts, NOV provides exceptional value and
opportunity for the Owl Fund. We rate the company a strong
Buy with a price target of $92.73 indicating a 18.7% return.








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National Oilwell Varco
Exchange: NYSE Ticker: NOV Target Price: $92.73 Current Price: $78.11

Sector Outperform
Recommendation: BUY





All prices current at end of previous trading sessions from date of
report. Data is sourced from local exchanges via CapIQ,
Bloomberg and other vendors. The William C. Dunkelberg Owl
Fund does and seeks to do business with companies covered in its
research reports.

Key Statistics
Price Projected $92.73 52 wk High $84.71
Return 19% 52 wk Low $63.25
Shares O/S (mm) 429 Yield 1.30%
Market Cap (mm) $33,155 EV (mm) 32,711 $
P/E 13.3 Beta 2.06
Date EPS NI YOY NI Surp Price
2Q2013 $ 1.33 -9% 0.1% -2.5%
3Q2013 $ 1.34 -12% 2.1% 4.5%
4Q2013 $ 1.56 5% 12.3% 1.9%
1Q2014 $ 1.40 9% 0.7% -7.4%
Earnings History
$-
$2.00
$4.00
$6.00
$8.00
2010 2011 2012 2013 2014 2015
Diluted EPS & Consensus
1Q 2Q 3Q 4Q Year
Period 2010 2011 2012 2013 2014 2015
1Q $ 1.10 $ 1.00 $ 1.44 $ 1.29 $ 1.40 $ 1.63
2Q $ 0.97 $ 1.14 $ 1.46 $ 1.33 $ 1.47 $ 1.67
3Q $ 0.97 $ 1.26 $ 1.52 $ 1.34 $ 1.57 $ 1.77
4Q $ 1.05 $ 1.37 $ 1.49 $ 1.56 $ 1.68 $ 1.86
Year $ 4.09 $ 4.77 $ 5.91 $ 5.52 $ 6.12 $ 6.93
Earnings Per Share ( $) for Fiscal Year Ending Dec.

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CATALYSTS

Presently, NOV is in a transformational time in its history. The
company has been battling short-term headwinds while juggling the
restructuring of its business into new reporting segments, integrating
past acquisitions, and completing a spin-off. Investors are ripe with
uncertainty, but with many growth prospects, industry-leading
management, and long-term growth prospects, we feel there is no
better time to enter into a position in this undervalued stock. Below
is a synopsis of catalysts which will drive NOV to its fair value.

Rig Technology Margin Expansion
NOVs rig technology segment is the highest operating margin
segment (24-25%) which includes both offshore and onshore
equipment. Margins, however, have been compressed by a storm of
factors including: less favorable product mix, absence of learning
effect efficiency from the launch of new rig floor layouts, a
congested supply chain from a bloated backlog, poor pricing within
the backlog, and other related marginal cost increases. These factors
caused margins to compress precipitously from 26% in 2011, to
21.1% as of 1Q2014. While it has taken considerable time and effort
to correct this downtrend, NOV will see steadily increasing margins
through the remainder of FY2014 to a level of ~24% by the exit of
FY2015. Key drivers to margin increase is the return to a more
favorable product mix thanks to returning onshore demand, an
alleviating backlog, fruition of past capacity expansions, and the
return of learning effect.

Distribution Segment Spin-Off
NOV announced the spin-off of 85% of its Distribution &
Transmission segment which is expected to be $4.5 billion of the
current business. This spin-off will unlock value for shareholders in
a multitude of ways.
Higher Margins Overall: By spinning off the lower margin
(4.8% operating margin in FY2013) distribution segment, NOV
will realize immediate higher margins overall, aligning it more
closely with the higher valuations of its pure equipment
manufacturing peers.
Refocusing on Core Competencies: NOV believes this
business has enough legs to run on its own and by focusing on
its core equipment and services business it can realize financial
and operational improvements more quickly.
M&A Activity / Cash Return: This spin-off will yield
immediate cash flow to NOV which can be deployed to the
benefit of shareholders either through capital return or growth.
NOVs Board of Directors believes investing in future returns
of the business is paramount which is indicative of NOVs
acquisitive nature (27 acquisitions since 2009). Management and
IR have both guided that NOV paused M&A activity after its
$2.4B acquisition of Robbins & Myers in 2012 and has since
fully digested its integration. NOV is currently seeking new
deals which will differentiate its product offering or improve its
cost structure. Concerning returns to shareholders, the company
favors dividend increases over buybacks. NOV increased its
dividend 100% in May of 2013 to its present yield of 1.3%,
representing a dividend payout ratio of merely 16.7%, leaving
ECONOMIC MOAT
Summary: NOV has a wide economic moat
Brand Equity: NOV has been an industry
leader for over 140 years. Its name commands
significant brand name recognition and a great
reputation. Its products serve as benchmark for
other providers.
Depth of Installment Base: Due to NOVs
dominant market share, it has many legacy
products out on the market which require
routine maintenance and workover. As more
products are sold, NOV grows its recurring
revenue base more than its smaller competitors.
Customers incur higher switching costs because
maintenance is contracted by NOV upon
purchase.
Scale: NOV has a dominant market share and
its products can be found in 90% of the worlds
deepwater rigs. This scale was achieved when
NOV moved the drilling industry to accept
more standard rig designs. As NOV build more
new design rigs, it will again realize learning
curve effects, similar to

RISKS
E&P Capital Spending: National and
International oil company spending in
deepwater and unconventional shale plays
impacts their spending on capital equipment.
Contract Driller Day Rates: Supply &
demand forces in the contract drilling space has
a lagging impact on demand for NOVs rig
technology segments, particularly in new builds.
M&A Risk: Despite its track record of moving
efficiently through M&A processes, NOV runs
the risk of overpaying for future acquisitions or
failing to integrate legacy infrastructure in a
timely fashion.
Commodity Price Volatility: Although
indirectly affected by commodity price changes,
NOV remains susceptible to major swings in oil
commodity markets.

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NOV ample running room to distribute FCF to shareholders while also growing the business.

Brazil Flexibles Plant Completion
NOV made its largest capital expenditure ever in the building of a flexible plant in Brazil, which is expected to come
online in 2Q2014. This new plant will add capacity to NOVs Petroleum Service & Supply segment, boosting revenue
and margins. NOV is capitalizing on the explosion of drilling activity in South America, particulary in Brazil and
Argentina. The plants location in Brazil will allow NOV to get its flexible products to market faster, reduce shipping
costs, and be more responsive to shifting supply and demand forces in the area.

BUSINESS SEGMENTS
Rig technology: (48% of the revenue, 60.8% operating income)
This segment generated more than $11.7B in revenue for the FY 2013 which represents a 16% increase on a YOY scale.
The rig technology segment designs, manufactures, sells and services systems for the drilling, completion and servicing
of oil and gas wells. Most of the products result from a high-engineered work which automates productions. The
demand from this segment is mainly driven by the capital spending of the drilling contractors, oilfield service companies
and oil & gas companies. NOV has made strategic acquisition in this domain in order to enlarge its product portfolio
and its geographic expansion as well.
Petroleum Services & Supplies (30% of the revenue. 32.4% operating income)
This segment generated more than $11.7B in revenues during the FY 2013 which is an increase of 3% on a YOY scale.
This segment provides different consumable goods and services used in oil & gas wells. This segment manufactures
rents and sells different equipment used to achieve drilling operations. Demand from this segment is directly linked by
the level of oilfield drilling activity in the whole industry.
Distribution & Transmission (22% of the revenue, 6.8% operating income)
This segment generated more than $5.1B in revenue which represents a 30% increase from 2012. This segment provides
pipe, maintenance and repair for onshore and offshore drilling locations, pipeline operations and industrial sites.
Demand for this segment is linked to the level of drilling, servicing, and oil & gas production activities. In a same way,
this segment is influenced by the US economy as well as government regulations and policies.

INDUSTRY OVERVIEW

NOV, or No Other Vendor, has been a dominant player in the oil & gas equipment &services business for over 140
years. 90% of the worlds onshore and offshore rigs have a piece of NOV equipment onboard and NOVs growing
installed base of products provides its economic moat of high switching costs for customers. NOV superior products
and global presence allows them to produce and service its products anywhere in the world.

Offshore Themes
NOV manufactures offshore drilling rigs capable of drilling for oil at a variety of depths and mostly fall into
one of three categories: jack-ups, floaters, and drill ships. Each are used to drill for oil at different depths and
in different scenarios depending on the reserves location.

Worldwide Jack-up Fleet Aging
Overall, the jack-up rig fleet is aging, with 68% of the fleet over twenty years old. More and more drilling
operators are retiring these aging rigs in favor for newer, more technically advanced rigs. These newer rigs
drill oil more efficiently, require less maintenance, utilize more automation, and are above all, safer. As a
result, newer rigs garner higher day rates, which is imperative in the current high-supply rig environment.
Simply put, newer rigs have contracts and older do not. Operators with older fleets see their rigs go un-

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contracted and they are forced to stack them, or take them offline as to avoid burning through cash
keeping them online without cash flow. NOV delivers about 50 jack-ups to the market each year as this
tailwind sends them more business.

Deep and Ultra-Deepwater is the Future
E&P companies target and develop reserves providing the lowest marginal cost barrel of oil. As a result,
shallower more easily accessible reserves are developed and depleted before deep, more expensive to develop
reserves are produced. As fewer shallow reserves remain, and oil prices are above $80/barrel, more
unconventional deepwater reserves are economic to produce. These deepwater plays cannot be accessed by
jack-ups and can only be tapped by floaters or highly sophisticated rigs that float at the oceans surface and
remain in position using global positioning systems. These highly advanced rigs are very expensive and also
provide higher margins for manufacturers like NOV. A key trend supporting NOV in the long-term is the
build-out of national and international oil companys deepwater fleets.

Onshore Themes

Proliferation of Shales
Recent technological advancements have led to a natural gas boom in the United States and across the globe as E&Ps
can extract unconventional oil & gas economically. NOV markets a diversified product mix of onshore rigs, drill bits,
top drives, coil tubing, downhole tools, flexible pipes, and all other necessary components to extract oil & gas. NOVs
products are heavily used in E&P companys multi-stage hydraulic fracturing operations throughout the world. Natural
gas drilling has shifted to a 24/7/365 activity which is seen in increasing levels of utilization. As more wells are drilled ,
average footage drilled per well is increased, and equipment is worked harder, NOV sees more business in its onshore
newbuild, workover, and consumables business segments.


ACQUISITIONS

NOV is a highly acquisitive company having made 27 acquisitions since 2009. NOVs most notable acquisition was
made in August of 2012 when they acquired Robbins & Myers. The deal was worth $2.4 billion and was NOVs largest
acquisition of all time. NOV used $1.1 billion in cash to pay for the acquisition, and borrowed approximately $1.4 billion
under the $3.5 billion revolving credit facility. Prior to the Robbins & Myers acquisition, NOV held very low debt levels.
Robbins & Myers stood as a leading supplier of engineered, application-critical equipment and systems in global energy,
chemical and other industrial markets. NOV acquired Robbins & Myers in an attempt to expand its product offerings
and customer base. Earlier in 2012, NOV also acquired Wilson International for $800 million, NOV plans to use Wilson
International as the distribution arm of its business.
The acquisition of Wilson International, Robbins &
Myers, and CE Franklin led to a 30% increase in
revenue for NOVs distribution and transmission
segment. NOV expects to fund future cash
acquisitions primarily with cash flow from
operations and borrowings, including the un-
borrowed portion of the revolving credit facility or
new debt issuances; however NOV may also issue
additional equity either directly or in connection
with acquisitions. The table on the right shows
NOVs most significant acquisitions.




Company Date Deal Value ($ mil) EV/Net Sales
Robbins & Myers 2012 $2,435 2.39
Wilson International 2012 $800 N/A
NKT Flexibles 2012 $672 141.79
CE Franklin LTD 2012 $213 0.39
Ameron International Corp 2011 $640 1.28
Scomi Oiltools-Certain Assets 2011 $25 N/A
Advanced Production & Loading 2010 $431 N/A
Prosafe PLC-Turret, Swivel 2010 $165 N/A
Amber Lone Star Fluid Svcs LLC 2010 $48 N/A
Hochang Machinery Ind Co LTD 2009 $160 N/A
NOV M&A

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FINANCIALS

Revenue
In FY2013, NOV earned total revenue of $22.9B (3-year
CAGR 23.5%). Most revenue (48.6%) was earned by NOVs
Rig Technology segment. This segment grew 16% YOY in
FY2013 (That segment has been strongly supported by major
capital expenditures accomplished through the cash flow
generated by contractors and services from drilling activities,
completion, increase in rigs construction and recent update of
old equipment by major oil companies. The segment also
experienced an increase in its backlog revenue by 14% YOY.
The aftermarket segment mainly composes non-backlog,
workover revenue increased by 15% YOY compare to 2012. In 2013, the acquisition of Robbins & Myers definitely
helped to increase the revenue of the Rig Technology segment. Moving forward, NOV closed four orders deep-water
floating rig equipment packages, and twenty five drilling equipment packages for jack-up rigs which contributed $3.6B
during the 4Q2013. NOV expects long term future revenue growth for offshore rig construction as E&P build out their
deepwater fleets. Additionally, after NOV completes its spin-off, the company will realize be able to drive growth in key
markets such as China, Russia, Mexico, Argentina, and Canada given the distribution businesses greater reach.
For the Petroleum Services and Supplies the slight increase of 3% in revenue on a YOY scale has been allowed thanks to
the drilling and completions activities in Canada which overall off-set the cyclical slow-down in the US. Thanks to this
increase in demand from Canada, NOV has been able to expand itself by 1% in this segment. However, oversupply in
the United States combined with a flat rig count contributed flat demand for drill pipe as well as downhole tools.
Finally,the international segment experienced the biggest increase in revenue by 18% due to large year-end projects
shipments where the international rig count increased by 5% YOY.
The distribution & transmission segment experienced 30% growth . This increase is the result of the Wilson acquisition
which occurred during the 2
nd
Q of 2012 followed by the acquisition of Franklin in the 3
rd
Q 2012. However, the US
segment decreased by 8% YOY due to bad weather conditions which caused fewer billing days available in the 4thQ
2013.

Backlog - a Glimpse into the Future
NOVs backlog currently stands at a record high $16.3B, growing at a 5-year CAGR of 20%, with 93% allocated to
offshore equipment and 94% destined for international markets. NOVs backlog only comprises rig technology capital
equipment orders of $250,000 or more and these orders also require a down payment. As mentioned above, NOVs rig
technology sector constructs jack-ups, floaters, and other offshore rigs, along with other long-term projects which
require +2 years to complete depending on levels of customization, learning curve effect of skilled workers, and supply
chain efficiencies. As new orders are received, they are moved into a queue. This queue is moved into work in progress
and as orders are completed they are billed and recognized as revenue. As NOVs backlog serves as a leading indicator
of guaranteed future revenue, the market pays close attention to not only its value, but its growth. Slowing backlog
growth can be an indicator of softening demand for a manufacturer, yet there is some devil in this statistics details. Too
large of a backlog can impact a companys supply chain and increase marginal costs. NOVs huge backlog was
detrimental to margins in the near term.



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Book-to-Bill Ratio
The Book-to-bill ratio is an industry-specific
ratio expressed as # of incoming orders to
backlog : # of completed orders exiting
the backlog. Aside from monitoring backlog
value on an absolute basis, this ratio values it
on a relative basis, with a ratio less than one
indicating shrinking backlog and a ratio
greater than one indicating a growing
backlog.
EBITDA

Since FY2010, NOVs EBITDA has been growing
at a CAGR of 21% until FY2012. Since then,
EBITDA has stayed flat at $4.25B. NOV is expected
to reach an EBITDA level of $5.2B in 2015 which
will represent 20% growth during the period. This
impressive growth will be the result of a resurgence
in onshore demand for rigs and consumables, as well
as expected EBITDA from future acquisitions.

Margins

NOV currently maintains a 24% gross margin for 2013 and an 18.5% EBITDA margin, and a 10.3% net income margin
for the first quarter of 2014. Our DCF model projects a gross margin expansion leaving the gross margin at 25% and a
19.5% EBITDA margin. This is indicative of the completed spin-off of its distribution segment. NOVs rig technology
margins have steadily declined since mid-2010 due to an adverse mix shift in the segment, lower-margin acquisitions, and
taking on additional expenses in order to support several strategic growth initiatives. The adverse mix shift was a result
of offshore contracts contracted at higher prices in 2007 and 2008 which were then completed in low cost environments
in 2009 and 2010. As these projects have reached completion and been replaced with lower priced projects, rig
technology margins have experienced a steady decline. NOV has moved through the lower-margined segment of its
backlog and will recognize higher margins going forward in FY2014. Margins will NOVs petroleum services segment
experienced increased revenue of $155 million operating profit of $23 million YoY in 2013 despite flat demand, as a
result pricing pressure and under absorbed facilities continued to pressure margins. Overall, as commodity prices rise
and drilling activity increases in North America and internationally, NOVs margins should rebound. Orders for new
deep-water drilling rigs have steadily risen and the rig technology segment continues to enjoy high day rates for offshore
rigs. Despite the positive outlook, NOVs
margins may have difficulty expanding
beyond current levels due to due to lower-
margin contributions from recent subsea
production equipment acquisitions, a bearish
outlook for land drilling, workover and
pressure pumping equipment markets in
North America. Low gas and natural gas
liquids prices as well as higher costs of
execution due to significantly compressed

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project timelines may also hurt margins. A steady flow through of lower priced projects and incremental expenses to
support long-term strategic growth initiatives will also contribute to margin stagnation.
Earnings

NOV recently reported earnings, with a Q1 EPS figure of $1.40, two cents above analyst estimates. NOV posted
quarterly revenue results of $5.78 billion missing the consensus estimate of $5.8 billion. The revenue figure translates to
a 6% decrease quarter over quarter. Despite the miss on revenue, the company saw backlog for capital equipment orders
for its Rig Technology segment at March 31, 2014 reach an all-time record of $16.35 billion, a one percent increase
from the 4Q 2013, and 27% from the previous years same quarter. New Rig Technology orders during the quarter were
$2.33 billion further showing the strong demand for oilfield equipment and NOVs dominant position in the market.
Dividend


NOV has been consitently paying dividends to its shareholders for the past 10 years. In the previous quarter, NOV
announced a strong dividend on February 27, 2014 of $0.26/share. That is a 100% increase relative to its previous years
dividends. The strong dividend increase can be attributed to NOVs ongoing and accomplished investment in different
technologies, new products and facilities. However, investors must ask, can NOV sustain this increase in dividends.
NOV has been able to generate a strong cash flow which can cover both dividend payments as well as capital
requirements. By the end of the FY 2013, NOVs operating cash flow was $3.3B, however dividends were only $389M
and Capex was $669 million. NOV is only paying a mere 16.7% of its net income in dividends. Moving forward, the
spin-off from its distribution and transmission segment will help NOV focus on its two main other segments. Through
recent acquisitions and investments the company faces solid financial health; the strong dividend growth is certainly
repeatable. As NOV prefers to return cash to shareholders in the form of dividend increases, it typically does not do
initiate share repurchases.
Debt

Total Debt: $4.78 Billion Debt to Equity: 14.17% Interest Coverage Ratio: 30.8








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At the end of the FY 2013, NOV had accumulated a total debt of $3,149M vs. $3,148M in 2012. Looking back even
further one can see that the total debt increased significantly going from $159 million in 2011 to $3,149M today. This
significant increase can be explained by the fact that NOV has made several strategic acquisitions since 2012 as well as
new technologic developments. The current debt-to-equity ratio is 14.17%, below the industry average. NOV has also
been able to keep sustain a quick ratio of 1.04 meaning that the company will have no problems meeting its short term
obligations.
Free Cash Flow

NOVs free cash flow reaches $2.7B which provides the company a stablity and security to cover the dividend payments.
NOVs free cash flow has significantly increased since June 2013 going from $40M to $2.7B, this translates to an
increase of 6650% in a period of less than a year. This increase has been made possible due to new record highs in the
change in inventory as inventory increasing by 943% going from -$492 million between 2012 and 2013, reaching
approximately $500 million. Moving forward free cash flow is expected to slightly decrease during the FY2014 and is
expected to rebound in FY2015 to reach almost $3B.
The decrease in 2012 can be attributed to a decrease in
cash from operating activities. NOV saw its accounts
receivable decrease by more than 100% going from -
$474M in 2011 to -$1149M in 2012 as well as its change in
inventories which decreased by 100% going from -$591M
in 2011 to -$1061M in 2012 and change in Inc. Taxes
which decreased by 244% going from $283M in 2011 to -
$409 in 2013.
NOV has already recovered from this decrease and is expected to move higher in 2015 due to its spin-off and its
backlog orders which will help the company elevate its margins.





















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PEER GROUP IDENTIFICATION
This peer group includes the other members of
the S&P 500 Oil & Gas Equipment & Services index
which were chosen based on related business operations
and geographic distribution.
Baker Hughes Inc. (NYSE: BHI)
Cameron International Corp. (NYSE: CAM)
FMC Technologies Inc. (NYSE: FTI)
Halliburton Co. (NYSE: HAL)
TARGET PRICE
After deriving price targets using historical average
valuation ($92.73), implied relative valuation ($95.32), and
DCF valuation (EM: $93.16; GP: $93.82), we opted for
the most conservative of our results: Historical Valuation.
Historical Average Target Price = $92.73
Target Multiple EV/EBITDA = 8.0x
NTM Consensus EBITDA = $4,903mm
Projected Capital Return: 18.7%

VALUATION


UNDERVALUATION

On a 3-year EV/EBITDA basis, NOV has deviated below where it normally trades on a historical average and relative
to its peer group. Given NOVs pending D&T segment spin-off and expected cash return to shareholders, strong
earnings potential, and strong FCF we believe NOVs shares are currently undervalued and present a favorable
risk/reward scenario. NOV has clearly been hurt by declining demand for new rigs within the U.S. onshore market and
recent operating margin disappointments; both factors have significantly weighed down the stock. Investors have
overreacted to the soft conditions now seen in U.S. land drilling, where rig counts have dropped. Towards the end of
2012, the stock was cut from equal weight to overweight due to NOV providing guidance that backlog had peaked and
was decreasing, however the speculation was false. At the beginning of 2013, NOV had reported that rig technology
sales were down 10%, this led to shares being sold off 6.2%, NOV subsequently announced that they were acquiring
Robbins & Myers. Recently, NOV was subject to a hard sell off as investors overreacted to disappointing earnings, and
weak guidance. Revenue for the first quarter of 2014 was down 6% in a sequential basis. While the backlog of equipment
orders came in $16.35 billion the market was disappointed with new orders being booked which came in at just $2.33
billion. Without the adequate capacity, NOVs large backlog strained its supply chain and created marginal cost increases.
Management stated that NOV processed $8.7B of its backlog in 2013 and expects to bill $8.8B in 2014. The current
$16.3B backlog total effectively represents two years of revenue for NOV. In the recent 1Q2014 earnings call,
management highlighted that NOV currently has a record backlog value, which it guided would deflate to about $14B to
$15B by the end of FY2014. Along with missing margins, when investors heard this guidance, they overreacted and sold
off NOV.










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Comparable Analysis


Peer Group Identification

Baker Hughes Inc. (NYSE:BHI) - Baker Hughes supplies oilfield services with high-performance drilling, evaluation
and completions, production technology and reservoir consulting in more than 80 different countries. Thanks to its
solutions, Baker Hughes are considerably reducing costs and risk as well as improving productivity for its clients in the
oil and gas industry.
Cameron International Corp (NYSE: CAM) - Cameron International Corp is a leading supplier and manufacturer of
flow equipment products, systems and services in the oil and gas industry operating at a worldwide scale. However, 2/3
of its business comes from operations located outside the United States. They are operating through 3 main segments
which are: DPS (Drilling and production systems), V&M (Valves and Measurement) and PCS (Process & Compression
Systems).
FMC Technologies Inc. (NYSE: FTI) FMC Technologies Inc. supplies energy technology solutions for subsea
production and processing systems, surface wellhead systems, high pressure fluid control equipment, measurement
solutions and loading systems for the oil & gas industry. FTI is currently operating across 30 production sites through
17 different countries.
Halliburton Co. (NYSE: HAL) - Halliburton is the worlds largest supplier of services and products for the production
of oil and natural gas, development and exploration in the upstream industry through more than 80 different countries.
Their main geographic locations are divided between North America, Latin America, Europe, Africa, and Middle
East/Asia.







Leverage
Stock Equity Enterprise Dividend Gross EBITDA Debt/
Price Market Market ROE ROA ROC ROIC/WACC Yield Margin Margin Equity
% % % % % % % %
Company 4/29/2014 Value Value LTM NFY LTM NFY LTM LTM LTM LTM NTM LTM LTM MRQ
BHI US EQUITY $69.32 $30,222 $33,729 24.2 13.0 9.0 6.1 7.3 4.2 5.9 0.35 0.87 17.14 16.47 24.73
CAM US EQUITY $64.50 $13,170 $16,430 19.2 13.3 11.0 8.7 14.7 5.4 9.0 1.06 - 24.96 14.66 48.87
FTI US EQUITY $56.50 $13,288 $14,380 25.1 17.0 13.9 10.0 25.0 8.3 N/A 1.31 - 22.41 14.18 59.22
HAL US EQUITY $62.78 $53,019 $58,739 19.7 12.3 9.5 6.7 19.1 9.7 14.3 1.21 0.88 15.25 20.71 57.55
Mean 22.9 14.4 11.3 8.3 15.6 6.0 7.4 0.9 0.29 21.5 15.1 44.3
Median 24.2 13.3 11.0 8.7 14.7 5.4 7.4 1.1 - 22.4 14.7 48.9
NOV US EQUITY $77.31 $33,155 $32,711 13.3 11.1 7.6 6.3 11.4 7.0 9.8 1.96 1.35 24.11 18.54 14.17
P/E Multiple EV/EBITDA
National Oilwell Varco Comparable Analysis
Capitalization Valuation Multiples Margins
($ in millions except per share)
Ratios

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APPENDIX
Discounted Cash Flow




PROJECT Owl Fund FCF - National Oilwell Varco 4
Summary of Financial Projections
(dollars in millions, except per share)
FYE December 31, Projected FYE December 31, (a)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net Sales $14,658.0 $20,041.0 $22,869.0 $24,241.1 $25,453.2 $26,395.0 $27,186.8 $28,002.4 $28,982.5 $29,852.0
% Growth - - 36.7% 14.1% 6.0% 5.0% 3.7% 3.0% 3.0% 3.5% 3.0%
EBITDA (a) $3,492.0 $4,185.0 $4,178.0 $4,726.4 $5,199.1 $5,510.0 $5,664.4 $5,823.5 $6,014.6 $6,184.1
Margin 23.8% 20.9% 18.3% 19.5% 20.4% 20.9% 20.8% 20.8% 20.8% 20.7%
EBIT $2,937.0 $3,557.0 $3,423.0 $3,878.6 $4,327.0 $4,619.1 $4,757.7 $4,900.4 $5,071.9 $5,224.1
Margin 20.0% 17.7% 15.0% 16.0% 17.0% 17.5% 17.5% 17.5% 17.5% 17.5%
Net Income $1,994.0 $2,491.0 $2,327.0 $2,624.4 $2,933.1 $3,033.6 $3,129.5 $3,233.2 $3,351.9 $3,457.2
Margin 13.6% 12.4% 10.2% 10.8% 11.5% 11.5% 11.5% 11.5% 11.6% 11.6%
EPS $4.70 $5.83 $5.44 $6.13 $6.85 $7.09 $7.31 $7.55 $7.83 $8.08
Growth Rate - - 24.0% -6.8% 12.8% 11.8% 3.4% 3.2% 3.3% 3.7% 3.1%
(a) Excludes extraordinary and non-recurring items.
(b) SOURCE PROJECTIONS

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DISCLAIMER
This report is prepared strictly for educational purposes and should not be used as an actual investment guide.
The forward looking statements contained within are simply the authors opinions. The writer does not own any
National Oilwell Varco Inc. stock.
TUIA STATEMENT
Established in honor of Professor William C. Dunkelberg, former Dean of the Fox School of Business, for his
tireless dedication to educating students in real-world principles of economics and business, the William C.
Dunkelberg (WCD) Owl Fund will ensure that future generations of students have exposure to a challenging,
practical learning experience. Managed by Fox School of Business graduate and undergraduate students with
oversight from its Board of Directors, the WCD Owl Funds goals are threefold:
Provide students with hands-on investment management experience
Enable students to work in a team-based setting in consultation with investment professionals.
Connect student participants with nationally recognized money managers and financial institutions

Earnings from the fund will be reinvested net of fund expenses, which are primarily trading and auditing costs
and partial scholarships for student participants.