NATIONAL OILWELL INC - 10-Q Quarterly Report

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FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2003 OR

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

Commission file number 1-12317

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

DELAWARE 76-0475875
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

10000 RICHMOND AVENUE
HOUSTON, TEXAS
77042-4200
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(Address of principal executive offices)

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

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

YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

As of May 5, 2003, 84,235,183 common shares were outstanding.

NATIONAL-OILWELL, INC.

INDEX

PART I - FINANCIAL INFORMATION:

Item 1. Financial Statements

Consolidated Balance Sheets - March 31, 2003 (Unaudited) and December 31, 2002 3

Consolidated Statements of Operations (Unaudited) - Three months ended March 31, 2003 and 2002 4

Consolidated Statement of Cash Flows (Unaudited) - Three months ended March 31, 2003 and 2002 5

Notes to Consolidated Financial Statements (Unaudited) 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11

Item 3. Quantitative and Qualitative Disclosures About Market Risk 15

Item 4. Controls and Procedures 16

PART II - OTHER INFORMATION 17

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL-OILWELL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

The accompanying notes are an integral part of these statements.

3

NATIONAL-OILWELL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)

The accompanying notes are an integral part of these statements.

4

NATIONAL-OILWELL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

The accompanying notes are an integral part of these statements.

5

NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

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. Actual results could differ
from those estimates.

The accompanying unaudited consolidated financial statements present information
in accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and
applicable rules of Regulation S-X. They do not include all information or
footnotes required by accounting principles generally accepted in the United
States for complete financial statements and should be read in conjunction with
our 2002 Annual Report on Form 10-K/A.

In our opinion, the consolidated financial statements include all adjustments,
all of which are of a normal, recurring nature, necessary for a fair
presentation of the results for the interim periods. The results of operations
for the three months ended March 31, 2003 are not necessarily indicative of the
results to be expected for the full year.

2. ACQUISITIONS

On January 16, 2003, we acquired the Mono pumping products business from
Halliburton Energy Services for approximately $89 million, consisting of $22.7
million in cash and 3.2 million shares of our common stock. This transaction,
which consisted of purchasing all the outstanding stock of Monoflo, Inc. in the
United States and Mono Group in the United Kingdom, generated approximately $46
million in goodwill and will add to the non-capital product lines within our
Products and Technology segment.

On January 2, 2003, we acquired LSI, a Houston, Texas based distributor of
specialty electrical products, for approximately $13 million. This transaction
generated approximately $6 million in goodwill and is complementary to our
distribution services business.

During December 2002, we completed the acquisition of Hydralift ASA, a Norwegian
based company specializing in the offshore drilling equipment industry, for a
total purchase price, including the assumption of debt, of approximately $300
million. Allocation of the purchase price, which is preliminary, will be
allocated to the assets acquired and liabilities assumed based on their relative
fair values. The final allocation of the purchase price will be based upon
independent appraisals and other valuations and may reflect other actions
including product line rationalizations or other actions.

3. INVENTORIES

Inventories consist of (in thousands):

6

4. COMPREHENSIVE INCOME

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

5. BUSINESS SEGMENTS

Segment information (unaudited) follows (in thousands):

7

6. DEBT

Debt consists of (in thousands):

At March 31, 2003, we had $320 million of committed credit facilities and were
in compliance with all covenants governing these facilities.

We replaced an existing credit facility in July 2002 with a new three-year
unsecured $175 million revolving credit facility. Borrowings against this
facility at March 31, 2003 totaled $23 million. This facility is available for
acquisitions and general corporate purposes and provides up to $50 million for
letters of credit, of which $23 million were outstanding at March 31, 2003.
Interest is based upon prime or Libor plus 0.5% subject to a ratings based grid.
In securing this new credit facility, we incurred approximately $0.9 million in
fees, which are being amortized to expense over the term of the facility. This
credit facility contains financial covenants and ratios regarding maximum debt
to capital and minimum interest coverage.

Recently acquired Hydralift ASA has multi-currency term loans and revolving
credit facilities totaling $145 million, which expire in 2006. These facilities
contain financial covenants and the term loans have mandatory repayments of
approximately $14 million beginning in May 2004. Interest is based upon a
pre-agreed upon percentage point spread from either the prime interest rate or
NIBOR. At March 31, 2003, borrowings totaled $77 million and there were $24
million of outstanding letters of credit and guarantees.

We also have additional uncommitted credit facilities totaling $134 million that
are used primarily for acquisitions, general corporate purposes and letters of
credit. Borrowings against these additional credit facilities totaled $3 million
at March 31, 2003 and an additional $10 million had been used for letters of
credit and guarantees.

7. STOCK-BASED COMPENSATION

We apply Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations in accounting for our
stock option plans. Accordingly, no compensation expense has been recognized for
stock option grants as all options granted had an exercise price equal to the
market value of the underlying common stock on the date of grant. Had
compensation expense for the stock option grants been determined on the fair
value at the grant dates consistent with the method of Statement of Financial
Accounting Standards Board (SFAS) No. 123, "Accounting for Stock-Based
Compensation", our net income and income per share would have been adjusted to
the pro forma amounts indicated below (amounts in thousands, except per share
amounts):

8

For purposes of determining compensation expense using the provisions of SFAS
No. 123, the fair value of option grants was determined using the Black-Scholes
option-valuation model. The weighted average fair value per share of stock
options granted in the first quarter of 2003 was $9.20 and $8.95 in 2002. The
key input variables used in valuing the options granted in 2003 and 2002 were:
risk-free interest rate of 2.58% in 2003 and 2.40% in 2002; dividend yield of
zero in each year; stock price volatility of 50% in 2003 and 54% in 2002, and
expected option lives of five years for each year presented.

8. RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") issued Statement on Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations", which sets forth the accounting and reporting to be followed for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs and SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses disposal
activities and termination costs in exiting an activity. Effective January 1,
2003 we adopted these new accounting pronouncements and they did not have a
significant impact on our results of operations or financial position.

The FASB issued Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation," ("SFAS No. 148") in December 2002. SFAS No. 148
amends the disclosure requirements of Statement of Financial Accounting
Standards No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
provisions of SFAS No. 148, which we adopted on January 1, 2003, did not have a
material impact on our consolidated financial statements (see Note 7).

The FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements, Including Guarantees of Indebtedness of Others," ("FIN 45"), which
we adopted effective January 1, 2003. FIN 45 requires that upon issuance of
certain types of guarantees, a guarantor recognize and account for the fair
value of the guarantee as a liability. FIN 45 contains exclusions to this
requirement, including the exclusion of a parent's guarantee of its
subsidiaries' debt to a third party. Upon adoption, this new accounting
pronouncement had no material impact on our consolidated financial position,
results of operations or cash flows.

9

The FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities," ("FIN 46"), which we adopted effective January 31, 2003. This
statement addresses the consolidation of variable interest entities ("VIEs") by
business enterprises that are the primary beneficiaries. A VIE is an entity that
does not have sufficient equity investment at risk to permit it to finance its
activities without additional subordinated financial support, or whose equity
investors lack the characteristics of a controlling financial interest. The
primary beneficiary of a VIE is the enterprise that has the majority of the
risks or rewards associated with the VIE. We have no material interests in VIEs
that will require disclosure or consolidation under FIN 46.

10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

We design, manufacture and sell drilling systems, drilling equipment and
downhole products as well as distribute maintenance, repair and operating
products to the 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 and
drilling contractors, 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.

We conduct our operations through the following segments:

Products and Technology

Our Products and Technology segment designs and manufactures complete land
drilling and workover rigs, and drilling related systems for offshore rigs.
Technology has increased the desirability of one vendor assuming responsibility
for the entire suite of components used in the drilling process, as mechanical
and hydraulic components are replaced by or augmented with integrated
computerized systems. In addition to traditional components such as drawworks,
mud pumps, top drives, derricks, cranes, jacking and mooring systems, and other
structural components, we provide automated pipehandling, control and electrical
power systems. We have also developed new technology for drawworks and mud pumps
applicable to the highly demanding offshore markets.

Distribution Services

Our Distribution Services segment provides maintenance, repair and operating
supplies and spare parts from our network of distribution service centers to
drill site and production locations throughout North America and to offshore
contractors worldwide. Increasingly, this business also is expanding to
locations outside North America, including the Middle East, Southeast Asia, and
South America. Using our information technology platforms and processes, we can
provide complete procurement, inventory management, and logistics services to
our customers. Products are purchased from numerous manufacturers and vendors,
including our Products and Technology segment.

11

RESULTS OF OPERATIONS

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

Products and Technology

Revenues for the Products and Technology segment increased $94 million during
the first quarter of 2003 as compared to the same quarter in 2002 due to the
Hydralift ASA and Mono acquisitions. Despite the relatively strong hydrocarbon
prices experienced during the first quarter, many operators and drilling
contractors took a cautious approach regarding their capital spending needs, and
spending for our products were generally flat to slightly down.

Operating income increased by $6 million in the first quarter of 2003 compared
to the same quarter in 2002 due to the impact of the Hydralift and Mono
acquisitions. Lower gross margins of 0.5% and increased selling and
administrative costs offset a portion of the benefits derived from those
acquisitions.

Backlog of the Products and Technology capital products was $368 million at
March 31, 2003, a small increase from the December 31, 2002 balance of $364
million. Backlog at March 31, 2002, which excluded any Hydralift ASA capital
products, was $300 million. Most of the product in current backlog will be
delivered during 2003.

Distribution Services

Distribution Services revenues increased $17 million, or approximately 10%,
during the first quarter of 2003 over the comparable 2002 period. North American
revenues were the principal contributor to this increase as the number of active
rigs running in the U.S. gradually increased during the quarter. Revenue growth
in the international sector, adversely impacted by the Venezuelan political
instability and the Iraqi war impact in the Middle East, increased only 7%, or
$3 million. Maintenance, repair and operating supplies revenues accounted for
all of the revenue increase.

Operating income in the first quarter of 2003 reflects only a slight increase of
$0.1 million over the prior year results due to slightly lower margins and an
increase in expenses. Infrastructure costs have been incurred to improve our
geographic coverage, employee retention and overall customer service.

12

Corporate

Corporate charges represent the unallocated portion of centralized and executive
management costs. These costs are approximately $0.8 million higher during the
quarter ending March 31, 2003 when compared to the same period in the prior year
due to corporate-led marketing and training initiatives and general overhead
incurred to support a larger company.

Interest Expense

Interest expense increased during the three months ended March 31, 2003 as
compared to the prior year due to the senior notes issued in November 2002 to
acquire Hydralift ASA plus interest incurred on Hydralift's existing borrowings.
Other financial costs, principally bank fees related to letters of credit and
performance bonds, increased during the three months ending March 31, 2003 when
compared to the same period of the prior year, reflecting our increased
international activity.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003 we had working capital of $780 million, an increase of $31
million from December 31, 2002 primarily due to increases in inventories and
costs associated with major projects accounted for under the percentage -of
- -completion accounting method. Cash decreased $53 million during the quarter
ended March 31, 2003 due primarily to financing the Mono and LSI acquisitions
for $35 million and payment of semi-annual interest on the senior notes of
approximately $10 million.

Total capital expenditures were $8 million during the first three months of 2003
compared to $4 million in the first three months of the prior year. The majority
of these capital expenditures represent additions to the downhole rental tool
fleet and enhancements to information management systems. We believe we have
sufficient existing manufacturing capacity to meet currently anticipated demand
through 2003 for our products and services.

At March 31, 2003, we had $320 million of committed credit facilities and were
in compliance with all covenants governing these facilities.

We replaced an existing credit facility in July 2002 with a new three-year
unsecured $175 million revolving credit facility. Borrowings against this
facility at March 31, 2003 totaled $23 million. This facility is available for
acquisitions and general corporate purposes and provides up to $50 million for
letters of credit, of which $23 million were outstanding at March 31, 2003.
Interest is based upon prime or Libor plus 0.5% subject to a ratings based grid.
In securing this new credit facility, we incurred approximately $0.9 million in
fees, which are being amortized to expense over the term of the facility. This
credit facility contains financial covenants and ratios regarding maximum debt
to capital and minimum interest coverage.

Recently acquired Hydralift ASA has multi-currency term loans and revolving
credit facilities totaling $145 million, which expire in 2006. These facilities
contain financial covenants and the term loans have mandatory repayments of
approximately $14 million beginning in May 2004. Interest is based upon a
pre-agreed upon percentage point spread from either the prime interest rate or
NIBOR. At March 31, 2003, borrowings totaled $77 million and there were $24
million of outstanding letters of credit and guarantees.

We also have additional uncommitted credit facilities totaling $134 million that
are used primarily for acquisitions, general corporate purposes and letters of
credit. Borrowings against these additional credit facilities totaled $3 million
at March 31, 2003 and an additional $10 million had been used for letters of
credit and guarantees.

13

We believe cash generated from operations and amounts available under the credit
facilities and from other sources of debt will be sufficient to fund operations,
working capital needs, capital expenditure requirements and financing
obligations. We also believe any significant increase in capital expenditures
caused by any need to increase manufacturing capacity can be funded from
operations or through debt financing.

During the three months ended March 31, 2003, we did not enter into any
transactions, arrangements, or relationships with unconsolidated entities or
other persons which would materially affect liquidity, or the availability of or
requirements for capital resources, from the amounts disclosed in our
Form 10-K/A for the year ending December 31, 2002.

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

Inflation has not had a significant impact on our operating results or financial
condition in recent years.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements requires us to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Our estimation process generally relates to
potential bad debts, obsolete and slow moving inventory, pension plan
accounting, value of intangible assets, and deferred income tax accounting. Our
estimates are based on historical experience and on our future expectations that
we believe to be reasonable under the circumstances. The combination of these
factors result in the amounts shown as carrying values of assets and liabilities
in the financial statements and accompanying notes. Actual results could differ
from our current estimates and those differences may be material.

These estimates may change as new events occur, as more experience is acquired,
as additional information is obtained and as our operating environment changes.
There have been no material changes or developments in our evaluation of the
accounting estimates and the underlying assumptions or methodologies that we
believe to be Critical Accounting Policies and Estimates as disclosed in our
Form 10-K/A for the year ending December 31, 2002.

RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") issued Statement on Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations", which sets forth the accounting and reporting to be followed for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs and SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses disposal
activities and termination costs in exiting an activity. Effective January 1,
2003 we adopted these new accounting pronouncements and they did not have a
significant impact on our results of operations or financial position.

The FASB issued Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation," ("SFAS No. 148") in December 2002. SFAS No. 148
amends the disclosure requirements of Statement of Financial Accounting
Standards No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
provisions of SFAS No. 148, which we adopted on January 1, 2003, did not have a
material impact on our consolidated financial statements (see Note 7).

14

The FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements, Including Guarantees of Indebtedness of Others," ("FIN 45"), which
we adopted effective January 1, 2003. FIN 45 requires that upon issuance of
certain types of guarantees, a guarantor recognize and account for the fair
value of the guarantee as a liability. FIN 45 contains exclusions to this
requirement, including the exclusion of a parent's guarantee of its
subsidiaries' debt to a third party. Upon adoption, this new accounting
pronouncement had no material impact on our consolidated financial position,
results of operations or cash flows.

The FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities," ("FIN 46"), which we adopted effective January 31, 2003. This
statement addresses the consolidation of variable interest entities ("VIEs") by
business enterprises that are the primary beneficiaries. A VIE is an entity that
does not have sufficient equity investment at risk to permit it to finance its
activities without additional subordinated financial support, or whose equity
investors lack the characteristics of a controlling financial interest. The
primary beneficiary of a VIE is the enterprise that has the majority of the
risks or rewards associated with the VIE. We have no material interests in VIEs
that will require disclosure or consolidation under FIN 46.

FORWARD-LOOKING STATEMENTS

Some of the information in this document contains, or has incorporated by
reference, forward-looking statements. Statements that are not historical facts,
including statements about our beliefs and expectations, are forward-looking
statements. Forward-looking statements typically are identified by use of terms
such as "may," "will," "expect," "anticipate," "estimate," and similar words,
although some forward-looking statements are expressed differently. You should
be aware that our actual results could differ materially from results
anticipated in the forward-looking statements due to a number of factors,
including but not limited to changes in oil and gas prices, customer demand for
our products and worldwide economic activity. You should also consider carefully
the statements under "Risk Factors" which address additional factors that could
cause our actual results to differ from those set forth in the forward-looking
statements. Given these uncertainties, current or prospective investors are
cautioned not to place undue reliance on any such forward-looking statements. We
undertake no obligation to update any such factors or forward-looking statements
to reflect future events or developments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in foreign currency exchange rates and interest rates.
Additional information concerning each of these matters follows:

Foreign Currency Exchange Rates

We have operations in foreign countries, including Canada, Norway and the United
Kingdom, as well as operations in Latin America, China and other European
countries. The net assets and liabilities of these operations are exposed to
changes in foreign currency exchange rates, although such fluctuations generally
do not affect income since their functional currency is the local currency. For
operations where our functional currency is not the local currency, such as
Singapore and Venezuela, the net asset or liability position is insignificant
and, therefore, changes in foreign currency exchange rates are not expected to
have a material impact on earnings.

Some of our revenues in foreign countries are denominated in US dollars, and
therefore, changes in foreign currency exchange rates impact our earnings to the
extent that costs associated with those US dollar revenues are denominated in
the local currency. In order to mitigate that risk, we may utilize

15

foreign currency forward contracts to better match the currency of our revenues
and associated costs. We do not use foreign currency forward contracts for
trading or speculative purposes. The counterparties to these contracts are major
financial institutions, which minimizes counterparty credit risk.

The impact of foreign currency exchange rates has not materially affected our
results of operations in any of the last three years.

Interest Rate Risk

Our long-term borrowings consist of $150 million in 6.875% senior notes, $150
million in 6.5% senior notes and $200 million in 5.65% senior notes. We also
have borrowings under our other credit facilities totaling $103.0 million at
March 31, 2003. A portion of the borrowings under our other credit facilities
are denominated in multiple currencies which could expose us to market risk with
exchange rate movements. These instruments carry interest at a pre-agreed upon
percentage point spread from either the prime interest rate, LIBOR or NIBOR.
Under our credit facilities, we may, at our option, fix the interest rate for
certain borrowings based on a spread over LIBOR or NIBOR for 30 days to 6
months. Based upon our March 31, 2003 borrowings under our variable rate
facilities of $103.0 million, an immediate change of one percent in the interest
rate would cause a change in annual interest expense of approximately $1.0
million. Our objective in maintaining a portion of our debt in variable rate
borrowings is the flexibility obtained regarding early repayment without
penalties and lower overall cost as compared with fixed-rate borrowings.

ITEM 4. CONTROLS AND PROCEDURES

Within 90 days before filing this report, we carried out an evaluation, under
the supervision and with the participation of the company's management,
including the company's President and Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
company's disclosure controls and procedures. Based upon that evaluation, the
company's President and Chief Executive Officer along with the company's Chief
Financial Officer concluded that the company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the company (including its consolidated subsidiaries) required to be
included in the company's periodic Securities and Exchange Commission filings.

There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
our evaluation.

16

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Certification pursuant to Section 906 of the Sarbanes - Oxley Act
of 2002

99.2 Certification pursuant to Section 906 of the Sarbanes - Oxley Act
of 2002

(b) Reports on Form 8-K

A report on Form 8 - K was filed on February 12, 2003
regarding a press release announcing our financial results for the fourth
quarter and full year ended December 31,2002.

A report on Form 8 - K was filed on April 25, 2003 regarding
a press release announcing our financial results for the three months ended
March 31,2003.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: May 15, 2003 /s/ Steven W. Krablin
------------ ---------------------
Steven W. Krablin
Principal Financial and Accounting Officer
and Duly Authorized Signatory

17

CERTIFICATION

I, Merrill A. Miller, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of National-Oilwell, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors:

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: May 15, 2003

/s/ Merrill A. Miller, Jr.
- --------------------------
Merrill A. Miller, Jr.
Chief Executive Officer

18

CERTIFICATION

I, Steven W. Krablin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National-Oilwell, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors:

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: May 15, 2003

/s/ Steven W. Krablin
- ---------------------
Steven W. Krablin.
Chief Financial Officer

19

INDEX TO EXHIBITS

(a) Exhibits

99.1 Certification pursuant to Section 906 of the Sarbanes - Oxley Act
of 2002

99.2 Certification pursuant to Section 906 of the Sarbanes - Oxley Act
of 2002