The case study concerns Pete Miller, CEO of National Oilwell Varco (NOV) since 2

Question

The case study concerns Pete Miller, CEO of National Oilwell Varco (NOV) since 2001. Miller acquired over 200 companies, each with a strategic tie to the oil producing industry. The company now has a dominant share of the market for offshore drilling equipment, a segment of the industry that reported the most orders ever in 2013. NOV stands to capitalize on all segments of the future oil industry – the actual building of the drilling rigs, jack-ups, and ships that have to go offshore and do the drilling. (find the complete lecture on Part 4: Leading, Chapter 11, pages 361 to 363. ) Case Question 2: How does each of the following situational influences on organizational design affect organizational design (and strategy) at NOV – core technology, environment, and organizational size? How about organizational life cycle? At what stage in that cycle would you put NOV? Which of NOV’s actions give an indication of the company’s life-cycle stage as management sees it? (Note: NOV intends to spend $100 billion in the next ten years.)

Explanation / Answer

An Interview with Pete Miller, CEO of National Oilwell Varco
NOV's CEO discusses his company’s history, where it stands now, and what it looks forward to in years to come.

Taylor Muckerman (TMFrunAMuck)
Dec 13, 2013 at 10:12AM
With operations in over 1,160 locations worldwide, National Oilwell Varco (NYSE:NOV) is a leading provider of equipment and services to the oil and gas industry through its three segments; Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission. CEO Merrill "Pete" Miller has held a number of senior executive positions with NOV, beginning in 1996. Miller also serves on the boards of Chesapeake Energy Corporation (NYSE:CHK), Offshore Energy Center, Petroleum Equipment Suppliers Association, and Spindletop International.

Miller joins Taylor Muckerman for a discussion of the oil and gas industry; where it is today, where it's heading, and how National Oilwell Varco intends to help it get there. They also look to the past to explore how NOV got where it is today and why it made the choices it did along the way.

A full transcript follows the video.

Taylor Muckerman: Taylor Muckerman here with Pete Miller, CEO of National Oilwell Varco. I'm sure a lot of you have heard of it. It's a fan favorite at The Motley Fool. Thank you for having us today; very gracious of your time.

Pete Miller: My pleasure.

Taylor Muckerman: Just to start off, get into the offshore markets; really booming now and across the globe. Started with the Gulf of Mexico for many of our viewers, really came into the headlines in 2010 with Macondo, but picked up the pace since then.

Estimates are for over $100 billion in spending within the next 10 years on an annual basis. That's about three times 2012, so just to get your thoughts on how that could potentially affect your business.

Pete Miller: I think for National Oilwell Varco, it really impacts in a lot of different ways. First, and probably the one that most of our investors know best, is the actual building of the drilling rigs, jack-ups, and ships that have to go offshore and do the drilling.

That is ongoing right now. Probably in the last six months we've had more jack-ups ordered than probably have been ordered in a six month time frame in history. It's really pretty incredible, but it's because people need the good equipment

I think, post Macondo -- we actually were doing pretty well prior to Macondo as well -- and then post Macondo everything kind of shut down, in the Gulf especially. But people started to realize that you have to have the best equipment possible. You've got to have the best technology. Fortunately, we're there to provide that.

The capital side is really positive. However, I think the best kept secret at NOV is our Petroleum Services and Supplies business. That's really directly related to the drilling of wells. Those are expendable products. That's drill pipe, that's solids control, that's bits. That's all different things like that. With the expanded drilling offshore, we also are seeing an improvement in our PS&S business as well.

Muckerman: That's fantastic. When you're talking about new rigs coming online, some say that up to 100 could be needed by 2020, 2025. Do you expect that to be more rig replacement, or are you expecting that to add to the overall fleet size, for the most part?

Miller: A combination of both.

I think you're doing a couple different things right now, Taylor. First off, when you look at the drill ships, for the most part that's additive. The drill ships are really doing the exploration in the deep water, but those are new ships being added to the fleet.

Now, you take a look at the floaters that are out there, the semi-submersibles; those are more of the production and development rigs, and those go back to -- the first floater probably went out, maybe the early '50s -- and you're doing a lot of replacement there, but you're also doing some additive.

But I would say a lot of that is just going to be rep

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