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corresp

February 2, 2007

VIA EDGAR, FEDERAL EXPRESS AND TELECOPY

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549-7010

    Attention:

    Gary A. Newberry

         Re:

    National Oilwell Varco, Inc.

Form 10-K for Fiscal Year Ended December 31, 2005

Filed March 6, 2006

Forms 10-Q for Fiscal Quarters Ended March 31, 2006, June 30, 2006

and September 30, 2006

Filed May 9, 2006, August 4, 2006 and November 3, 2006

File No. 1-12317

Ladies and Gentlemen:

     On behalf of National Oilwell Varco, Inc. (the “Company”), this letter sets forth the
Company’s responses to the comments of the staff (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) in its comment letter dated January 23, 2007 (the “Comment Letter”)
with respect to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the
“2005 Form 10-K”) and Forms 10-Q for the fiscal quarters ended March 31, 2006, June 30, 2006 and
September 30, 2006 (“2006 Forms 10-Q”).

     For your convenience, we have repeated in italics each comment of the Staff exactly as
given in the Comment Letter and set forth below each such comment is the Company’s
response.

    Vinson & Elkins LLP Attorneys at Law

Austin Beijing Dallas Dubai Hong Kong Houston

London Moscow New York Shanghai Tokyo Washington

    First City Tower, 1001 Fannin Street, Suite 2500

Houston, TX 77002-6760

Tel 713.758.2222 Fax 713.758.2346 www.velaw.com

United States Securities and Exchange Commission February 2, 2007 Page 2

Form 10-K for the Fiscal Year Ended December 31, 2005

Management Discussion and Analysis of Financial Condition and Results of Operations,
page 27

Critical Accounting Policies and Estimates

    1.

    We note your response to prior comment 3 in our letter dated December 27, 2006. You appear
to imply that many of the policies and estimates that you discuss in your filing are not
material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters and/or that the impact of the estimates and assumptions on financial
condition or operating performance is not material. As such, you should re-evaluate which
estimates are, in fact, critical and limit your discussions to critical policies and
estimates.

    For those policies and estimates that you do deem to be material, we reissue our prior
comment 3. We caution you that a sensitivity analysis is not the only required disclosure,
and that sensitivity analyses and other disclosure must be based on outcomes that are
reasonably likely to occur and would have a material effect. For example, if your revenue
recognition policies have, in the past resulted in estimates that have required material
subsequent adjustments, or if you deem such adjustments to be reasonably likely to occur in
the future, then it is inappropriate to provide a sensitivity analysis that presents the
impact of an immaterial 1% change in gross profits. We again refer you to the guidance at
FRC 501.14.

    Please amend your filing accordingly.

    Response: The Company has re-evaluated its disclosure regarding Critical
Accounting Estimates to better address the guidelines established under FRC 501.14. Please
find attached as Exhibit A a draft of the Company’s revised Critical Accounting Estimates
which the Company proposes to file as part of an amendment to its 2005 Form 10-K.

Supplemental Pro Forma Comparison, page 40

    2.

    We note your response to prior comment 4 in our letter dated December 27, 2006, and we are
not able to agree with your approach, as follows:

    (a)

    We do not agree that disclosure of this information in a Form 8-K is
appropriate.

United States Securities and Exchange Commission February 2, 2007 Page 3

    (b)

    We believe that amending your 2005 Form 10-K and first quarter 2006 Form 10-Q
is necessary to avoid investor confusion.

    (c)

    It is not appropriate to call you disclosure “pro forma comparison” or to
refer to combined results as “pro forma results” or to refer to “pro forma”
adjustments. The information you disclose in Appendix A of your response consists of
non-GAAP measures, which should not be confused with pro forma information required
under GAAP, specifically Rule 11 of Regulation S-X and SFAS 141. As such, please
rename your non-GAAP measures to “adjusted results” or a similar term, in your chart
and throughout your filing, where applicable.

    (d)

    If any of your adjustments do not relate directly to the Varco acquisition,
you should specifically state so. For example, it is not clear whether your insurance
litigation settlement and your Rig Technology costs were related to the acquisition.
If not, it is inappropriate to preface the chart by stating that it adjusts for
acquisition-related items.

    Amend your Form 10-K for the year ended December 31, 2005, as well as your Form 10-Q for
the quarter ended March 31, 2006, accordingly. We would also expect you to comply with all
other applicable comments from our letter dated December 27, 2006, and this letter in your
amendments. We agree that amending Forms 10-Q for the quarters ended June 30, 2006, and
September 30, 2006, does not appear to be necessary.

    Response: The Company has changed its proposed GAAP to non-GAAP reconciliation
disclosures to conform to all of your comments. In particular, the Company has removed all
references to the term “pro forma” throughout the supplemental comparison section and
replaced it with the term “adjusted results.” Please find attached a draft of the
Company’s revised disclosures which the Company proposes to file as part of amendments
to its 2005 Form 10-K and its First Quarter 2006 Form 10-Q.

Form 10-Q for the Quarters ended March 31, June 30 and September 30, 2006

Exhibits

    3.

    We have considered your response to prior comment 9 in our letter of December 27, 2006. We
do not agree with your conclusions. The exhibit table in Regulation S-K Item 601 identifies
exhibits, such as your articles of incorporation, that should be filed or incorporated by
reference with each report. Please include this information in your amended Form 10-Q and in
subsequent future filings.

United States Securities and Exchange Commission February 2, 2007 Page 4

    Response: The Company will include this information in the Company’s proposed
amendment to its First Quarter 2006 Form 10-Q and in future filings.

     In connection with responding to the Staff’s comments, on behalf of the Company, we confirm
that the Company acknowledges that (i) the Company is responsible for the adequacy and accuracy of
the disclosure in the filing, and (ii) the Staff comments or changes to disclosure in response to
Staff comments do not foreclose the Commission from taking any action with respect to the filing.
We also confirm that the Company acknowledges the Staff’s position that the Company may not assert
Staff comments as a defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

     If you have any questions or comments concerning these responses, please call the undersigned
at (713) 758-3710 or, in his absence, Gillian Hobson at (713) 758-3747.

    Sincerely,

VINSON & ELKINS L.L.P.

    By:

/s/
James M. Prince

    James M. Prince

    cc:

    Clay C. Williams

Dwight W. Rettig

Robert Blanchard

Raymond Chang

EXHIBIT A

Critical Accounting Estimates

In preparing the financial statements, we make assumptions, estimates and judgments that affect the
amounts reported. We periodically evaluate our estimates and judgments that are most critical in
nature which are related to revenue recognition under long-term construction contracts; allowance
for doubtful accounts; inventory reserves; impairments of long-lived assets (excluding goodwill);
goodwill impairment and income taxes. Our estimates are based on historical experience and on our
future expectations that we believe are reasonable. The combination of these factors forms the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results are likely to differ from our current estimates and
those differences may be material.

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 group. 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 to complete 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 as mentioned in “Risk Factors.” These factors can impact the
accuracy of the Company’s estimates and materially impact the Company’s future reported earnings.

Historically,
the Company’s estimates have been reasonably dependable regarding the recognition of
revenues and gross profits on percentage of completion contracts, excluding $21.7 million of losses
resulting from changes in cost estimates relating to two rigs delivered to Kazakhstan as discussed
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Excluding these losses, and based upon an analysis of

A-1

percentage of completion contracts for all open contracts outstanding at December 31, 2005, 2004,
and 2003, adjustments (representing the differences between the estimated and actual results) to
all outstanding contracts resulted in changes to gross profit margins of 1.1% ($12.1 million on
$1.1 billion of outstanding contracts), 0.9% ($7.3 million on $697.3 million of outstanding
contracts), and 2.5% ($6.7 million on $266.8 million of outstanding contracts). While the Company
believes that its estimates will continue to be reasonably dependable with its estimates under
percentage of completion accounting, the factors identified in the preceding paragraph could result
in significant adjustments in future periods.

Allowance for Doubtful Accounts

The determination of the collectibility of amounts due from customer accounts requires the Company
to make judgments regarding future events and trends. Allowances for doubtful accounts are
determined based on a continuous process of assessing the Company’s portfolio on an individual
customer and overall basis. 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 and the accounts receivable portfolio as a whole. A substantial portion of the
Company’s revenues come from international oil companies, international shipyards, international
oilfield service companies, and government-owned or government-controlled oil companies. Therefore,
the Company has significant receivables in many foreign jurisdictions. If worldwide oil and gas
drilling activity or changes in economic conditions in foreign jurisdictions deteriorate, the
creditworthiness of the Company’s customers could also deteriorate and they may be unable to repay
these receivables, and additional allowances could be required. At December 31, 2005 and 2004,
allowance for bad debts totaled $17.4 million and $12.8 million, or 1.5% and 2.6% of accounts
receivable before the allowance, respectively. The decrease of the allowance for bad debts as a
percentage of accounts receivable of 1.1% is primarily due to the 2005 Varco acquisition which
resulted in an addition of approximately $385.3 million of accounts receivable recorded at fair
value.

Historically, the Company’s charge-offs and provisions for the allowance for doubtful accounts have
been immaterial to the Company’s consolidated financial statements. However, because of the risk
factors mentioned above, changes in our estimates could become material in future periods.

Inventory Reserves

Inventory is carried at the lower of cost or estimated net realizable value. The Company
determines reserves for inventory based on historical usage of inventory on-hand, assumptions about
future demand and market conditions, and estimates about potential alternative uses, which are
usually limited. The Company’s inventory consists of specialized spare parts, work in process, and
raw materials to support ongoing manufacturing operations

A-2

and the Company’s large installed base of specialized equipment used throughout the oilfield.
Customers rely on the Company to stock these specialized items to ensure that their equipment can
be repaired and serviced in a timely manner. The Company’s estimated carrying value of inventory
therefore depends upon demand driven by oil and gas drilling and well remediation activity, which
depends in turn upon oil and gas prices, the general outlook for economic growth worldwide,
available financing for the Company’s customers, and political stability in major oil and gas
producing areas, among other factors. At December 31, 2005 and 2004, inventory reserves totaled
4.5% and 6.0% of gross inventory, respectively. Recent high demand and a strong outlook for
oilfield equipment sales provide the basis for the Company’s December 31, 2005 and 2004 estimates
regarding the future usage and realizable value of inventory. The decrease of inventory reserves
as a percentage of gross inventory is due primarily to the 2005 Varco acquisition which resulted in
the addition of approximately $377.1 million of inventory recorded at fair value, as discussed in
Note 3 of the Consolidated Financial Statements.

While inventory reserves and accruals have not had a material impact on the Company’s financial
results for the periods covered in this report, changes in worldwide oil and gas activity, or the
development of new technologies which make older drilling technologies obsolete, could require the
Company to record additional allowances to reduce the value of its inventory. Such changes in our
estimates could be material under weaker market conditions or outlook.

Impairment of Long-Lived Assets (Excluding Goodwill)

Long-lived assets, which include property, plant and equipment and identified intangible assets,
comprise a significant amount of the Company’s total assets. The Company makes judgments and
estimates in conjunction with the carrying value of these assets, including amounts to be
capitalized, depreciation and amortization methods and estimated useful lives.

Additionally, the carrying values of these assets are reviewed for impairment periodically or
whenever events or changes in circumstances indicate that the carrying amounts may not be
recoverable. An impairment loss is recorded in the period in which it is determined that the
carrying amount is not recoverable. This requires the Company to make long-term forecasts of its
future revenues and costs related to the assets subject to review. These forecasts require
assumptions about demand for the Company’s products and services, future market conditions and
technological devel