NATIONAL OILWELL INC, S-3, 1997-11-14

NATIONAL OILWELL INC
S-3, 1997-11-14
INDUSTRIAL MACHINERY & EQUIPMENT

Previous: DELTA FINANCIAL CORP, 10-Q, 1997-11-14

Next: JAVELIN SYSTEMS INC, 10QSB, 1997-11-14

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1997

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

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

<TABLE>
<C> <C>
DELAWARE 76-0475815
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>

5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 960-5100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

---------------------

PAUL M. NATION, ESQUIRE
VICE PRESIDENT AND GENERAL COUNSEL
NATIONAL-OILWELL, INC.
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 960-5100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

Copies to:

<TABLE>
<C> <C>
DAVID R. KING, ESQUIRE JAMES M. PRINCE, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP ANDREWS & KURTH L.L.P.
2000 ONE LOGAN SQUARE 4200 TEXAS COMMERCE TOWER
PHILADELPHIA, PENNSYLVANIA 19103-6993 600 TRAVIS
(215) 963-5000 HOUSTON, TEXAS 77002
(713) 220-4200
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
- ------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share............................ 6,152,500 shares $72.81 $447,963,525 $71,893(3)
=================================================================================================================================
</TABLE>

(1) Includes 802,500 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments, if any. Pursuant to Rule 416(a), this
Registration Statement shall include an additional 6,152,500 shares of
Common Stock to be paid as a stock dividend on November 18, 1997.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based on the
average of the high and low prices reported on the New York Stock Exchange
on November 13, 1997.

(3) Pursuant to Rule 429(b), this Registration Statement includes 2,894,074
shares of Common Stock previously registered on Form S-4 Registration
Statement (File No. 333-32191), as amended. In connection with the 2,894,074
previously registered shares of Common Stock that are being carried forward
onto this Registration Statement, the Registrant paid a fee of $56,452. In
connection with this Registration Statement, the Registrant is paying a fee
based solely on the additional 3,258,426 shares of Common Stock being
registered herein.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

EXPLANATORY NOTE

The Prospectuses contained in this Registration Statement reflect a
one-for-one stock dividend to be paid by the Company on November 18, 1997.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER , 1997
PROSPECTUS

10,700,000 SHARES

[LOGO]

NATIONAL-OILWELL, INC.
COMMON STOCK
---------------------

All of the 10,700,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of National-Oilwell, Inc. ("National-Oilwell" or the "Company")
offered hereby are being sold by certain stockholders of National-Oilwell (the
"Selling Stockholders"). See "Selling Stockholders." National-Oilwell will not
receive any of the proceeds from the sale of the Common Stock by the Selling
Stockholders.

Of the 10,700,000 shares of Common Stock being offered hereby, 8,560,000
shares are being offered in the United States and Canada (the "U.S. Offering")
by the U.S. Underwriters (as defined herein) and 2,140,000 shares are being
offered outside the United States and Canada (the "International Offering" and,
together with the U.S. Offering, the "Offerings") by the International Managers
(as defined herein, together with the U.S. Underwriters, the "Underwriters").
The price to public and the underwriting discount per share are identical for
the Offerings and the closings for both Offerings are conditioned upon each
other. See "Underwriting."

The Common Stock is traded on the New York Stock Exchange under the symbol
"NOI." On November 12, 1997, the last reported sale price of the Common Stock on
the New York Stock Exchange was $38.25 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
===================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) SELLING STOCKHOLDERS(2)
- -------------------------------------------------------------------------------------------------------------------
Per Share.................................... $ $ $
- -------------------------------------------------------------------------------------------------------------------
Total(3)..................................... $ $ $
===================================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Expenses estimated at $430,000 will be paid by the Company.

(3) The Selling Stockholders have granted to the Underwriters options,
exercisable within 30 days after the date of this Prospectus, to purchase up
to an additional 1,605,000 shares of Common Stock at the Price to Public,
less Underwriting Discount, solely to cover over-allotments, if any. If such
options are exercised in full, the Price to Public, Underwriting Discount
and Proceeds to Selling Stockholders will be $ , $ and
$ , respectively. See "Underwriting."

---------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1997.

---------------------

MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
THE ROBINSON-HUMPHREY COMPANY
SIMMONS & COMPANY
INTERNATIONAL
---------------------

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 4

NATIONAL-OILWELL
MANUFACTURED DRILLING MACHINERY & EQUIPMENT

[PICTURE OF POWER SWIVEL]

POWER SWIVEL
[PICTURE OF DRAWWORKS]
DRAWWORKS

[PICTURE OF RIG]

[PICTURE OF MUD PUMPS]

MUD PUMPS

National-Oilwell designs and builds land drilling rigs including the
primary machinery components highlighted above.

MERRILL LYNCH SPECIALISTS INC. ("MLSI"), AN AFFILIATE OF MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, ONE OF THE UNDERWRITERS, ACTS AS A
SPECIALIST IN THE COMMON STOCK OF THE COMPANY PURSUANT TO THE RULES OF THE NEW
YORK STOCK EXCHANGE, INC. UNDER AN EXEMPTION GRANTED BY THE SECURITIES AND
EXCHANGE COMMISSION ON JULY 31, 1995, MLSI WILL BE PERMITTED TO CARRY ON ITS
ACTIVITIES AS A SPECIALIST IN THE COMMON STOCK FOR THE ENTIRE PERIOD OF THE
DISTRIBUTION OF THE COMMON STOCK. THE EXEMPTION IS SUBJECT TO THE SATISFACTION
BY MLSI OF THE CONDITIONS SPECIFIED IN THE EXEMPTION. SEE "UNDERWRITING."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
or incorporated by reference in this Prospectus. Prospective investors should
also review carefully the information set forth under "Risk Factors."

Unless otherwise indicated, all information in this Prospectus (i) assumes
the exchange on a one-for-one basis of all exchangeable shares (the
"Exchangeable Shares") of Dreco Energy Services Ltd. ("Dreco") into shares of
Common Stock, (ii) reflects a one-for-one stock dividend (the "Stock Dividend")
paid on November 18, 1997 and (iii) assumes no exercise of the Underwriters'
over-allotment option. Unless the context otherwise requires (i) all references
to "National-Oilwell" or the "Company" are to National-Oilwell, Inc. and its
subsidiaries, and give effect to the September 25, 1997 business combination
(the "Combination") with Dreco and (ii) all references to activities of, and
financial information with respect to, National-Oilwell are presented on a
combined basis, even with respect to periods prior to the consummation of the
Combination.

THE COMPANY

National-Oilwell is a worldwide leader in the design, manufacture and sale
of machinery, equipment and downhole products used in oil and gas drilling and
production, as well as in the distribution to the oil and gas industry of
maintenance, repair and operating products. The Company manufactures and
assembles drilling machinery, including drawworks, mud pumps and power swivels
(also known as "top drives"), which are the major mechanical components of rigs
used to drill oil and gas wells, as well as masts, derricks and substructures,
which are used to support these mechanical components. Many of these components
are designed specifically for applications in offshore, extended reach and deep
land drilling. The Company estimates that approximately 65% of the mobile
offshore rig fleet and the majority of the world's larger land rigs (2,000
horsepower and greater) manufactured in the last twenty years utilize drawworks,
mud pumps and other drilling machinery components manufactured by the Company.

As a result of the Combination, National-Oilwell has added a business
segment that designs and manufactures drilling motors and specialized drilling
tools for rent and for sale. Drilling motors are essential components of systems
for horizontal, directional, extended reach and performance drilling. Drilling
tools include drilling jars, shock tools and other specialized products.

The Company also provides distribution services through its network of
approximately 120 distribution service centers located near major drilling and
production activity worldwide, but principally in the United States and Canada.
These distribution service centers stock and sell a variety of expendable items
for oilfield applications and spare parts for National-Oilwell equipment. As oil
and gas companies and drilling contractors have refocused on their core
competencies and emphasized efficiency initiatives to reduce costs and capital
requirements, the Company's distribution services have expanded to offer
outsourcing and alliance arrangements that include comprehensive procurement,
inventory management and logistics support.

National-Oilwell believes that the Combination with Dreco, completed on
September 25, 1997, enhances the ability of National-Oilwell to compete in the
oilfield products and services industry. Specifically, the combined companies
have the ability to provide a more complete rig package to customers through the
combination of National-Oilwell's oilfield equipment operations (which had
emphasized the major machinery components of a drilling rig) with Dreco's rig
fabrication business (which had emphasized the design and construction of
derricks, masts and substructures). In addition, the combination of Dreco's
engineering expertise with the size, geographical coverage and after-market
support of National-Oilwell is attractive to many customers. National-Oilwell
also added Dreco's downhole products business as a third business segment and
may benefit from the ability of the combined company to market and deliver
Dreco's line of downhole products through National-Oilwell's extensive
distribution system.

significant increases in the prices they can charge for their services and
equipment, and the resulting higher cash flows are enabling capital spending to
replace and upgrade the aging drilling rig fleet.

Over the last fifteen years, much of the demand for capital equipment has
been satisfied from the large surplus of equipment built during the late
seventies and early eighties. The Company believes that the surplus has been
reduced substantially over this period, especially for higher capacity equipment
for which National-Oilwell is a leading supplier. National-Oilwell's backlog for
capital equipment has grown to $240 million at September 30, 1997, up from $38
million at December 31, 1996. The Company expects to ship substantially all of
the current backlog by the end of 1998.

Even with the recent increase in capital equipment orders, National-Oilwell
believes that additional industry growth will occur due to annual ongoing
requirements for higher capacity equipment that will be needed to replace
equipment of this type lost to normal attrition and to satisfy future industry
production requirements. National-Oilwell believes that reasonably anticipated
demand for the purchase of capital equipment from it in 1998 can be met without
significant incremental capital expenditures by the Company's continuing focus
on process improvement and through the combined capabilities available after the
Combination.

National-Oilwell is incorporated in Delaware, with its principal executive
offices located at 5555 San Felipe, Houston, Texas 77056, and its telephone
number is (713) 960-5100.

BUSINESS STRATEGY

National-Oilwell's current business strategy is to enhance its market
positions and operating performance by:

Leveraging Its Installed Base of Higher Horsepower Drilling
Machinery. National-Oilwell believes its market position presents substantial
opportunities to capture a significant portion of expenditures for the
construction of new, higher capability drilling rigs and equipment as well as
the upgrade and refurbishment of existing drilling rigs and equipment. The
Company believes the advanced age of the existing fleet of drilling rigs,
coupled with increasing drilling activity involving greater depths and extended
reach, will increase the demand for the construction of new drilling rigs and
the upgrading and capacity enhancement of existing rigs. National-Oilwell's
higher horsepower drawworks, mud pumps and power swivels provide, in many cases,
the largest capacities currently available in the industry.

Expanding Its Downhole Business. National-Oilwell believes that the
strengthened marketing and distribution capabilities resulting from the
Combination provide an opportunity for growth in the rental and sale of
high-performance drilling motors and downhole tools, especially for use in
directional, horizontal, extended reach and other value-added drilling
applications.

Building on Distribution Strengths and Alliance/Outsourcing
Trends. National-Oilwell has developed and implemented integrated information
and process systems that enhance procurement, inventory management and logistics
activities. The strategic integration of National-Oilwell's distribution
expertise, extensive distribution network and growing base of customer alliances
provides an increased opportunity for cost-effective marketing of
National-Oilwell's manufactured equipment. As a result of efficiency
initiatives, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers, or
outsourcing their procurement, inventory management and logistics requirements
for equipment and supplies in order to achieve cost and capital improvements.
National-Oilwell believes that it is well-positioned to provide these services
as a result of its (i) large and geographically diverse network of distribution
service centers in major oil and gas producing areas, (ii) purchasing leverage
due to the volume of products sold, (iii) breadth of available product lines and
(iv) information systems that offer customers enhanced online and onsite
services.

Continuing to Make Acquisitions That Enhance Its Product
Line. National-Oilwell believes that the oilfield service and equipment industry
will continue to experience consolidation as smaller businesses seek to align
themselves with larger market participants in order to gain access to broader
markets and become
4
<PAGE> 7

affiliated with integrated product offerings. National-Oilwell's strategy is to
take advantage of this trend, including by acquiring businesses that have
operations complementary to its existing product lines. During 1997, the Company
made three significant acquisitions: in September, it completed its Combination
with Dreco, which enables the Company to provide a more complete rig package to
its customers; in May, the Company acquired PEP, Inc., a manufacturer of
petroleum expendable pump products that are similar to those manufactured by
National-Oilwell; and, in April, it acquired the drilling controls business of
Ross Hill Controls, a leader in the manufacture, sale and service of innovative
electrical control systems used in conjunction with drilling operations.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock Offered by Selling Stockholders(1):
U.S. Offering........................................... 8,560,000 shares
International Offering.................................. 2,140,000 shares
Common Stock to be Outstanding After the Offerings........ 51,292,340 shares(1)(2)
New York Stock Exchange Symbol............................ NOI
</TABLE>

- ---------------

(1) Includes 320,000 shares of Common Stock that will be sold in the Offerings
upon the exercise of options by Selling Stockholders.

(2) Excludes 971,288 shares of Common Stock issuable at November 3, 1997 upon
exercise of outstanding options to purchase Common Stock and 316,264 shares
of Common Stock that will be issued in January 1999 pursuant to the
Company's Value Appreciation Plans.

RISK FACTORS

PROSPECTIVE PURCHASERS OF THE COMMON STOCK SHOULD CAREFULLY CONSIDER THE
FACTORS SET FORTH UNDER THE CAPTION "RISK FACTORS."

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains, or has incorporated by reference, forward-looking
statements that address, among other things, statements under "Prospectus
Summary" and "Risk Factors" as well as in the Prospectus generally. Although
National-Oilwell believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from National-Oilwell's expectations are
disclosed under "Risk Factors" and in this Prospectus generally, as well as in
the documents incorporated by reference herein.

RECENT DEVELOPMENTS

For October 1997, the first full month following the Combination,
National-Oilwell reported consolidated revenues of $89.0 million and net income
of $5.2 million ($0.10 per share, assuming the exchange of all Exchangeable
Shares and after adjustment for the Stock Dividend).
5
<PAGE> 8

RISK FACTORS

The following risk factors, as well as the other information contained in
this Prospectus, should be considered carefully before purchasing the Common
Stock offered hereby.

DEPENDENCE ON OIL AND GAS INDUSTRY

National-Oilwell's businesses are substantially dependent upon the
condition of the oil and gas industry and the industry's willingness to explore
for and produce oil and gas. The degree of such willingness is generally
dependent upon the prevailing view of future product prices, which are
influenced by numerous factors affecting the supply and demand for oil and gas,
including the level of drilling activity, worldwide economic activity, interest
rates and the cost of capital, the development of alternate energy sources,
environmental regulation, tax policies, political requirements of national
governments, coordination by the Organization of Petroleum Exporting Countries
("OPEC") and the cost of producing oil and gas. Any significant reduction in
demand for drilling services, in cash flows of drilling contractors or in rig
utilization rates below current levels could result in a drop in demand for
products manufactured and sold by National-Oilwell.

VOLATILITY OF OIL AND GAS PRICES

Oil and gas prices and activity have been characterized by significant
volatility over the last twenty years. Since 1986, spot oil prices (West Texas
Intermediate) have ranged from a low of approximately $11 per barrel in 1986 to
a high of approximately $40 per barrel in 1991; spot gas prices (Henry Hub) have
ranged from lows below $1.00 per mcf of gas in 1992 to highs above $3.00 per mcf
in 1996 and 1997. These price changes have caused numerous shifts in the
strategies and expenditure levels of oil and gas companies and drilling
contractors, particularly with respect to decisions to purchase major capital
equipment of the type manufactured by National-Oilwell. Moreover, uncertainty
with respect to the stability and direction of future prices has often led to
deferral of such expenditures. No assurance can be given as to the future price
levels of oil and gas or the volatility thereof, or that the future price of oil
and gas will be sufficient to support current levels of exploration and
production.

HIGHLY COMPETITIVE INDUSTRY

The oilfield products and services industry is highly competitive. The
revenues and earnings of National-Oilwell can each be affected by competitive
actions such as price changes, introduction of new technologies and products or
improved availability and delivery. National-Oilwell competes with a large
number of companies, some of which may offer certain more technologically
advanced products, possess greater financial resources and have more extensive
and diversified operations.

POTENTIAL PRODUCT LIABILITY AND WARRANTY CLAIMS

Certain products of National-Oilwell are used in potentially hazardous
drilling, completion and production applications that can cause personal injury
or loss of life, damage to property, equipment or the environment and suspension
of operations. National-Oilwell maintains insurance coverage in such amounts and
against such risks as it believes to be in accordance with normal industry
practice. Such insurance does not, however, provide coverage for all liabilities
(including liabilities for certain events involving pollution), and there can be
no assurance that such insurance will be adequate to cover all losses or
liabilities that may be incurred by National-Oilwell in its operations.
Moreover, no assurance can be given that National-Oilwell will, in the future,
be able to maintain insurance at levels it deems adequate and at rates it
considers reasonable or that particular types of coverage will be available.
Litigation arising from a catastrophic occurrence at a location where
National-Oilwell's equipment and services are used may, in the future, result in
National-Oilwell being named as a defendant in product liability or other
lawsuits asserting potentially large claims. National-Oilwell is a party to
various legal and administrative proceedings which have arisen from its
businesses. No assurance can be given with respect to the outcome of these or
any other pending legal and administrative proceedings and the effects such
outcomes may have on National-Oilwell.

6
<PAGE> 9

IMPACT OF GOVERNMENTAL REGULATIONS

Many aspects of National-Oilwell's operations are affected by political
developments, including restrictions on the ability to do business in various
foreign jurisdictions, and are subject to both domestic and foreign governmental
regulation, including those relating to oilfield operations, worker safety and
the protection of the environment. In addition, National-Oilwell depends on the
demand for its services from the oil and gas industry and, therefore, is
affected by any changes in taxation, price controls or other laws and
regulations that affect the oil and gas industry generally. The adoption of laws
and regulations curtailing exploration for or production of oil and gas for
economic or other policy reasons could adversely affect National-Oilwell's
operations. National-Oilwell cannot determine the extent to which its future
operations and earnings may be affected by political developments, new
legislation, new regulations or changes in existing regulations.

IMPACT OF ENVIRONMENTAL REGULATIONS

The operations of National-Oilwell and its customers are affected by
numerous foreign, federal, state, provincial and local environmental laws and
regulations. The technical requirements of these laws and regulations are
becoming increasingly expensive, complex and stringent. These laws may impose
penalties or sanctions for damages to natural resources or threats to public
health and safety. Such laws and regulations may also expose National-Oilwell to
liability for the conduct of or conditions caused by others, or for acts of
National-Oilwell that were in compliance with all applicable laws at the time
such acts were performed. Sanctions for noncompliance may include revocation of
permits, corrective action orders, administrative or civil penalties and
criminal prosecution. Certain environmental laws provide for joint and several
liability for remediation of spills and releases of hazardous substances. In
addition, National-Oilwell may be subject to claims alleging personal injury or
property damage as a result of alleged exposure to hazardous substances, as well
as damage to natural resources.

RISK OF CERTAIN FOREIGN MARKETS

Certain of National-Oilwell's revenues result from the sale of products to
customers for ultimate destinations in the Middle East, Africa and other
international markets and are subject to risks of instability of foreign
economies and governments. Furthermore, National-Oilwell's sales can be affected
by laws and regulations limiting exports to particular countries. In certain
cases, export laws and regulations of one jurisdiction may contradict those of
another.

National-Oilwell attempts to limit its exposure to foreign currency
fluctuations by limiting the amount of sales denominated in currencies other
than United States dollars, Canadian dollars and British pounds.
National-Oilwell has not engaged in and does not currently intend to engage in
any significant hedging or currency trading transactions designed to compensate
for adverse currency fluctuations among those or any other foreign currencies.

INTEGRATION OF ACQUISITIONS AND MANAGEMENT OF GROWTH

National-Oilwell recently consummated the Combination with Dreco and
expects to evaluate and, where feasible, make additional strategic acquisitions
in the future. There is no guarantee that the Company will not encounter
integration difficulties or that it will extract any anticipated cost savings
and margin enhancements. In addition, the process of combining the organizations
could cause the interruption of, or a loss of momentum in, the activities of
some or all of the companies' businesses, which could have an adverse effect on
their combined operations. The Combination and recent growth in revenues and
backlog have placed significant demands on the Company and its management to
improve the combined entity's operational, financial and management information
systems, to develop further the management skills of the Company's managers and
supervisors, and to continue to train, motivate and effectively manage the
Company's employees. The failure of the Company to manage its growth effectively
could have a material adverse effect on the Company.

The Company has pursued an aggressive acquisition strategy, acquiring three
businesses to date in 1997, and expects to continue to evaluate acquisitions
that can provide meaningful benefits by expanding the Company's business and
leveraging its existing infrastructure. However, there are various risks
associated with pursuing an acquisition strategy of this nature, including
problems inherent in integrating new businesses.

7
<PAGE> 10

There can be no assurance that suitable acquisition candidates will be
available, that acquisitions can be completed on reasonable terms, that the
Company will successfully integrate the operations of any acquired entities or
that the Company will have access to adequate funds to effect any desired
acquisitions.

POTENTIAL FUTURE SALE OF SHARES COULD AFFECT MARKET PRICE

At November 3, 1997, the Company had outstanding options to purchase an
aggregate of 1,291,288 shares of Common Stock at prices ranging from $5.63 to
$25.25 per share, of which options to purchase an aggregate of 320,000 shares of
Common Stock at an average exercise price of $5.63 per share will be exercised
in connection with the Offerings. Pursuant to the Stockholders Agreement (the
"Stockholders Agreement") among the Company and certain of the Company's
stockholders, Inverness/Phoenix LLC ("Inverness") and First Reserve Corporation
("First Reserve") have certain demand registration rights and certain other
stockholders have certain rights to be included in any resulting registrations
and, pursuant to the Company's agreement to acquire PEP, Inc., certain other
stockholders have additional demand registration rights. Inverness, First
Reserve and certain other stockholders also have piggyback registration rights
pursuant to the Stockholders Agreement. Following the Offerings, Inverness,
First Reserve and various other stockholders will have registration rights with
respect to 6,173,600, 5,070,494, and 5,185,478 shares of Common Stock,
respectively. The parties to the Stockholders Agreement are either participating
as Selling Stockholders in the Offerings or have waived their registration
rights with respect to a Registration Statement filed by the Company with
respect to the Offerings. The Company, its executive officers and directors and
all Selling Stockholders of the Company have agreed not to offer, pledge,
hypothecate, sell, contract to sell, grant any option, right or warrant for the
sale of, or otherwise dispose of or transfer any shares of Common Stock, or any
securities convertible into, or exchangeable or exercisable for, Common Stock,
and not to file any registration statement under the Securities Act of 1933 with
respect to the Common Stock, with certain exceptions, for a period of 90 days
commencing on the date of this Prospectus without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as
representative of the Underwriters. Future sales of shares of Common Stock by
stockholders or option holders could adversely affect the market price of the
Common Stock. See "Underwriting."

CERTAIN ANTI-TAKEOVER PROVISIONS COULD DISCOURAGE UNSOLICITED PROPOSALS

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Bylaws (the "Bylaws") contain certain
provisions which may have the effect of delaying, deferring or preventing a
change in control of the Company, including a classified board of directors, the
removal of directors from office only for cause, the prohibition of stockholder
action by written consent, advance notice requirements respecting stockholder
nominations for director or any other matter, the number of directors being set
by the board of directors, super majority voting provisions respecting certain
amendments to the Certificate of Incorporation and limitation of persons who may
call special stockholders' meetings. The Delaware General Corporation Law
requires super majority voting thresholds to approve certain "business
combinations" between interested stockholders and the Company which may render
more difficult or tend to discourage attempts to acquire the Company. In
addition, the Company's board of directors has the authority to issue shares of
preferred stock ("Preferred Stock") in one or more series and to fix the rights
and preferences of the shares of any such series without stockholder approval.
Any series of Preferred Stock is likely to be senior to the Common Stock with
respect to dividends, liquidation rights and, possibly, voting rights. The
ability to issue Preferred Stock could also have the effect of discouraging
unsolicited acquisition proposals, thus affecting the market price of the Common
Stock and preventing stockholders from obtaining any premium offered by the
potential buyer.

NO ANTICIPATED DIVIDENDS

The Company's board of directors has not previously authorized and does not
currently anticipate authorizing in the foreseeable future the payment of cash
dividends.

USE OF PROCEEDS

All of the shares of Common Stock are being offered by the Selling
Stockholders. National-Oilwell will not receive any of the proceeds from the
sale of such shares of Common Stock in the Offerings.

8
<PAGE> 11

NATIONAL-OILWELL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial
data for National-Oilwell. Data for the year ended December 31, 1996 includes
the operations of National-Oilwell for the twelve months ended and as of
December 31, 1996 combined pursuant to pooling-of-interests accounting with the
operations of Dreco for the twelve months ended and as of November 30, 1996.
Data for the four years ended August 31, 1995 reflect the operations of Dreco
only, as the operations of National-Oilwell were acquired from a predecessor as
of January 1, 1996 and, in accordance with generally accepted accounting
principles, cannot be combined. Data for the nine months ended September 30,
1997 includes the operations of National-Oilwell for the nine months ended and
as of September 30, 1997 combined pursuant to pooling-of-interests accounting
with the operations of Dreco for the six months ended May 31, 1997 and the three
months ended and as of September 30, 1997. Data for the nine months ended
September 30, 1996 includes the operations of National-Oilwell for the nine
months ended and as of September 30, 1996 combined pursuant to
pooling-of-interests accounting with the operations of Dreco for the nine months
ended and as of August 31, 1996. The unaudited consolidated financial statements
of National-Oilwell include, in the opinion of National-Oilwell's management,
all adjustments necessary to present fairly the results of such periods. Such
data should be read in conjunction with "National-Oilwell Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein from the Company's Current Report on Form 8-K
dated November 7, 1997 and Current Report on Form 10-Q for the quarter ended
September 30, 1997.

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, YEAR ENDED AUGUST 31,(1)
------------------- ------------ -------------------------------------
1997(2) 1996 1996(3) 1995 1994 1993 1992
-------- -------- ------------ ------- ------- ------- -------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................. $705,719 $561,023 $761,816 $86,875 $79,663 $93,981 $66,397
Operating income (loss) before special
items (4).............................. 63,340 30,668 44,110 10,059 (9,253) 3,133 4,963
Operating income (loss) (4).............. 52,680 30,668 27,499 10,059 (9,253) 3,133 4,963
Income (loss) before taxes and
extraordinary loss (5)................. 48,975 22,301 16,718 12,196 (6,709) 6,061 6,525
Income (loss) before extraordinary loss
(5).................................... 30,211 13,058 10,147 7,789 (6,682) 7,386 5,457
Net income (loss)........................ 29,588 13,058 6,147 7,789 (6,682) 7,386 5,457
Income per share before extraordinary
loss (5)............................... 0.58 0.33 0.25 0.68 (0.59) 0.65 0.48
Net income per share..................... 0.57 0.33 0.15 0.68 (0.59) 0.65 0.48
OTHER DATA:
Depreciation and amortization............ 10,480 6,342 8,775 4,558 4,926 4,481 3,410
Capital expenditures..................... 19,462 10,780 15,166 6,435 5,932 6,167 5,172
BALANCE SHEET DATA:
Working capital.......................... 228,484 170,634 168,897 32,992 18,292 27,725 25,594
Total assets............................. 498,102 346,650 352,518 72,355 69,323 74,047 54,592
Long-term debt, less current
maturities............................. 67,596 122,884 39,136 1,987 1,440 2,857 2,579
Stockholders' equity..................... 248,800 96,563 169,016 48,957 38,690 46,626 41,170
</TABLE>

- ---------------

(1) Data for the four years ended August 31, 1995 reflect the operations of
Dreco only, as the operations of National-Oilwell were acquired from a
predecessor as of January 1, 1996 and, in accordance with generally accepted
accounting principles, cannot be combined.

(2) In order to conform Dreco's fiscal year end to match National-Oilwell's year
end, the results of operations for the month of June 1997 have been included
directly in stockholders' equity. Dreco's revenues, net income and net
income per share were $13.4 million, $0.9 million, and $0.02 for the month.

(3) In order to conform Dreco's August 31 fiscal year end to a period within 93
days of National-Oilwell's December 31 year end, the results of operations
for the period from September 1, 1995 through November 30, 1995 have been
included directly in stockholders' equity. Dreco's revenues, net income and
net income per share were $33.4 million, $3.2 million, and $0.28 for such
period.

9
<PAGE> 12

(4) In September 1997, National-Oilwell recorded a $10,660,000 charge related to
merger expenses incurred in connection with the Combination with Dreco. In
October 1996, National-Oilwell recorded $16,611,000 in charges related to
the cancellation of management agreements and expenses related to special
incentive plans that terminated upon the occurrence of its initial public
offering of Common Stock.

(5) National-Oilwell recorded extraordinary losses of $623,000 net of income tax
benefit of $376,000 in September 1997, and of $4,000,000 net of income tax
benefit of $2,400,000, in October 1996 due to the write-off of deferred debt
issuance costs.

10
<PAGE> 13

BUSINESS

GENERAL

The Company manufactures and assembles drilling machinery, including
drawworks, mud pumps and power swivels (also known as "top drives"), which are
the major mechanical components of rigs used to drill oil and gas wells, as well
as masts, derricks and substructures, which are used to support these mechanical
components. Many of these components are designed specifically for applications
in offshore, extended reach and deep land drilling. As a result of the
Combination, National-Oilwell has added a business segment that designs and
manufactures drilling motors and specialized drilling tools for rent and for
sale. Drilling motors are essential components of systems for horizontal,
directional, extended reach and performance drilling. Drilling tools include
drilling jars, shock tools and other specialized products. In addition,
National-Oilwell provides distribution services through its network of
approximately 120 distribution service centers. The relative revenues, before
eliminations, and operating income contribution of the three segments is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
PRODUCTS AND DOWNHOLE DISTRIBUTION
TECHNOLOGY PRODUCTS SERVICES
------------ -------- ------------
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1997
Total revenues................................... $248,040 $48,622 $456,819
Operating income................................. 31,686 18,455 19,466
YEAR ENDED DECEMBER 31, 1996
Total revenues................................... $266,534 $28,604 $518,685
Operating income................................. 25,902 8,858 17,483
</TABLE>

In April 1987, National-Oilwell's predecessor was formed as a partnership
to consolidate two oilfield equipment manufacturing and distribution operations,
each of which had been a leader in the oilfield equipment and distribution
businesses since the late 1800s. Certain members of management and an investor
group incorporated National-Oilwell, Inc. as a Delaware corporation and
purchased the business of the partnership in January 1996. In October 1996,
National-Oilwell sold 9,200,000 shares of its Common Stock in an initial public
offering and listed its shares on the New York Stock Exchange.

On September 25, 1997, National-Oilwell completed the Combination with
Dreco. Pursuant to the Combination Agreement, dated as of May 14, 1997, as
amended, by and between National-Oilwell and Dreco, each holder of Dreco Common
Shares prior to the transaction received .9159 Dreco Exchangeable Shares in
exchange for each of their Dreco Common Shares. Each Exchangeable Share is
intended to have substantially identical economic and legal rights as, and will
ultimately be exchanged for, a share of National-Oilwell Common Stock.

National-Oilwell believes that the Combination with Dreco enhances the
ability of National-Oilwell to compete in the oilfield products and services
industry. Specifically, the combined companies have the ability to provide a
more complete rig package to customers through the combination of
National-Oilwell's oilfield equipment operations (which had emphasized the major
machinery components of a drilling rig) and Dreco's oilfield equipment
operations (which had emphasized the design and construction of derricks, masts
and substructures). In addition, the combination of Dreco's engineering
expertise with the size, geographical coverage and after-market support of
National-Oilwell is attractive to many customers. National-Oilwell also added
Dreco's downhole products business as a business segment and may benefit from
the ability of the combined company to market and deliver Dreco's line of
downhole products through National-Oilwell's extensive marketing and
distribution system.

On May 15, 1997, National-Oilwell acquired by merger 100% of the common
stock of PEP, Inc., a manufacturer of petroleum expendable pump products that
are similar to those manufactured by National-Oilwell. This acquisition provides
a broader line of products as well as additional manufacturing capacity. On

11
<PAGE> 14

April 25, 1997, National-Oilwell purchased the drilling controls business of
Ross Hill Controls, a leader in the manufacture, sale and service of innovative
electrical control systems, including silicon controlled rectifier ("SCR")
houses, used in conjunction with drilling operations. These products are closely
associated with and complementary to other components used in connection with
the drilling process and allow National-Oilwell to offer a more complete rig
package. On December 2, 1996, Dreco acquired 100% of the issued and outstanding
shares of Vector Oil Tool Ltd., which manufactures, sells, rents and services
downhole motors and other products.

CURRENT INDUSTRY ENVIRONMENT

Drilling activity worldwide has increased significantly since early 1996
with demand for oil and gas rising and inventories comparatively low. In
addition, increased use of 3-D seismic, directional drilling and other
technologies have lowered the cost of finding and developing hydrocarbons, while
at the same time oil and gas prices have become more stable. As a result of
these industry conditions, drilling contractors are experiencing significant
increases in the prices they can charge for their services and equipment, and
the resulting higher cash flows are enabling capital spending to replace and
upgrade the aging drilling rig fleet.

Over the last fifteen years, much of the demand for capital equipment has
been satisfied from the large surplus of equipment built during the late
seventies and early eighties. The Company believes that the surplus has been
reduced substantially over this period, especially for higher capacity equipment
for which National-Oilwell is a leading supplier. The Company's orders for new
equipment have increased dramatically over the last eight quarters as shown
below:

CAPITAL EQUIPMENT BACKLOG
($ Millions)

[GRAPH]

Dec-95 Mar-96 Jun-96 Sep-96 Dec-96 Mar-97 Jun-97 Sep-97
------ ------ ------ ------ ------ ------ ------ ------
Backlog 38.0 43.4 33.8 39.2 38.2 86.0 140.8 238.6
Revenue 34.0 27.5 41.4 36.0 34.5 32.4 39.5 55.1

Even with the recent increase in capital equipment orders, National-Oilwell
believes that additional industry growth will occur due to annual ongoing
requirements for higher capacity equipment that will be needed to replace
equipment lost to normal attrition and to satisfy future industry production
requirements. National-Oilwell believes that reasonably anticipated demand for
the purchase of capital equipment from it in 1998 can be met without significant
incremental capital expenditures by the Company's continuing focus on process
improvement, and through the combined capabilities available after the
Combination. Depending on the timing and nature of future orders, future
expansion may be required.

12
<PAGE> 15

BUSINESS STRATEGY

National-Oilwell's current business strategy is to enhance its market
positions and operating performance by:

Building on Distribution Strengths and Alliance/Outsourcing
Trends. National-Oilwell has developed and implemented integrated information
and process systems that enhance procurement, inventory management and logistics
activities. The strategic integration of National-Oilwell's distribution
expertise, extensive distribution network and growing base of customer alliances
provides an increased opportunity for cost-effective marketing of
National-Oilwell's manufactured equipment. As a result of efficiency
initiatives, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers, or
outsourcing their procurement, inventory management and logistics requirements
for equipment and supplies in order to achieve cost and capital improvements.
National-Oilwell believes that it is well-positioned to provide these services
as a result of the Company's (i) large and geographically diverse network of
distribution service centers in major oil and gas producing areas, (ii)
purchasing leverage due to the volume of products sold, (iii) breadth of
available product lines and (iv) information systems that offer customers
enhanced online and onsite services.

Continuing to Make Acquisitions That Enhance its Product
Line. National-Oilwell believes that the oilfield service and equipment industry
will continue to experience consolidation as smaller businesses seek to align
themselves with larger market participants in order to gain access to broader
markets and become affiliated with integrated product offerings.
National-Oilwell's strategy is to take advantage of this trend, including by
acquiring businesses that have operations complementary to its existing product
lines. During 1997, the Company made three significant acquisitions: in
September, it completed its Combination with Dreco, which enables the Company to
provide a more complete rig package to its customers; in May, the Company
acquired PEP, Inc., a manufacturer of petroleum expendable pump products that
are similar to those manufactured by National-Oilwell; and, in April, it
acquired the drilling controls business of Ross Hill Controls, a leader in the
manufacture, sale and service of SCR houses used in conjunction with drilling
operations.

OPERATIONS

Products and Technology

National-Oilwell designs, manufactures and sells the major mechanical
components for both land and offshore rigs used to drill oil and gas wells as
well as complete land drilling and well servicing rigs. The mechanical
components include drawworks, mud pumps, power swivels, SCR houses, traveling
equipment and rotary tables. These are the major components involved in the
primary functions of the drilling of oil and gas wells, which consist of pumping
fluids and hoisting, supporting and rotating the drill string. Many of these
components are designed specifically for applications in offshore, extended
reach and deep land drilling. This equipment is installed on new rigs and used
in the upgrade, refurbishment and repair of existing rigs. While offering a
complete line of conventional rigs, National-Oilwell has extensive experience in
providing rig

13
<PAGE> 16

designs to satisfy requirements for harsh or specialized environments. Such
products include North Slope of Alaska and Arctic drilling and well servicing
rigs, highly mobile drilling and well servicing rigs for jungle and desert use,
modular well servicing rigs for offshore platforms and modular drilling
facilities for North Sea platforms. Masts, derricks and substructures are made
for use on land rigs and on fixed and mobile offshore platforms and are suitable
for drilling to maximum depths ranging up to more than 30,000 feet. Other
products include pedestal cranes, reciprocating and centrifugal pumps and fluid
end expendables for all major manufacturers' pumps.

National-Oilwell's business includes the sale of replacement parts for its
own manufactured machinery and equipment. National-Oilwell estimates that
approximately 65% of the mobile offshore rig fleet and the majority of the
world's larger land rigs (2,000 horsepower and greater) manufactured in the last
twenty years utilize drawworks, mud pumps and other drilling machinery
components manufactured by National-Oilwell. In addition, National-Oilwell
manufactures and sells centrifugal and reciprocating pumps used in oilfield and
industrial applications.

Downhole Products

National-Oilwell designs and manufactures drilling motors and specialized
drilling tools for rent and sale. Rentals generally involve products that are
not economical for a customer to own or maintain because of the broad range of
equipment required for the diverse hole size and depths encountered in drilling
for oil and gas. Sales generally involve products that require infrequent
service, are disposable or are sold in countries where National-Oilwell does not
provide repair and maintenance services.

National-Oilwell's drilling motors are devices placed between the drill
string and the drill bit to cause the bit to rotate without necessarily rotating
the drill string. Drilling motors are essential components in systems for
horizontal, directional, extended reach and performance drilling.

National-Oilwell often rents its drilling motors, retaining control over
the servicing and maintenance function so as to preserve their operating
reliability. National-Oilwell is continuing to enhance and broaden the range of
its drilling motors by, among other things, widening the size range offered,
reducing the initial cost and ongoing repair and maintenance cost, and
developing alternative designs of motor bearing assembly sealing systems and
speed reduction systems.

National-Oilwell manufactures hydraulic-mechanical and mechanical drilling
jars and shock tools. Drilling jars are used to assist in releasing a drill
string that becomes stuck in a well bore. A shock tool is a downhole shock
absorber placed low in the drill string, often directly above the drill bit when
rotary drilling in formations that are hard and abrasive. Shock tools are
intended to extend bit life, reduce drill string failures and reduce damage to
the drilling rig. National-Oilwell also manufactures and rents or sells fishing
jars, jar accelerators, bumper subs, reamers, stabilizers, kelly and tubing
safety valves and drill string inside blowout preventers.

Distribution Services

National-Oilwell provides distribution services through its network of
approximately 120 distribution service centers located near major drilling and
production activity worldwide, but principally in the United States and Canada.
These distribution service centers stock and sell a variety of expendable items
for oilfield applications and spare parts for National-Oilwell equipment. As oil
and gas companies and drilling contractors have refocused on their core
competencies and emphasized efficiency initiatives to reduce costs and capital
requirements, National-Oilwell's distribution services have expanded to offer
outsourcing and alliance arrangements that include comprehensive procurement,
inventory management and logistics support. In addition, management believes
that National-Oilwell has a competitive advantage in the distribution services
business by distributing market-leading products manufactured by its Products
and Technology business.

The supplies and equipment stocked by National-Oilwell's distribution
service centers vary by location. Each distribution point generally offers a
large line of oilfield products including valves, fittings, flanges, spare parts
for oilfield equipment and miscellaneous expendable items. Most drilling
contractors and oil and gas

14
<PAGE> 17

companies typically buy such supplies and equipment pursuant to non-exclusive
contracts, which normally specify a discount from National-Oilwell's list price
for each product or product category.

National-Oilwell's tubular business is focused on the procurement,
inventory management and delivery of oil country tubular goods manufactured by
third parties. Tubular goods primarily consist of well casing and production
tubing used in the drilling, completion and production of oil and gas wells.
Well casing is used to line the walls of a well bore to provide structural
support. Production tubing provides the conduit through which the oil or gas
will be brought to the surface upon completion of the well. Historically, sales
of tubular goods have been concentrated in North America, although
National-Oilwell makes occasional sales for shipment to foreign destinations.
Substantially all of National-Oilwell's sales of tubular goods are made through
National-Oilwell's direct sales force.

As a result of efficiency initiatives that are taking place in the oil and
gas industry, drilling contractors and oil and gas companies are more frequently
seeking strategic alliances and outsourcing their procurement and inventory
management requirements. These strategic alliances constitute a growing
percentage of National-Oilwell's business and differ from standard agreements
for supplies and equipment in that National-Oilwell becomes the customer's
primary supplier of those items. In certain cases, National-Oilwell has assumed
responsibility for procurement, inventory management and product delivery for
the customer, occasionally by working directly out of the customer's facilities.

MARKETING

Substantially all of National-Oilwell's drilling machinery, equipment and
spare parts sales and a large portion of National-Oilwell's pumps and parts are
sold through National-Oilwell's direct sales force and through
National-Oilwell's distribution service centers. National-Oilwell also markets
its pumps and parts through distribution networks not owned by National-Oilwell.
Sales to foreign state-owned oil companies are typically made in conjunction
with agent or representative arrangements. National-Oilwell's downhole products
are rented in Canada and Venezuela and marketed worldwide through its own sales
force and through commission representatives. Customers include drilling
contractors, exploration and production companies, supply companies and
nationally owned or controlled drilling and production companies.

COMPETITION

The oilfield equipment industry is highly competitive and
National-Oilwell's revenues and earnings can be affected by price changes,
introduction of new technologies and products and improved availability and
delivery. National-Oilwell competes in one or more of its segments with a large
number of companies, including Continental Emsco Company (Products and
Technology and Distribution Services), IRI International Corporation (Products
and Technology) and Wilson Industries, Inc. (Downhole Products and Distribution
Services).

MANUFACTURING AND BACKLOG

National-Oilwell's principal manufacturing facilities are located in
Houston, Texas, Clearfield, Utah, McAlester, Oklahoma and Edmonton, Alberta,
Canada. National-Oilwell also outsources the manufacture of parts or purchases
components in finished form from qualified subcontractors. National-Oilwell's
manufacturing operations require a variety of components, parts and raw
materials which National-Oilwell purchases from multiple commercial sources.
National-Oilwell has not experienced and does not expect any significant delays
in obtaining deliveries of essential components, parts or raw materials.

Sales of National-Oilwell's products are made on the basis of written
orders and oral commitments. The level of backlog at any particular time is not
necessarily indicative of the future operating performance of the Company, and
orders may be changed at any time. Substantially all of the current backlog will
be shipped by the end of 1998. See "-- Current Industry Environment."

15
<PAGE> 18

ENGINEERING

National-Oilwell maintains a staff of engineers and technicians to (i)
design and test new products, components and systems for use in drilling and
pumping applications, (ii) enhance the capabilities of existing products and
(iii) assist National-Oilwell's sales organization and customers with special
projects. National-Oilwell's product engineering efforts focus on developing
technology to improve the economics and safety of drilling and pumping
processes. National-Oilwell has recently developed a 1,000-ton capacity power
swivel to complement its lower capacity models. National-Oilwell has also
introduced a 6,000 horsepower heave compensating drawworks and dual derrick
systems to increase customer efficiencies on deep water drilling rigs at
extended depths and during horizontal drilling.

PATENTS AND TRADEMARKS

National-Oilwell owns or has a license to use a number of patents covering
a variety of products. Although in the aggregate these patents are of
importance, National-Oilwell does not consider any single patent to be of a
critical or essential nature. In general, National-Oilwell depends on
technological capabilities, quality products and application of its expertise
rather than patented technology in the conduct of its business. National-Oilwell
enjoys significant product name-brand recognition, principally through its
NATIONAL-OILWELLH, DRECOH, ROSS HILL, TRUDRILH, VECTOR, GRIFFITHH and
MISSION-FLUID KING trade names.

DISTRIBUTION SUPPLIERS

National-Oilwell obtains products sold by its Distribution Services
business from a number of suppliers, including the Company's Products and
Technology segment. National-Oilwell does not believe that any one supplier of
products is material to National-Oilwell. For the year ended December 31, 1996,
National-Oilwell purchased approximately one third of its tubular requirements
pursuant to a distribution agreement with the U.S. Steel Group of USX
Corporation, and its remaining requirements from various suppliers. National-
Oilwell has not experienced and does not foresee experiencing a shortage in
products or tubular goods sold by National-Oilwell, although order lead times
for tubular goods have increased over the last six months due to higher demand
for these products.

16
<PAGE> 19

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information regarding each of the directors and
executive officers of National-Oilwell. The Certificate of Incorporation of
National-Oilwell currently classifies the board of directors into three classes
having staggered terms of three years each. The periods shown for service as an
employee of National-Oilwell include service as an employee of its predecessor
partnership and of Dreco.

<TABLE>
<CAPTION>
DIRECTOR'S
TERM
NAME AGE POSITION WITH THE COMPANY EXPIRING
---- --- ------------------------- ----------
<S> <C> <C> <C>
Joel V. Staff(1).................... 53 Chairman of the Board, President and 1999
Chief Executive Officer
James J. Fasnacht................... 42 Vice President and Group President, --
Distribution Services
W. Douglas Frame.................... 55 Vice President and Group President, --
Downhole Products
Jerry N. Gauche..................... 49 Vice President -- Organizational --
Effectiveness
Steven W. Krablin................... 47 Vice President and Chief Financial --
Officer
Lynn L. Leigh....................... 72 Senior Vice President -- Marketing --
Gail M. McGee....................... 50 Vice President and Chief Information --
Officer
Merrill A. Miller, Jr............... 47 Vice President and Group President, --
Products and Technology
Paul M. Nation...................... 43 Vice President, Secretary and General --
Counsel
Frederick W. Pheasey................ 55 Executive Vice President and Director 1998
Howard I. Bull(2)(3)................ 57 Director 1998
James C. Comis III.................. 33 Director 1998
James T. Dresher(2)(3).............. 78 Director 2000
W. McComb Dunwoody(1)............... 52 Director 1999
William E. Macaulay(1).............. 52 Director 1999
Robert L. Phillips.................. 46 Director 2000
Bruce M. Rothstein.................. 45 Director 2000
</TABLE>

- ---------------

(1) Member of Executive Committee.

(2) Member of Audit Committee.

(3) Member of Compensation Committee.

Joel V. Staff has served as the President and Chief Executive Officer of
National-Oilwell since July 1993 and Chairman of the Board since January 1996.
Prior to joining National-Oilwell, Mr. Staff served as a Senior Vice President
of Baker Hughes Incorporated, a worldwide diversified oil services company, from
October 1983 to May 1993.

James J. Fasnacht has served as Vice President since November 1993, as
Group President, Distribution Services since April 1997, as General Manager of
Pumping Systems from November 1993 to April 1997, as Human Resources Manager
from 1991 to November 1993 and in various other capacities since joining
National-Oilwell in 1979.

W. Douglas Frame has served as Vice President and Group President, Downhole
Products since September 1997. Prior thereto, Mr. Frame, who joined Dreco in
1978, served in various capacities in both the drilling equipment and downhole
products groups.

17
<PAGE> 20

Jerry N. Gauche has served as Vice President -- Organizational
Effectiveness since joining National-Oilwell in January 1994. Prior thereto, Mr.
Gauche was employed by BP Exploration, Inc., an oil and gas exploration and
production company, where he served as General Manager of Central Services from
January 1990 to September 1992 and Director of Public Affairs and Executive
Coordination from May 1988 to December 1989. From October 1992 to January 1994,
Mr. Gauche was self-employed managing his personal investments.

Steven W. Krablin has served as Vice President and Chief Financial Officer
since January 1996. Mr. Krablin served in various capacities including Vice
President -- Finance and Chief Financial Officer of Enterra Corporation, an
international oilfield service company, from November 1986 to January 1996.

Lynn L. Leigh has served as Senior Vice President -- Marketing since
October 1993. Prior to joining National-Oilwell, Mr. Leigh served as the
President and Chief Executive Officer of Hydril Company, a manufacturer of
oilfield drilling equipment, from January 1992 to July 1993. From July 1993 to
October 1993, Mr. Leigh was self-employed managing his personal investments.

Gail M. McGee joined National-Oilwell in June 1997 as Vice President and
Chief Information Officer. From May 1996 to March 1997, Ms. McGee was Chief
Information Officer of J.D. Power and Associates, a survey firm. From February
1994 to May 1996, she served as Vice President of Wells Fargo Bank. From January
1988 to February 1994, Ms. McGee was Vice President, Department Head of
Productivity and Organizational Readiness at Chemical Bank.

Merrill A. Miller, Jr. has served as Vice President since July 1996, as
Group President, Products and Technology since April 1997, as General Manager of
Drilling Systems from July 1996 to April 1997 and as Vice President of
Marketing, Drilling Systems from February 1996 to July 1996. Prior thereto, Mr.
Miller was President of Anadarko Drilling Company, a drilling contractor, from
January 1995 to February 1996. From May 1980 to January 1995, Mr. Miller served
in various capacities including Vice President/U.S. Operations of Helmerich &
Payne International Drilling Co., a drilling contractor.

Paul M. Nation has served as Vice President since 1994 and Secretary and
General Counsel of National-Oilwell since 1987.

Frederick W. Pheasey has served as Executive Vice President and director of
National-Oilwell since September 1997. He was a co-founder of Dreco and served
in various executive capacities with Dreco and its predecessors since 1972.

Howard I. Bull has served as a Director of National-Oilwell since January
1996. Mr. Bull was President, Chief Executive Officer and a director of Dal-Tile
International, Inc., a manufacturer and distributor of tile, from April 1994
until his retirement in June 1997. Prior thereto, Mr. Bull spent 10 years with
Baker Hughes Incorporated, a worldwide diversified oil services company, where
he became Chief Executive Officer for Baker Hughes Drilling Equipment Company.
Additionally, he served at York International Corporation, a worldwide
manufacturer and distributor of air conditioner and refrigeration equipment, as
President of its Applied Systems Division and Air Conditioning Business Group.
Mr. Bull also serves as a director of Marine Drilling Companies, Inc., an
offshore drilling contractor. Mr. Bull has an interest in one of the funds
managed by Inverness/Phoenix LLC, a principal stockholder of the Company. See
"Selling Stockholders."

James C. Comis III has served as a Director of National-Oilwell since
January 1996. He is a Managing Director of Inverness Management LLC. Through
Inverness Management LLC and its affiliates, Mr. Comis has been engaged in
sponsoring and investing in private equity transactions since 1990.
Additionally, Mr. Comis has served as Managing Director of Inverness/Phoenix
LLC, a principal stockholder of the Company, since 1994. See "Selling
Stockholders."

James T. Dresher has served as a Director of National-Oilwell since January
1996. Mr. Dresher has been Chairman/Chief Executive Officer and principal owner
of Unidata, Inc., a Denver-based software company, since December 1991 and has
been Chairman and owner of Glenangus, a residential real estate development
company, since 1972. In addition, he served as Chairman/CEO of York
International Corporation, a worldwide manufacturer and distributor of air
conditioner and refrigeration equipment, from 1988 to 1993.

18
<PAGE> 21

Prior thereto, Mr. Dresher served as a director, Chief Financial Officer and
Executive Vice President of Baker International Corporation, a worldwide
diversified oil services company. Mr. Dresher has an interest in one of the
funds managed by Inverness/Phoenix LLC, a principal stockholder of the Company.
See "Selling Stockholders."

W. McComb Dunwoody has served as a Director of National-Oilwell and
Chairman of its Executive Committee since January 1996. He is a Managing
Director of Inverness Management LLC. Through Inverness Management LLC and its
affiliates, Mr. Dunwoody has been engaged in sponsoring and investing in private
equity transactions since 1981. Additionally, Mr. Dunwoody has served as
President and Chief Executive Officer of Inverness/Phoenix LLC, a principal
stockholder of the Company, since 1994 and has been Chief Executive Officer of
The Inverness Group Incorporated since 1981. See "Selling Stockholders."

William E. Macaulay has served as a Director of National-Oilwell since
January 1996. He has been the President and Chief Executive Officer of First
Reserve Corporation, a corporate manager of private investments focusing on the
energy and energy-related sectors, since 1983. First Reserve Corporation is a
principal stockholder of the Company. See "Selling Stockholders." Mr. Macaulay
serves as a director of Weatherford Enterra, Inc., an oilfield service company,
Maverick Tube Corporation, a manufacturer of steel pipe and casing,
TransMontaigne Oil Company, an oil products distribution and refining company,
Hugoton Energy Corporation, an independent oil and gas exploration and
production company, Cal Dive International, Inc., a provider of subsea services
in the Gulf of Mexico, Phoenix Energy Services, Inc., a diversified energy
service company, Anker Coal Group, Inc., a producer and marketer of coal, James
River Coal Corporation, a coal producer, Domain Energy Corporation, an oil and
gas exploration company, and Entech Industries, Inc., a manufacturer of high-end
valves used principally in sub-sea gathering systems.

Robert L. Phillips has served as a director of National-Oilwell since
September 1997. From April 1994 until September 1997, Mr. Phillips was President
and Chief Executive Officer of Dreco. Prior thereto, Mr. Phillips had been a
partner of the law firm of Blake, Cassels & Graydon, in Calgary, Alberta, since
February 1990 and Secretary of Dreco from February 1990 to March 1994.

Bruce M. Rothstein has served as a Director of National-Oilwell since May
1996. Mr. Rothstein is a Managing Director of First Reserve Corporation, which
he joined in 1991. First Reserve Corporation is a principal stockholder of the
Company. See "Selling Stockholders." Mr. Rothstein serves as a director of Anker
Coal Group, Inc., a producer and marketer of coal, and Entech Industries, Inc.,
a manufacturer of high-end valves used principally in sub-sea gathering systems.

19
<PAGE> 22

SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of November 3, 1997 and as adjusted
to reflect the sale of the shares offered in the Offerings. This information has
been provided by each of the Selling Stockholders as of November 3, 1997, at the
request of National-Oilwell. There are no shares subject to stock options
granted under the Amended and Restated National-Oilwell, Inc. Stock Award and
Long-Term Incentive Plan (the "Stock Incentive Plan") that are exercisable
within 60 days of November 3, 1997.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED SUBSEQUENT TO
OFFERINGS(1) SHARES OFFERINGS(1)
--------------------- BEING --------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED(2) NUMBER PERCENT
--------------------------- ---------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND OFFICERS
James J. Fasnacht..................... 377,046 * 150,000 227,046 *
W. Douglas Frame(3)(4)................ 33,336 * 20,000 13,336 *
Jerry N. Gauche....................... 505,060 * 200,000 305,060 *
Lynn L. Leigh......................... 333,880 * 150,000 183,880 *
Frederick W. Pheasey(4)............... 730,610 1.4 500,000 230,610 *
Robert L. Phillips(4)(5).............. 380,556 * 300,000 80,556 *
Joel V. Staff(6)...................... 1,808,622 3.5 640,000 1,168,622 2.3
5% HOLDERS
First Reserve Corporation(7).......... 8,370,494 16.3 3,300,000 5,070,494 9.9
General Electric Capital
Corporation(8)...................... 3,187,804 6.2 1,040,000 2,147,804 4.2
Inverness/Phoenix LLC(9).............. 10,203,600 19.9 4,060,000 6,143,600 12.0
OTHER STOCKHOLDERS
B. D. Berryhill....................... 274,400 * 110,000 164,400 *
Dean Foote............................ 106,310 * 30,000 76,310 *
Billy R. Hext......................... 509,600 * 200,000 309,600 *
----------
TOTAL SHARES BEING OFFERED............ 10,700,000
==========
</TABLE>

- ---------------

* Less than one percent.

(1) Based on 51,292,340 shares of Common Stock outstanding at November 3, 1997,
including 320,000 shares that will be sold in the Offerings upon the
exercise of stock options.

(2) In addition to these shares, each Selling Stockholder has granted the U.S.
Underwriters and the International Managers options, exercisable within 30
days after the date of this Prospectus, to purchase up to a number of
additional shares equal to 15 percent of the number of shares offered hereby
(an aggregate of 1,605,000 shares), solely to cover over-allotments, if any.

(3) All the shares offered by Mr. Frame in the Offerings will come from the
exercise of options.

(4) All or part of the shares beneficially owned prior to the Offerings are held
as Exchangeable Shares. To the extent necessary, Exchangeable Shares will be
exchanged for shares of National-Oilwell Common Stock by the Selling
Stockholder immediately prior to closing of the Offerings.

(5) Shares beneficially owned prior to the Offerings include 366,360 shares
subject to exercisable options and 2,288 shares of Common Stock beneficially
owned by Mr. Phillips' wife, in respect of which Mr. Phillips has disclaimed
any beneficial ownership. All shares offered by Mr. Phillips in the
Offerings will come from the exercise of options.

(6) Shares beneficially owned prior to the Offerings include 1,057,628 shares
owned by the trusts created by that certain Trust Agreement dated April 12,
1989 by and among Joel V. Staff and Mary Martha Staff, as Trustors, and
Richard Staff, as Trustee. Joel Staff does not vote nor exercise investment
power over, and disclaims beneficial ownership of, these shares. The trusts
are selling 520,000 shares, and Mr. Staff is selling 120,000 shares.

20
<PAGE> 23

(7) Shares beneficially owned prior to the Offerings are as reflected in
Schedule 13G filed with the SEC on February 14, 1997. Represents shares
beneficially owned as of December 31, 1996 by the following limited
partnerships of which, in each case, First Reserve Corporation is the
managing general partner: First Reserve Fund V, Limited
Partnership -- 334,830; First Reserve Fund VI, Limited Partnership --
7,700,834; and First Reserve Fund V-2, Limited Partnership -- 334,830. First
Reserve Corporation, in its role as managing partner of the partnerships,
has the power to cause each partnership to dispose of or to vote shares held
by each partnership. William E. Macaulay, a director of National-Oilwell,
and John A. Hill, another First Reserve Corporation stockholder, may be
deemed to share beneficial ownership of the shares owned by First Reserve
Corporation as a result of Messrs. Macaulay's and Hill's ownership of common
stock of First Reserve Corporation. In addition, Mr. Macaulay is President
of First Reserve Corporation. Both Messrs. Macaulay and Hill disclaim
beneficial ownership of all such shares. The partnerships are selling shares
on a pro rata basis.

(8) Shares beneficially owned prior to the Offerings are as reflected in
Schedule 13G filed with the SEC on February 13, 1997. General Electric
Capital Corporation has sole voting and investment power over the shares.

(9) Shares beneficially owned prior to the Offerings are as reflected in
Schedule 13G filed with the SEC on February 14, 1997. Represents shares
beneficially owned as of December 31, 1996 by the following partnerships of
which, in each case, Inverness/Phoenix LLC is the managing general partner:
DPI Oil Service Partners Limited Partnership -- 9,450,562; and DPI Partners
II -- 753,038. Inverness/Phoenix LLC, in its role as managing general
partner of the partnerships, has the power to cause each partnership to
dispose of or to vote shares held by each partnership. Messrs. Comis and
Dunwoody, each of whom is a director of National-Oilwell, serve on the
investment committee of Inverness/Phoenix LLC, which committee has sole
power to vote and dispose of that company's investments. Howard I. Bull and
James T. Dresher, directors of National-Oilwell, each have interests in DPI
Partners I, a general partnership which holds a limited partnership interest
in DPI Oil Service Partners Limited Partnership, and limited partnership
interests in DPI Oil Service Partners Limited Partnership. Messrs. Bull and
Dresher each disclaim beneficial ownership of all such shares. Prior to the
Offerings, certain of the partnerships' shares to be sold in the Offerings
will be transferred to charitable trusts or foundations created on behalf of
Messrs. Comis, Dresher and Dunwoody. Such shares will be sold in the
Offering by such trusts and foundations. The partnerships will sell shares
on a pro rata basis.

21
<PAGE> 24

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general summary of certain United States federal income
and estate tax consequences expected to result under current law from the
purchase, ownership and taxable disposition of Common Stock by a person or
entity other than (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any state thereof, (iii) an estate, the income
of which is subject to United States federal income taxation regardless of its
source or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of the
trust (a "Non-U.S. Holder"). This summary does not address all of the United
States federal income and estate tax considerations that may be relevant to a
Non-U.S. Holder in light of its particular circumstances or to Non-U.S. Holders
that may be subject to special treatment under United States federal income tax
laws (such as insurance companies, tax-exempt organizations, financial
institutions, brokers, dealers in securities, and taxpayers that are neither
citizens nor residents of the United States, or that are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States).
Furthermore, this summary does not discuss any aspects of state, local or
foreign taxation. This summary is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations, judicial
opinions, published positions of the United States Internal Revenue Service (the
"IRS") and other applicable authorities, all of which are subject to change,
possibly with retroactive effect. Each prospective purchaser of Common Stock is
advised to consult its tax advisor with respect to the tax consequences of
acquiring, holding and disposing of Common Stock.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of United States federal income tax at a 30 percent rate
(or such lower rate as may be specified by an applicable income tax treaty)
unless the dividends are effectively connected with the conduct of a trade or
business of the Non-U.S. Holder within the United States, in which case the
dividends will be taxed at ordinary United States federal income tax rates and
will not be subject to the withholding tax described above. If the Non-U.S.
Holder is a corporation, such effectively connected income may also be subject
to an additional "branch profits tax."

SALE OR DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of Common Stock so long as (i) the gain is not effectively connected
with a trade or business of the Non-U.S. Holder in the United States; (ii) in
the case of a Non-U.S. Holder who is an individual and holds the Common Stock as
a capital asset, either (a) such holder is not present in the United States for
183 or more days in the taxable year of the disposition or (b) such holder does
not have a "tax home" in the United States for United States federal income tax
purposes or does not maintain an office or other fixed place of business in the
United States to which such gain is attributable; (iii) the Non-U.S. Holder is
not subject to tax pursuant to the provisions of United States federal income
tax law applicable to certain United States expatriates or (iv) the Common Stock
continues to be "regularly traded on an established securities market" for
United States federal income tax purposes and the Non-U.S. Holder has not held,
directly or indirectly, at any time during the five-year period ending on the
date of disposition (or, if shorter, the Non-U.S. Holder's holding period), more
than 5 percent of the outstanding Common Stock.

BACKUP WITHHOLDING AND INFORMATION REPORTING

United States backup withholding tax generally will not apply to dividends
paid on Common Stock to a Non-U.S. Holder at an address outside the United
States. The Company must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends paid to such holder and the amount, if any, of tax
withheld with respect to such dividends. This information may also be made
available to the tax authorities in the Non-U.S. Holder's country of residence.

22
<PAGE> 25

Upon the sale or other taxable disposition of Common Stock by a Non-U.S.
Holder to or through a United States office of a broker, the broker must backup
withhold at a rate of 31 percent and report the sale to the IRS, unless the
holder certifies its non-U.S. status under penalties of perjury or otherwise
establishes exemption. Upon the sale or other taxable disposition of Common
Stock by a Non-U.S. Holder to or through the foreign office of a United States
broker, or a foreign broker with certain types of relationships to the United
States, the broker must report the sale to the IRS (but is not required to
backup withhold) unless the broker has documentary evidence in its files that
the seller is a Non-U.S. Holder and certain other conditions are met, or the
holder otherwise establishes an exemption.

Backup withholding is not an additional U.S. federal income tax. Amounts
withheld under the backup withholding rules are generally allowable as a refund
or credit against such Non-U.S. Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
IRS.

The United States Treasury Department has recently issued regulations
generally effective for payments made after December 31, 1998 that will affect
the procedures to be followed by a Non-U.S. Holder in establishing such holder's
status as a Non-U.S. Holder for purposes of the withholding, backup withholding
and information reporting rules discussed herein. Among other things, a Non-U.S.
Holder may be required to furnish new certification of foreign status.
Prospective investors should consult their advisors concerning the effect of
such regulations on an investment in the Common Stock.

FEDERAL ESTATE TAXES

Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States federal estate tax
purposes) of the United States at the time of death will be included in such
individual's gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.

23
<PAGE> 26

UNDERWRITING

Subject to the terms and conditions set forth in the U.S. purchase
agreement (the "U.S. Purchase Agreement") among the Company, the Selling
Stockholders and each of the underwriters named below (the "U.S. Underwriters"),
the Selling Stockholders have agreed to sell to each of the U.S. Underwriters,
and each of the U.S. Underwriters has severally agreed to purchase from the
Selling Stockholders, the number of shares of Common Stock set forth below
opposite their respective names.

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
----------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith.......................
Incorporated
Goldman, Sachs & Co.........................................
Morgan Stanley & Co. Incorporated...........................
The Robinson-Humphrey Company, LLC..........................
Simmons & Company International.............................
----------
Total.......................................... 8,560,000
==========
</TABLE>

The Company and the Selling Stockholders have also entered into an
international purchase agreement (the "International Purchase Agreement" and,
together with the U.S. Purchase Agreement, the "Purchase Agreements") with the
underwriters outside the United States and Canada (the "International Managers"
and, together with the U.S. Underwriters, the "Underwriters"). Subject to the
terms and conditions set forth in the International Purchase Agreement, and
concurrently with the sale of 8,560,000 shares of Common Stock to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, the Selling Stockholders
have agreed to sell to the International Managers, and the International
Managers have severally agreed to purchase from the Selling Stockholders, an
aggregate of 2,140,000 shares of Common Stock. The public offering price per
share and the underwriting discount per share are identical under the
International Purchase Agreement and the U.S. Purchase Agreement.

In the Purchase Agreements, the several U.S. Underwriters and the several
International Managers have agreed, respectively, subject to the terms and
conditions set forth therein, to purchase all of the shares being sold pursuant
to the Purchase Agreements if any of such shares of Common Stock are purchased.
Under certain circumstances, the commitments of nondefaulting U.S. Underwriters
or International Managers (as the case may be) may be increased as set forth in
the U.S. Purchase Agreement and the International Purchase Agreement,
respectively. The closings with respect to the sale of the shares of Common
Stock to be purchased by the International Managers and the U.S. Underwriters
are conditioned upon one another.

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for purposes of resale at the public offering price, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to persons
who are non-United States persons or non-Canadian persons or to persons they
believe intend to resell to persons who are non-United States persons or
non-Canadian persons, and the International Managers and any dealer to whom they
sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are United States persons and Canadian persons or to
persons they believe intend to resell to persons who are United States and
Canadian persons, except, in each case, for transactions pursuant to the
Intersyndicate Agreement.

The U.S. Underwriters have advised the Selling Stockholders that the U.S.
Underwriters propose to offer the shares of Common Stock offered hereby to the
public initially at the public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share on sales
to certain other dealers. After the U.S. Offering, the public offering price,
concession and discount may be changed.

24
<PAGE> 27

The Selling Stockholders have granted an option to the U.S. Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 1,284,000 additional shares of Common Stock at the price to
public set forth on the cover page of this Prospectus, less the underwriting
discount. The U.S. Underwriters may exercise this option only to cover
over-allotments, if any. If the U.S. Underwriters exercise this option, each of
the U.S. Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table bears to the 10,700,000 shares of Common Stock offered hereby. The Selling
Stockholders have also granted an option to the International Managers,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 321,000 additional shares of Common Stock solely to cover
over-allotments, if any, on terms similar to those granted to the U.S.
Underwriters.

The Company has agreed to indemnify the Selling Stockholders and the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments which the Selling Stockholders or
Underwriters may be required to make in respect thereof. In addition, the
Selling Stockholders have agreed, subject to certain limitations, to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, with respect to information provided by the Selling Stockholders
in this Prospectus.

In connection with the Offerings, the Company's directors and executive
officers and the Selling Stockholders have agreed that they will not, during a
period of 90 days from the date of this Prospectus, without the prior written
consent of Merrill Lynch, directly or indirectly(i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase any option, or
contract to sell or grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into, or exchangeable or exercisable for, Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise; provided, shares of Common Stock may be
(i) sold by the Selling Stockholders pursuant to the Purchase Agreements (as
defined herein); (ii) transferred pursuant to bona fide gifts to persons who
agree prior to the transfer to be bound by a similar lock-up agreement; (iii)
transferred in private transactions to affiliates of such stockholders who agree
to be bound by a similar agreement; (iv) pledged as collateral for certain loans
or (v) transferred to a beneficial owner of such shares who is subject to a
similar lock-up agreement pursuant to an event of termination under the
Company's Supplemental Savings Plan. In addition, National-Oilwell will not,
without the prior written consent of Merrill Lynch, as representative of the
Underwriters, directly or indirectly, offer, contract to sell, sell, grant any
option, right or warrant with respect to, pledge, hypothecate or otherwise
transfer or dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the Securities Act of 1933 with respect to the foregoing except
for (i) issuances pursuant to the exercise or exchange of outstanding warrants,
stock options and convertible or exchangeable securities, (ii) grants of options
or shares of Common Stock pursuant to the Company's Stock Award and Long-Term
Incentive Plan and the Dreco Energy Services Ltd. Amended and Restated 1989
Employee Incentive Stock Option Plan, and (iii) issuances of capital stock by
the Company in connection with acquisitions of businesses, provided such shares
issuable pursuant to acquisitions shall not be transferable prior to the end of
the 90-day period.

The U.S. Underwriters are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S. Underwriters
may reduce that short position by purchasing Common Stock in the open market.
The U.S. Underwriters may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.

25
<PAGE> 28

The U.S. Underwriters may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the U.S. Underwriters purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offerings.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent it were to
discourage resales of the security.

None of the Company, any of the Selling Stockholders or any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, none of the Company, any of the Selling
Stockholders or any of the Underwriters makes any representation that the U.S.
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

MLSI, an affiliate of Merrill Lynch, acts as a specialist in the Common
Stock of the Company pursuant to the rules of the New York Stock Exchange, Inc.
Under an exemption granted by the Securities and Exchange Commission on July 31,
1995, MLSI will be permitted to carry on its activities as a specialist in the
Common Stock for the entire period of the distribution of the Common Stock. The
exemption is subject to the satisfaction by MLSI of the conditions specified in
the exemption.

Merrill Lynch from time to time provides investment banking and financial
advisory services to the Company. Merrill Lynch also acted as a representative
of various underwriters in connection with the Company's initial public offering
of Common Stock in October 1996 and served as advisor, and provided a fairness
opinion, to the Company in connection with the Combination, for which it
received customary compensation.

26
<PAGE> 29

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for
National-Oilwell by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
Certain legal matters will be passed upon for the Selling Stockholders by
Bracewell & Patterson, L.L.P., Houston, Texas and for the Underwriters by
Andrews & Kurth L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements of National-Oilwell at December 31,
1996 and for the year then ended, appearing in National-Oilwell's Current Report
on Form 8-K dated November 7, 1997 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon, included therein,
and incorporated by reference elsewhere herein which is based in part on the
report of Coopers & Lybrand, independent auditors. The financial statements
referred to above are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.

The consolidated financial statements of National-Oilwell at August 31,
1995 and for each of the two years in the period ended August 31, 1995,
appearing in National-Oilwell's Current Report on Form 8-K dated November 7,
1997 have been audited by Coopers & Lybrand, independent auditors, as set forth
in their report thereon and incorporated by reference elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

National-Oilwell is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
Regional Offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material also may
be accessed electronically by means of the Commission's home page on the
Internet (http://www.sec.gov). In addition, such reports, proxy statements and
other information concerning National-Oilwell can be inspected and copied at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.

This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together will all exhibits and schedules thereto, referred to as this
"Registration Statement") filed by National-Oilwell with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement for further information
with respect to National-Oilwell and the securities offered hereby. Copies of
the Registration Statement are on file at the offices of the Commission and may
be obtained upon payment of the prescribed fee or may be examined without charge
at the public reference facilities of the Commission described above. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.

27
<PAGE> 30

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus:

1. National-Oilwell's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, as amended by Form 10-K/A filed on August 18,
1997.

2. National-Oilwell's Quarterly Report on Form 10-Q for the period
ended March 31, 1997.

3. National-Oilwell's Quarterly Report on Form 10-Q for the period
ended June 30, 1997.

4. National-Oilwell's Quarterly Report on Form 10-Q for the period
ended September 30, 1997.

5. National-Oilwell's Current Report on Form 8-K filed on May 25,
1997.

6. National-Oilwell's Current Report on Form 8-K filed on October 8,
1997.

7. National-Oilwell's Current Report on Form 8-K filed on November 7,
1997.

8. The description of National-Oilwell's shares of Common Stock
contained in the Registration Statement on Form 8-A filed by
National-Oilwell with the Commission on October 15, 1996 to register such
securities under the Exchange Act.

All reports and documents filed by National-Oilwell pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment to
this Registration Statement which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.

Upon request, National-Oilwell will provide without charge to each person
to whom this Prospectus is delivered a copy of any or all of such documents
which are incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Written or oral requests for
copies should be directed to Gay Mather, Manager, Investor Relations,
National-Oilwell, Inc., 5555 San Felipe, Houston, Texas 77056 (telephone number
(713) 960-5422).

28
<PAGE> 31

============================================================

NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR
INCORPORATED BY REFERENCE, IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 6
Use of Proceeds............................ 8
National-Oilwell, Inc. and Subsidiaries
Selected Consolidated Financial Data..... 9
Business................................... 11
Management................................. 17
Selling Stockholders....................... 20
Certain United States Federal Tax
Consequences to Non-U.S. Holders......... 22
Underwriting............................... 24
Legal Matters.............................. 27
Experts.................................... 27
Available Information...................... 27
Incorporation of Certain Documents by
Reference................................ 28
</TABLE>

============================================================
============================================================
10,700,000 SHARES

[LOGO]
NATIONAL-OILWELL, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------

MERRILL LYNCH & CO.

GOLDMAN, SACHS & CO.

MORGAN STANLEY DEAN WITTER

THE ROBINSON-HUMPHREY COMPANY

SIMMONS & COMPANY
INTERNATIONAL
, 1997

============================================================
<PAGE> 32

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER , 1997

PROSPECTUS

10,700,000 SHARES

[LOGO]

NATIONAL-OILWELL, INC.
COMMON STOCK
---------------------
All of the 10,700,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of National-Oilwell, Inc. ("National-Oilwell" or the "Company")
offered hereby are being sold by certain stockholders of National-Oilwell (the
"Selling Stockholders"). See "Selling Stockholders." National-Oilwell will not
receive any of the proceeds from the sale of the Common Stock by the Selling
Stockholders.

Of the 10,700,000 shares of Common Stock being offered hereby, 2,140,000
shares are being offered initially outside the United States and Canada (the "
Offering") by the International Managers (as defined herein) and 8,560,000
shares are being offered in the United States and Canada (the "U.S. Offering"
and, together with the International Offering, the "Offerings") by the U.S.
Underwriters (as defined herein, together with the International Managers, the
"Underwriters"). The price to public and the underwriting discount per share are
identical for the Offerings and the closings for both Offerings are conditioned
upon each other. See "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) SELLING STOCKHOLDERS(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $
==================================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Expenses estimated at $430,000 will be paid by the Company.
(3) The Selling Stockholders have granted to the Underwriters options,
exercisable within 30 days after the date of this Prospectus, to purchase up
to an additional 1,605,000 shares of Common Stock at the Price to Public,
less Underwriting Discount, solely to cover over-allotments, if any. If such
options are exercised in full, the Price to Public, Underwriting Discount
and Proceeds to Selling Stockholders will be $ , $ and
$ , respectively. See "Underwriting."
---------------------

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 33

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

NATIONAL-OILWELL
MANUFACTURED DRILLING MACHINERY & EQUIPMENT

[PICTURE OF POWER SWIVEL]

POWER SWIVEL
[PICTURE OF DRAWWORKS]
DRAWWORKS

[PICTURE OF RIG]

[PICTURE OF MUD PUMPS]

MUD PUMPS

National-Oilwell designs and builds land drilling rigs including the
primary machinery components highlighted above.

For United Kingdom purchasers: The shares of Common Stock may not be
offered or sold in the United Kingdom other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments, whether as principal or agent (except in circumstances that do not
constitute an offer to the public within the meaning of the Public Offers of
Securities Regulations 1995 or the Financial Services Act 1986), and this
Prospectus may only be issued or passed on to any person in the United Kingdom
if that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom the Prospectus may otherwise lawfully be passed on.

2
<PAGE> 34

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions set forth in the international purchase
agreement (the "Purchase Agreement") among the Company, the Selling Stockholders
and each of the underwriters named below (the "International Managers"), the
Selling Stockholders have agreed to sell to each of the International Managers,
and each of the International Managers has severally agreed to purchase from the
Selling Stockholders, the number of shares of Common Stock set forth below
opposite their respective names.

<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGERS OF SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International.................................
Goldman Sachs International.................................
Morgan Stanley & Co. International Limited..................
The Robinson-Humphrey Company, LLC..........................
Simmons & Company International.............................
---------
Total.......................................... 2,140,000
=========
</TABLE>

The Company and the Selling Stockholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement" and, together with the
Purchase Agreement, the "Purchase Agreements") with the underwriters in the
United States and Canada (the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters"). Subject to the terms and conditions
set forth in the U.S. Purchase Agreement, and concurrently with the sale of
2,140,000 shares of Common Stock to the International Managers pursuant to the
Purchase Agreement, the Selling Stockholders have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters have severally agreed to purchase from
the Selling Stockholders, an aggregate of 8,560,000 shares of Common Stock. The
public offering price per share and the underwriting discount per share are
identical under the Purchase Agreement and the U.S. Purchase Agreement.

In the Purchase Agreements, the several International Managers and the
several U.S. Underwriters have agreed, respectively, subject to the terms and
conditions set forth therein, to purchase all of the shares being sold pursuant
to the Purchase Agreements if any of such shares of Common Stock are purchased.
Under certain circumstances, the commitments of nondefaulting International
Managers or U.S. Underwriters (as the case may be) may be increased as set forth
in the Purchase Agreement and the U.S. Purchase Agreement, respectively. The
closings with respect to the sale of the shares of Common Stock to be purchased
by the International Managers and the U.S. Underwriters are conditioned upon one
another.

The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for purposes of resale at the public offering price, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the International Managers and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to persons
who are United States persons or Canadian persons or to persons they believe
intend to resell to persons who are United States persons or Canadian persons,
and the U.S. Underwriters and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to persons who are
non-United States persons and non-Canadian persons or to persons they believe
intend to resell to persons who are non-United States and non-Canadian persons,
except, in each case, for transactions pursuant to the Intersyndicate Agreement.

The International Managers have advised the Selling Stockholders that the
International Managers propose to offer the shares of Common Stock offered
hereby to the public initially at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The International Managers may
allow, and such dealers may reallow, a discount not in excess of $ per
share on sales to certain other dealers. After the International Offering, the
public offering price, concession and discount may be changed.

24
<PAGE> 35

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

The Selling Stockholders have granted an option to the International
Managers, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to 321,000 additional shares of Common Stock at the
price to public set forth on the cover page of this Prospectus, less the
underwriting discount. The International Managers may exercise this option only
to cover over-allotments, if any. If the International Managers exercise this
option, each of the International Managers will have a firm commitment, subject
to certain conditions, to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
foregoing table bears to the 10,700,000 shares of Common Stock offered hereby.
The Selling Stockholders have also granted an option to the U.S. Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 1,284,000 additional shares of Common Stock solely to cover
over-allotments, if any, on terms similar to those granted to the International
Managers.

In connection with the Offerings, the Company's directors and executive
officers and the Selling Stockholders have agreed that they will not, during a
period of 90 days from the date of this Prospectus, without the prior written
consent of Merrill Lynch, directly or indirectly (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase any option, or
contract to sell or grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into, or exchangeable or exercisable for, Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise; provided, shares of Common Stock may be
(i) sold by the Selling Stockholders pursuant to the Purchase Agreements (as
defined herein); (ii) transferred pursuant to bona fide gifts to persons who
agree prior to the transfer to be bound by a similar lock-up agreement; (iii)
transferred in private transactions to affiliates of such stockholders who agree
to be bound by a similar agreement; (iv) pledged as collateral for certain loans
or (v) transferred to a beneficial owner of such shares who is subject to a
similar lock-up agreement pursuant to an event of termination under the
Company's Supplemental Savings Plan. In addition, National-Oilwell will not,
without the prior written consent of Merrill Lynch, as representative of the
Underwriters, directly or indirectly, offer, contract to sell, sell, grant any
option, right or warrant with respect to, pledge, hypothecate or otherwise
transfer or dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the Securities Act of 1933 with respect to the foregoing except
for (i) issuances pursuant to the exercise or exchange of outstanding warrants,
stock options and convertible or exchangeable securities, (ii) grants of options
or shares of Common Stock pursuant to the Company's Stock Award and Long-Term
Incentive Plan and the Dreco Energy Services Ltd. Amended and Restated 1989
Employee Incentive Stock Option Plan, and (iii) issuances of capital stock by
the Company in connection with acquisitions of businesses, provided such shares
issuable pursuant to acquisitions shall not be transferable prior to the end of
the 90-day period.

25
<PAGE> 36

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

Each International Manager represents and agrees that (a) it has not
offered or sold and prior to the expiration of six months from the closing date
of the Offerings, will not offer or sell any shares of Common Stock to persons
in the United Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995,
(b) it has complied with and will comply with all applicable provisions of the
Financial Services Act of 1986 with respect to anything done by it in relation
to the Common Stock in, from or otherwise involving the United Kingdom, and (c)
it has only issued or passed on and will only issue or pass on to any person in
the United Kingdom any document received by it in connection with the issue or
sale of the Common Stock if that person is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.

No action has been or will be taken in any jurisdiction (except in the
United States and ) that would permit a public offering of the
shares of Common Stock or the possession, circulation or distribution of this
Prospectus or any other material relating to the Company or the shares of Common
Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be distributed
or published, in or from any country or jurisdiction except in compliance with
any applicable rules and regulations of such country or jurisdiction.

Purchasers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practices of the
country of purchase, in addition to the offering price set forth on the cover
page of this Prospectus.

26
<PAGE> 37

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

============================================================

---------------------

TABLE OF CONTENTS

============================================================
============================================================
10,700,000 SHARES

[LOGO]
NATIONAL-OILWELL, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------

MERRILL LYNCH INTERNATIONAL

GOLDMAN SACHS INTERNATIONAL

MORGAN STANLEY DEAN WITTER

THE ROBINSON-HUMPHREY COMPANY

SIMMONS & COMPANY
INTERNATIONAL

, 1997

============================================================
<PAGE> 38

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses of the Offerings are estimated to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 71,893
NASD Filing Fee............................................. 30,500
Printing Expenses........................................... 100,000
Legal Fees and Expenses..................................... 150,000
Accounting Fees and Expenses................................ 50,000
Transfer Agent Fees and Expenses............................ 10,000
Miscellaneous Expenses...................................... 17,607
--------
Total............................................. $430,000
========
</TABLE>

15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "DGCL")
authorizes, inter alia, a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that such person is or was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A Delaware corporation may
indemnify past or present officers and directors of such corporation or of
another corporation or other enterprise at the former corporation's request, in
an action by or in the right of the corporation to procure a judgment in its
favor under the same conditions, except that no indemnification is permitted
without judicial approval if such person is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in defense of any action referred to above, or in defense of any
claim, issue or matter therein, the corporation must indemnify him against the
expenses (including attorney's fees) which he actually and reasonably incurred
in connection therewith. Section 145 further provides that any indemnification
shall be made by the corporation only as authorized in each specific case upon a
determination by the (i) stockholders, (ii) board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (iii) independent counsel if a quorum of disinterested
directors so directs. Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.

Section 145 of the DGCL also empowers National-Oilwell to purchase and
maintain insurance on behalf of any person who is or was an officer or director
of National-Oilwell against liability asserted against or incurred by him in any
such capacity, whether or not National-Oilwell would have the power to indemnify
such officer or director against such liability under the provisions of Section
145. National-Oilwell maintains a directors' and officers' liability policy for
such purposes.

Article Sixth, Part II, Section 1 of National-Oilwell's Amended and
Restated Certificate of Incorporation and Article VI of National-Oilwell's
Bylaws each provide that directors, officers, employees and agents shall be
indemnified to the fullest extent permitted by Section 145 of the DGCL.

The Purchase Agreements (Exhibits 1.1 and 1.2 hereto) contain provisions
indemnifying National-Oilwell and its directors and officers that sign the
Registration Statement against certain liabilities in connection with the
Offerings. The Indemnification Agreement (Exhibit 1.4 hereto) provides for
indemnification by the Company of the Selling Stockholders against certain
liabilities in connection with the Offerings.

II-1
<PAGE> 39

16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits. The following exhibits are filed as part of this Registration
Statement.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of U.S. Purchase Agreement
1.2* -- Form of International Purchase Agreement
1.3** -- Form of Indemnification Agreement between the Company and
the Selling Stockholders
5* -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
23.1* -- Consent of Ernst & Young LLP
23.2* -- Consent of Coopers & Lybrand
23.3* -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5 hereto)
24* -- Powers of Attorney (included as part of the signature
page hereof)
</TABLE>

- ---------------

* Filed herewith.

** To be filed by amendment.

17. UNDERTAKINGS

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-2
<PAGE> 40

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Houston, state of Texas, on November 14, 1997.

NATIONAL-OILWELL, INC.

By: /s/ JOEL V. STAFF

----------------------------------
Joel V. Staff,
Chairman, President and Chief
Executive

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS STEVEN W.
KRABLIN AND PAUL M. NATION, OR EITHER OF THEM, HIS TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, TO EXECUTE AND CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ANY AND ALL AMENDMENTS AND POSTEFFECTIVE AMENDMENTS TO THIS
REGISTRATION STATEMENT AND A RELATED REGISTRATION STATEMENT THAT IS TO BE
EFFECTIVE UPON FILING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933,
AND IN EACH CASE TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR THEIR SUBSTITUTE OR SUBSTITUTES MAY DO OR CAUSE
TO BE DONE BY VIRTUE HEREOF.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ JOEL V. STAFF Chairman of the Board of Directors November 14, 1997
- ----------------------------------------------------- (Principal Executive Officer)
Joel V. Staff

/s/ STEVEN W. KRABLIN Principal Financial and Accounting November 14, 1997
- ----------------------------------------------------- Officer
Steven W. Krablin

/s/ HOWARD I. BULL Director November 14, 1997
- -----------------------------------------------------
Howard I. Bull

/s/ JAMES C. COMIS III Director November 14, 1997
- -----------------------------------------------------
James C. Comis III

/s/ JAMES T. DRESHER Director November 14, 1997
- -----------------------------------------------------
James T. Dresher

/s/ W. MCCOMB DUNWOODY Director November 14, 1997
- -----------------------------------------------------
W. McComb Dunwoody

/s/ WILLIAM E. MACAULAY Director November 14, 1997
- -----------------------------------------------------
William E. Macaulay
</TABLE>

II-3
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ FREDERICK W. PHEASEY Director November 14, 1997
- -----------------------------------------------------
Frederick W. Pheasey

/s/ ROBERT L. PHILLIPS Director November 14, 1997
- -----------------------------------------------------
Robert L. Phillips

/s/ BRUCE M. ROTHSTEIN Director November 14, 1997
- -----------------------------------------------------
Bruce M. Rothstein
</TABLE>

II-4
<PAGE> 42

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1* -- Form of U.S. Purchase Agreement
1.2* -- Form of International Purchase Agreement
1.3** -- Form of Indemnification Agreement between the Company and
the Selling Stockholders
5* -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
23.1* -- Consent of Ernst & Young LLP
23.2* -- Consent of Coopers & Lybrand
23.3* -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5 hereto)
24* -- Powers of Attorney (included as part of the signature
page hereof)
</TABLE>

- ---------------

* Filed herewith.

** to be filed by amendment.

<PAGE> 1

Draft of November 13, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NATIONAL-OILWELL, INC.
(a Delaware corporation)

8,560,000 Shares of Common Stock

U.S. PURCHASE AGREEMENT

Dated: November __, 1997

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE> 2
Draft of November 13, 1997

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
U.S. PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Representations and Warranties by the Company . . . . . . . . . . . . . . . . . . . . . . . . 4
(i) Compliance with Registration Requirements . . . . . . . . . . . . . . . . . . . . . . 4
(ii) Incorporated Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(iii) Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(iv) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(v) No Material Adverse Change in Business . . . . . . . . . . . . . . . . . . . . . . . 6
(vi) Good Standing of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(vii) Good Standing of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(viii) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ix) Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(x) Authorization and Description of Securities . . . . . . . . . . . . . . . . . . . . . 8
(xi) Absence of Defaults and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(xii) Absence of Labor Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xiii) Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xiv) Accuracy of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xv) Possession of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xvi) Absence of Further Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xvii) Possession of Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . 10
(xviii) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xix) Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Stockholders Consents and Agreements . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Representations and Warranties by the Selling Stockholders . . . . . . . . . . . . . . . . 12
(i) Accurate Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(ii) Authorization of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(iii) Good Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(iv) Due Execution of Power of Attorney and Custody Agreement . . . . . . . . . . . . . 13
(v) Absence of Manipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(vi) Absence of Further Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(vii) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 14
(viii) Certificates Suitable for Transfer . . . . . . . . . . . . . . . . . . . . . . . . 14
(ix) No Association with NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
(c) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 2. Sale and Delivery to U.S. Underwriters; Closing . . . . . . . . . . . . . . . . . . . . . . 15
(a) Initial Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Option Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Denominations; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SECTION 3. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Compliance with Securities Regulations and Commission Requests . . . . . . . . . . . . . . 17
(b) Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Delivery of Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Continued Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Blue Sky Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) Rule 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SECTION 4. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Expenses of the Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Allocation of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 5. Conditions of U.S. Underwriters' Obligations . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Effectiveness of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Opinion of Counsel for Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Opinions of General Counsel and Other Special Counsel . . . . . . . . . . . . . . . . . . . 21
(d) Opinion of Counsel for Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Opinion of Counsel for U.S. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Certificate of Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Accountant's Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) Bring-down Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(j) Approval of Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(k) No Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(l) Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(m) Purchase of Initial International Securities . . . . . . . . . . . . . . . . . . . . . . . 23
(n) Conditions to Purchase of U.S. Option Securities . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
(i) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(ii) Certificate of Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 23
(iii) Opinion of Counsel for Company . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(iv) Opinion of General Counsel and Other Special Counsel . . . . . . . . . . . . . . . 24
(v) Opinion of Counsel for the Selling Stockholders . . . . . . . . . . . . . . . . . . 24
(vi) Opinion of Counsel for U.S. Underwriters . . . . . . . . . . . . . . . . . . . . . 24
(vii) Bring-down Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(o) Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(p) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Indemnification of U.S. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Indemnification of Company, Directors and Officers
and the Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Actions against Parties; Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Settlement without Consent if Failure to Reimburse . . . . . . . . . . . . . . . . . . . . 27
(e) Cumulative Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

SECTION 7. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

SECTION 8. Representations, Warranties and Agreements to Survive Delivery . . . . . . . . . . . . . . 29

SECTION 9. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Termination; General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

SECTION 10. Default By One or More of the U.S. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . 30

SECTION 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SECTION 12. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SECTION 13. Governing Law and Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SECTION 14. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>

(iii)
<PAGE> 5
<TABLE>
<S> <C>
SCHEDULES
Schedule A - List of Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sch A-1
Schedule B - List of Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sch B-1
Schedule C - Pricing Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sch C-1
Schedule D - List of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sch D-1
Schedule E - List of persons and entities subject to Lock-up . . . . . . . . . . . . . . . . . . . . . . Sch E-1

EXHIBITS
Exhibit A - Form of Lock-up Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

(iv)
<PAGE> 6
NATIONAL-OILWELL, INC.

(a Delaware corporation)

8,560,000 Shares of Common Stock

(Par Value $.01 Per Share)

U.S. PURCHASE AGREEMENT

November __, 1997

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
The Robinson-Humphrey Company, LLC
Simmons & Company International
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

National-Oilwell, Inc., a Delaware corporation (the "Company"), and
the persons listed in Schedule B hereto (the "Selling Stockholders") confirm
their respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and each of the other U.S.
Underwriters named in Schedule A hereto (collectively, the "U.S. Underwriters",
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom Merrill Lynch, Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated, The Robinson-Humphrey Company, LLC and
Simmons & Company International are acting as representatives (in such
capacity, the "U.S. Representatives"), with respect to (i) the sale by the
Selling Stockholders, acting severally and not jointly, and the purchase by the
U.S. Underwriters, acting severally and not jointly, of the respective numbers
of shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") set forth in said Schedule A and B hereto, and
<PAGE> 7
(ii) with respect to the grant by the Selling Stockholders, acting severally
and not jointly, to the U.S. Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
1,284,000 additional shares of Common Stock to cover over-allotments, if any.
The aforesaid 8,560,000 shares of Common Stock (the "Initial U.S. Securities")
to be purchased by the U.S. Underwriters and all or any part of the 1,284,000
shares of Common Stock subject to the option described in Section 2(b) hereof
(the "U.S. Option Securities") are hereinafter called, collectively, the "U.S.
Securities."

It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by Selling Stockholders, acting severally and not
jointly, of an aggregate of 2,140,000 shares of Common Stock (the "Initial
International Securities") through arrangements with certain underwriters
outside the United States and Canada (the "International Managers") for which
Merrill Lynch International, Goldman Sachs International, Morgan Stanley
International Limited, The Robinson-Humphrey Company, LLC and Simmons & Company
International acting as lead managers (the "Lead Managers") and the grant by
certain Selling Stockholders, acting severally and not jointly, to the
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to 321,000 additional shares of Common Stock solely to cover overallotments, if
any (the "International Option Securities" and, together with the U.S. Option
Securities, the "Option Securities"). The Initial International Securities and
the International Option Securities are hereinafter called the "International
Securities." It is understood that the Selling Stockholders are not obligated
to sell and the U.S. Underwriters are not obligated to purchase, any Initial
U.S. Securities unless all of the Initial International Securities are
contemporaneously purchased by the International Managers.

The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities."

The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").

The Selling Stockholders understand that the U.S. Underwriters propose
to make a public offering of the U.S. Securities as soon as the U.S.
Representatives deem advisable after this Agreement has been executed and
delivered.

-2-
<PAGE> 8
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-__________________)
covering the registration of the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), including the related preliminary prospectus or
prospectuses. Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of
Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has
elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare
and file a term sheet (a "Term Sheet") in accordance with the provisions of
Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection
with the offering and sale of the Securities: one relating to the U.S.
Securities (the "Form of U.S. Prospectus") and one relating to the
International Securities (the "Form of International Prospectus"). The Form of
International Prospectus is identical to the Form of U.S. Prospectus, except
for the front cover and back cover pages and the information under the caption
"Underwriting" and the inclusion in the Form of International Prospectus of a
section under the caption "Certain United States Tax Considerations for
Non-United States Holders." The information included in any such prospectus or
in any such Term Sheet, as the case may be, that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective (a)
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto,
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final Form of U.S. Prospectus and the final Form of
International Prospectus, including the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first
furnished to the Underwriters for use in connection with the offering of the
Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434
is relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated November ____, 1997 and
preliminary International Prospectus dated November ____, 1997, respectively,
each together with the applicable Term Sheet and all references in this
Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the U.S. Prospectus, the
International Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be

-3-
<PAGE> 9
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information as and to the extent
incorporated by reference in the Registration Statement, any preliminary
prospectus (including the Form of U.S. Prospectus and Form of International
Prospectus) or the Prospectuses, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement, any
preliminary prospectus or the Prospectuses shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934 (the "1934
Act") as and to the extent incorporated by reference in the Registration
Statement, such preliminary prospectus or the Prospectuses, as the case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b), hereof and agrees with each U.S.
Underwriter, as follows:

(i) Compliance with Registration Requirements. The
Company meets the requirements for use of Form S-3 under the 1933 Act.
Each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and
no proceedings for that purpose have been instituted or are pending
or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.

-4-
<PAGE> 10
or supplements thereto were issued and at the Closing Time (and, if
any U.S. Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or
omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the U.S.
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through
the U.S. Representatives expressly for use in the Registration
Statement or the U.S. Prospectus.

Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated
or deemed to be incorporated by reference in the Registration
Statement and the Prospectuses, when they became effective or at the
time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations or the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 Act
Regulations"), as applicable, and, when read together with the other
information in the Prospectuses, at the time the Registration
Statement became effective, at the time the Prospectuses were issued
and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.

(iii) Independent Accountants. Each of the accountants who
certified the financial statements and supporting schedules included
or incorporated by reference in the Registration Statement are, to the
knowledge of the Company, independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The financial statements of
the Company included or incorporated by reference in the Registration
Statement and the Prospectuses, present fairly in all material
respects the financial position of the Company and its consolidated
subsidiaries, or such other entity, as the case may be, at the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated

-5-
<PAGE> 11
subsidiaries, or such other entity, as the case may be, for the
periods specified in conformity with generally accepted accounting
principles ("GAAP"), except for the omission of detailed information
and footnotes in the case of unaudited interim financial statements
included or incorporated by reference therein. The selected financial
data and the summary financial information included in the
Prospectuses present fairly the information shown therein and have
been compiled on a basis consistent with that of the financial
statements included or incorporated by reference in the Registration
Statement.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein,
(A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are
material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) except for a stock dividend paid on
November 18, 1997 to holders of Common Stock and Exchangeable Shares
("Exchangeable Shares") of Dreco Energy Services Ltd. ("Dreco") on the
record date therefor as described in the Prospectuses, there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.

(vi) Good Standing of the Company. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectuses and to enter
into and perform its obligations under this Agreement; and the Company
is duly qualified as a foreign corporation to transact business and is
in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.

-6-
<PAGE> 12
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of
the issued and outstanding capital stock or partnership interests of
each such Subsidiary has been duly authorized and validly issued, to
the extent consisting of shares of capital stock of a corporation is
fully paid and non-assessable, and is owned by the Company, directly
or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of, and none of the outstanding
partnership interests in, any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder or partner of
such Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Schedule D hereto and (b) certain other
subsidiaries which, considered in the aggregate as a single
Subsidiary, do not constitute a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X.

(viii) Capitalization. The authorized capital stock of the
Company consists of (i) 75,000,000 shares of Common Stock, of which
[51,271,368] shares are issued and outstanding as of [November 18,
1997], (ii) 10,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock") of which no shares are outstanding and (iii)
Special Voting Stock of which one share is outstanding. As of
[November 18, 1997], there were issued and outstanding ____________
Exchangeable Shares of Dreco, each of which is exchangeable into an
equal number of shares of Common Stock. Since [November 18, 1997], no
shares of capital stock of the Company have been issued except (i)
upon the exchange of outstanding Exchangeable Shares and (ii) upon the
exercise of issued and outstanding options granted under the Company's
Stock Award and Long-Term Incentive Plan, the Company's Value
Appreciation Plans and the Dreco Amended and Restated 1989 Employee
Incentive Stock Option Plan. All the issued and outstanding capital
stock of Dreco other than the Exchangeable Shares are owned
beneficially and of record by the Company. The outstanding shares of
capital stock of the Company (including without limitation the
Securities) have been, and the shares of Common Stock issuable upon
the exchange of the issued and outstanding Exchangeable Shares will
be, duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of the
Company was issued, and none of the shares of Common Stock issuable
upon the exchange of the issued and outstanding Exchangeable Shares
will be issued, in violation of the preemptive or other similar rights
of any securityholder of the Company. The Exchangeable Shares of
Dreco have been duly authorized and validly issued by Dreco and
represent the valid and binding obligations of the Company and Dreco,
enforceable in accordance with their terms. The shares of Common
Stock to be issued upon the exchange of the Exchangeable Shares have
been duly authorized and validly reserved for issuance upon the
exercise of the Exchangeable Shares. There are no outstanding
options, warrants or similar rights to purchase or otherwise acquire
from the Company additional shares of capital stock of the Company or
Dreco, except pursuant to options granted under the Company's Stock

-7-
<PAGE> 13

Award and Long-Term Incentive Plan, the Company's Value Appreciation
Plans and the Dreco Amended and Restated 1989 Employee Incentive Stock
Option Plan.

(ix) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed
and delivered by the Company.

(x) Authorization and Description of Securities. The
Securities to be purchased by the U.S. Underwriters and the
International Managers from the Selling Stockholders are duly
authorized, validly issued, fully paid and non-assessable, provided,
in respect of the Securities to be sold by the Selling Stockholders
after the exchange of the Exchangeable Shares or the exercise of
options, such Securities have been duly authorized, and when issued
and delivered by the Company prior to the Closing Time, will be
validly issued, fully paid and non-assessable. The Common Stock
conforms in all material respects to all statements relating thereto
contained in the Prospectuses and such description conforms in all
material respects to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal
liability solely by reason of being such a holder; and the issuance of
the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Company or its subsidiaries.

(xi) Absence of Defaults and Conflicts. Neither the
Company nor any of its subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance
of this Agreement and the International Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
International Purchase Agreement and in the Registration Statement and
compliance by the Company with its obligations under this Agreement
and the International Purchase Agreement have been duly authorized by
all necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their

-8-
<PAGE> 14
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company
or any subsidiary.

(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which may
reasonably be expected to result in a Material Adverse Effect, or
which may reasonably be expected to materially and adversely affect
the consummation of the transactions contemplated in this Agreement
and the International Purchase Agreement or the performance by the
Company of its obligations hereunder or thereunder; the aggregate of
all pending legal or governmental proceedings to which the Company or
any subsidiary is a party or of which any of their respective property
or assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.

(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectuses or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.

(xv) Possession of Intellectual Property. Except to the
extent it would not result in a Material Adverse Effect, the Company
and its subsidiaries own or possess, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them; and neither
the Company nor any of its subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein, and which infringement or conflict (if the

-9-
<PAGE> 15
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.

(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering or sale of
the Securities by the Selling Stockholders under this Agreement and
the International Purchase Agreement or the consummation of the
transactions contemplated by this Agreement and the International
Purchase Agreement (including, without limitation, the exchange of the
Exchangeable Shares for and issuance of the Securities prior to the
Closing), except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations and foreign or
state securities or blue sky laws.

(xvii) Possession of Licenses and Permits. The Company and
its subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by
them, and are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to possess or to
comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force
and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in
a Material Adverse Effect.

(xviii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests (except purchase money security interests),
claims, restrictions or encumbrances of any kind except such as (a)
are disclosed in the Prospectuses or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property
by the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Prospectuses, are in full force and effect, and neither the Company
nor any subsidiary has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the

-10-
<PAGE> 16
Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company
or such subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.

(xix) Investment Company Act. The Company is not, and upon
the sale of the Securities as herein contemplated will not be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended (the "1940 Act").

(xx) Environmental Laws. Except as disclosed in the
Registration Statement or except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending
or threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are
no events or circumstances that may reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its subsidiaries relating
to Hazardous Materials or any Environmental Laws.

(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement, except to the
extent the Company is in compliance with such rights or such rights
have been waived.

(xxii) Insurance. The Company maintains reasonably adequate
insurance for the business conducted by the Company and its
subsidiaries.

-11-
<PAGE> 17
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted
only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

(xxiv) Stockholders Consents and Agreements. The Company
has obtained all consents from and provided all requisite notices to,
or otherwise secured all requisite waivers from, any other
stockholders required in connection with the sale of the Securities.

(b) Representations and Warranties by the Selling Stockholders.
Each Selling Stockholder, severally and not jointly, represents and warrants to
each Underwriter as of the date hereof, as the Closing Time, and, if the
Selling Stockholder is selling Option Securities on a Date of Delivery, as of
each such Date of Delivery, and agrees with each Underwriter, as follows:

(i) Accurate Disclosure. To the best knowledge of such
Selling Stockholder, the representations and warranties of the Company
contained in Section 1(a) hereof are true and correct; such Selling
Stockholder has reviewed the Registration Statement and the
Prospectuses and, to the knowledge of such Selling Stockholder,
neither the Prospectuses nor any amendments or supplements thereto
includes any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; such Selling Stockholder is not prompted to sell the
Securities to be sold by such Selling Stockholder hereunder by any
information concerning the Company or any subsidiary of the Company
which is not set forth in the Prospectuses.

(ii) Authorization of Agreements. Each Selling
Stockholder has, and as of the Closing Time or Date of Delivery will
have, the full right, power and authority, and all authorization and
approval required by law, to enter into this Agreement and an
Irrevocable Power of Attorney and a Custody Agreement (collectively,
the "Power of Attorney and Custody Agreement") and to sell, transfer
and deliver the Securities to be sold by such Selling Stockholder
hereunder. The execution and delivery of this Agreement and the Power
of Attorney and Custody Agreement by or on behalf of such Selling
Stockholder and the sale and delivery of the Securities to be sold by
such Selling Stockholder and the consummation of the transactions
contemplated herein and compliance by such Selling Stockholder and do
not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any tax,
lien, charge or encumbrance upon the Securities to be sold by such
Selling Stockholder or any property or assets of such Selling
Stockholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Stockholder is a party
or by which such

-12-
<PAGE> 18
Selling Stockholder may be bound, or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the charter or by-laws or
other organizational instrument of such Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over such Selling Stockholder or any of its properties.

(iii) Good Title. Such Selling Stockholder has (provided,
(i) if such Selling Stockholder currently holds Exchangeable Shares,
such Selling Stockholder represents as of the date of this Agreement
only with respect to such Exchangeable Shares and (ii) if such Selling
Stockholder currently holds options, such Selling Stockholder
represents as of the date of this Agreement only with respect to such
options and the current exercisability of such options) and in any
case will at the Closing Time and, if any Option Securities are
purchased, on the Date of Delivery have good title to the Securities
to be sold by such Selling Stockholder hereunder, free and clear of
any security interest, mortgage, pledge, lien, charge, claim, equity
or encumbrance of any kind, other than pursuant to this Agreement and
the International Purchase Agreement; provided, the Securities are
currently subject to applicable restrictions on transfer under the
1933 Act; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good title to the Securities purchased by it
from such Selling Stockholder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance
of any kind.

(iv) Due Execution of Power of Attorney and Custody
Agreement. Such Selling Stockholder has duly executed and delivered,
in the forms heretofore furnished to the Representatives, the Power of
Attorney and Custody Agreement with W. McComb Dunwoody, William E.
MacCaulay and Joel V. Staff or any of them, as attorneys-in-fact (the
"Attorneys-in-Fact") and Texas Commerce Bank National Association, as
custodian (the "Custodian"); the Custodian is authorized to exchange
the Exchangeable Shares or exercise options under designated option
agreements, if applicable, and to deliver the Securities to be sold by
such Selling Stockholder hereunder and to accept payment therefor; and
the requisite Attorneys-in-Fact are authorized to execute and deliver
this Agreement and the certificate referred to in Section 5(f) or that
may be required pursuant to Section(s) 5(l) and 5(m) on behalf of such
Selling Stockholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Stockholder hereunder, to
determine the purchase price to be paid by the Underwriters to such
Selling Stockholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities to be sold by such Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of such Selling Stockholder in connection with this Agreement.

-13-
<PAGE> 19
(v) Absence of Manipulation. Such Selling Stockholder
has not taken, and will not take, directly or indirectly, any action
which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.

(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification
or decree of, any court or governmental authority or agency, domestic
or foreign, is necessary or required for the performance by each
Selling Stockholder of its obligations hereunder or in the Power of
Attorney and Custody Agreement, or in connection with the sale and
delivery of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as may have
previously been made or obtained or as may be required under the 1933
Act or the 1933 Act Regulations or under applicable foreign or state
securities laws.

(vii) Restriction on Sale of Securities. During a period
of 90 days from the date of the Prospectus, such Selling Stockholder
will not, without the prior written consent of Merrill Lynch, directly
or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any share of Common
Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (including, without limitation, any
Exchangeable Shares) or request the Company to file any registration
statement under the 1933 Act with respect to any of the foregoing or
(ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any
such swap or transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (i) the
Securities to be sold hereunder; (ii) the pledge of shares of Common
Stock or securities convertible into, or exchangeable or exercisable
for, Common Stock that are currently pledged as collateral for a loan
made to such person for any loan of an equal or lesser amount in
connection with the prepayment and cancellation of such loan by any
Selling Stockholder, provided that the pledgee agrees to be bound by a
similar lock-up agreement with respect to such securities; (iii) the
transfer by a Selling Stockholder of shares of Common Stock or
securities convertible into, or exchangeable or exercisable for,
Common Stock in a private transaction to a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Selling
Stockholder (an "Affiliate") if such Affiliate agrees prior to such
transfer in writing to be bound by a similar lock-up agreement; (iv)
bona fide gifts by such Selling Stockholder of shares of Common Stock
or securities convertible into, or exchangeable or exercisable for,
Common Stock to persons who agree prior to such transfer to be bound
by a similar lock-up agreement.

-14-
<PAGE> 20
(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by such Stockholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment in blank with
signatures guaranteed, have been placed in custody with the Custodian
with irrevocable conditional instructions to deliver such Securities
to the Underwriters pursuant to this Agreement.

(ix) No Association with NASD. Neither such Selling
Stockholder nor any of his, her or its affiliates directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article I, Section 1(m) of the
By-laws of the National Association of Securities Dealers, Inc.), any
member firm of the National Association of Securities Dealers, Inc.

(c) Officer's Certificates. Any certificate signed by any officer
of the Company or any of its subsidiaries delivered to the Global Coordinator,
the U.S. Representatives or to counsel for the U.S. Underwriters shall be
deemed a representation and warranty by the Company to each U.S. Underwriter as
to the matters covered thereby.

SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, each Selling Stockholder, severally and not jointly, agrees to sell to
each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter,
severally and not jointly, agrees to purchase from each Selling Stockholder,
severally and not jointly, at the price per share set forth in Schedule B, the
number of Initial U.S. Securities set forth in Schedule A opposite the name of
such U.S. Underwriter, plus any additional number of Initial U.S. Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof bears to the total number of Initial
Securities, subject, in each case, to such adjustments among the Underwriters
as the Representatives in their sole discretion shall make to eliminate any
sales or purchases of fractional securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, each Selling Stockholder hereby grants an option
to the U.S. Underwriters, severally and not jointly, to purchase up to an
additional 1,284,000 shares of Common Stock in the respective number of shares
set forth opposite their respective names on Schedule B at the price per share
set forth in Schedule C, less an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S.
Securities but not payable on the U.S. Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial U.S. Securities upon notice by the Global Coordinator to the Company

-15-
<PAGE> 21
setting forth the number of U.S. Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment
and delivery for such U.S. Option Securities. Any such time and date of
delivery for the U.S. Option Securities (a "Date of Delivery") shall be
determined by the Global Coordinator, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the U.S. Option Securities, each of the U.S. Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of U.S. Option Securities then being purchased which the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter bears to the total number of Initial U.S. Securities, subject in
each case to such adjustments as the Global Coordinator in its discretion shall
make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, 600 Travis Street, Houston,
Texas 77002, or at such other place as shall be agreed upon by the Global
Coordinator and the Selling Stockholders, at 10:00 A.M. (Eastern time) on the
third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any
given day) business day after the date hereof (unless postponed in accordance
with the provisions of Section 10), or such other time not later than ten
business days after such date as shall be agreed upon by the Global
Coordinator, the Selling Stockholders and the Company (such time and date of
payment and delivery being herein called "Closing Time").

In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase
price for, and delivery of certificates for, such U.S. Option Securities shall
be made at the above-mentioned offices, or at such other place as shall be
agreed upon by the Global Coordinator and the Company, on each Date of Delivery
as specified in the notice from the Global Coordinator to the Selling
Stockholders and Company.

Payment shall be made to the Selling Stockholders by checks or wire
transfer of immediately available funds to a bank account designated by the
Selling Stockholders, against delivery to the U.S. Representatives for the
respective accounts of the U.S. Underwriters of certificates for the U.S.
Securities to be purchased by them. It is understood that each U.S.
Underwriter has authorized the U.S. Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial U.S. Securities and the U.S. Option Securities, if any, which it has
agreed to purchase. Merrill Lynch, individually and not as representative of
the U.S. Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial U.S. Securities or the U.S. Option Securities,
if any, to be purchased by any U.S. Underwriter whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case may
be, but such payment shall not relieve such U.S. Underwriter from its
obligations hereunder.

-16-
<PAGE> 22
(d) Denominations; Registration. Certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or
the relevant Date of Delivery, as the case may be. The certificates for the
Initial U.S. Securities and the U.S. Option Securities, if any, will be made
available for examination and packaging by the U.S. Representatives in the City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants with
each U.S. Underwriter and each Selling Stockholder as follows:

(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Global Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectuses or any amended Prospectuses shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectuses or for additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule
424(b) was received for filing by the Commission and, in the event that it was
not, it will promptly file such prospectus. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the
Global Coordinator notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or to
the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise;
in addition, the Company will use its best efforts to furnish the Global
Coordinator with copies of any such documents a reasonable amount of time prior
to such proposed filing or use, as the case may be, and will not file or use
any such document to which the Global Coordinator or counsel for the U.S.
Underwriters shall reasonably object during the period contemplated in Section
3(e) hereto.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed

-17-
<PAGE> 23
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein and documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts, and
will also deliver to the U.S. Representatives, without charge, a conformed
copy of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the U.S. Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered
to each U.S. Underwriter, without charge, as many copies of each preliminary
prospectus as such U.S. Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each U.S. Underwriter, without charge,
during the period when the U.S. Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as
amended or supplemented) as such U.S. Underwriter may reasonably request. The
U.S. Prospectus and any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

(e) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectuses. If at any time when
a prospectus is required by the 1933 Act to be delivered in connection with
sales of the Securities, any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of counsel for the U.S.
Underwriters or for the Company, to amend the Registration Statement or amend
or supplement any Prospectus in order that the Prospectuses will not include
any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser, or if
it shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the U.S.
Underwriters such number of copies of such amendment or supplement as the U.S.
Underwriters may reasonably request; provided, however, that any such amendment
or supplement filed after nine months from the date hereof shall be at the
expense of the U.S. Underwriters.

-18-
<PAGE> 24
(f) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the U.S. Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Global Coordinator
may designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been
so qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.

(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.

(h) Listing. The Securities are listed on the New York
Stock Exchange or, in the case of Securities issuable upon the exchange of the
Exchangeable Shares, the Company will use its best efforts to effect the
listing of such Securities on the New York Stock Exchange.

(i) Restriction on Sale of Securities. During a period
of 90 days from the date of the Prospectuses, the Company will not, without the
prior written consent of the Global Coordinator, directly or indirectly, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, any Exchangeable Shares) or file any
registration statement under the 1933 Act with respect to any of the foregoing
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (i) any shares of Common Stock issued by the
Company upon the exercise or exchange of an option or warrant or the conversion
of a security outstanding on the date hereof and referred to in the Prospectus,
(ii) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company referred to
in the Prospectus, (iii) any options or shares of Common Stock issued pursuant
to any non-employee director stock plan or dividend reinvestment plan of the
Company existing on the date hereof or (iv) any shares of Common Stock or any
securities convertible or exchangeable into Common Stock issued as payment of
any part of the purchase price for businesses which are acquired by the Company
(provided,

-19-
<PAGE> 25
however, that such shares shall be subject to restrictions that will prohibit
the transfer thereof until after the expiration of the 90-day lock-up period
described in the preceding sentence).

(j) Reporting Requirements. The Company, during the
period when the Prospectuses are required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the 1934 Act Regulations.

SECTION 4. Payment of Expenses. (a) Expenses. The Company
will pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the printing and delivery
to the Underwriters of this Agreement, any Agreement among Underwriters and
such other documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Securities to
the Underwriters and the transfer of the Securities between the U.S.
Underwriters and the International Managers, (iv) the fees and disbursements of
the Company's counsel, accountants and other advisors, (v) the qualification of
the Securities under securities laws in accordance with the provisions of
Section 3(f) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any supplement
thereto, (viii) the fees and expenses of any transfer agent or registrar for
the Securities and (ix) the filing fees incident to, and the reasonable fees
and disbursements of counsel to the Underwriters in connection with, the review
by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities, and (x) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange.

(b) Expenses of the Selling Stockholders. The Selling
Stockholders will pay all expenses incident to the performance of their
respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including any stamp duties, capital duties and
stock transfer taxes, if any, payable upon the sale of the Securities to the
U.S. Underwriters, and their transfer between the U.S. Underwriters pursuant to
an agreement between such U.S. Underwriters; provided, however, that the
Company has advised the U.S. Underwriters that the Company is paying the fees
and disbursements of counsel to the Selling Stockholders.

(c) Termination of Agreement. If this Agreement is terminated by
the U.S. Representatives in accordance with the provisions of Section 5 (other
than subparagraphs (m) and

-20-
<PAGE> 26
(n)), or Section 9(a)(i) hereof, the Company shall reimburse the U.S.
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the U.S. Underwriters.

(d) Allocation of Expenses. The provisions of this Section shall
not affect any agreement that the Company and the Selling Stockholders may make
for the sharing of such costs and expenses.

SECTION 5. Conditions of U.S. Underwriters' Obligations. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained in Section 1 hereof or in certificates of any officer of
the Company or any subsidiary of the Company or on behalf of any Selling
Stockholder delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:

(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).

(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the opinion, dated as of Closing Time, of
Morgan, Lewis & Bockius LLP, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters in the form
previously agreed upon and to such further effect as counsel to the
Underwriters may reasonably request.

(c) Opinions of General Counsel and Other Special Counsel. At
Closing Time, the Representatives shall have received the opinion, dated as of
Closing Time, of Paul M. Nation, General Counsel of the Company, in form and
substance satisfactory to counsel for the Underwriters, together with signed
or reproduced copies of such letter for each of the other Underwriters in the
form previously agreed upon and to such further effect as counsel to the
Underwriters may reasonably request. In addition, the Representatives shall
have received the opinion, dated as of Closing Time, of Robert H. Gillard,
counsel for Dreco Energy Services Ltd., in the form previously agreed upon.

-21-
<PAGE> 27
(d) Opinion of Counsel for Selling Stockholders. At Closing Time,
the U.S. Representatives shall have received the opinions, dated as of Closing
Time, of Bracewell & Patterson, L.L.P., counsel for the Selling Stockholders,
and Stikeman, Elliott, counsel for the Canadian Selling Stockholders, in form
and substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters in the respective forms previously agreed upon and to such further
effect as counsel to the U.S. Underwriters may reasonably request.

(e) Opinion of Counsel for U.S. Underwriters. At Closing Time,
the U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Andrews & Kurth L.L.P., counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the other
U.S. Underwriters with respect to the matters requested by the U.S.
Underwriters.

(f) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
U.S. Representatives shall have received a certificate executed on behalf of
the Company by the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company, dated as of Closing
Time, to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1(a) hereof are true and
correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.

(g) Certificate of Selling Stockholders. At Closing Time, the
U.S. Representatives shall have received a certificate of an Attorney-in-Fact
on behalf of each Selling Stockholder, severally and not jointly, dated as of
Closing Time, to the effect that (i) the representations and warranties of each
Selling Stockholder contained in Section 1(b) hereof are true and correct in
all respects with the same force and effect as though expressly made at and as
of Closing Time and (ii) each Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.

(h) Accountant's Comfort Letters. At the time of the execution of
this Agreement, the U.S. Representatives shall have received from each of Ernst
& Young and, with respect to historical financial information concerning Dreco,
Coopers & Lybrand a letter dated such date, in form and substance satisfactory
to the U.S. Representatives, together with signed or reproduced copies of such

-22-
<PAGE> 28
letters for each of the other U.S. Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectuses.

(i) Bring-down Comfort Letters. At Closing Time, the
Representatives shall have received from each of Ernst & Young and Coopers &
Lybrand a letter, dated as of Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (h) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to Closing Time.

(j) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.

(k) No Objection. The NASD has confirmed that it has not raised
any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(l) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit A hereto signed by the persons listed on Schedule E hereto.

(m) Purchase of Initial International Securities.
Contemporaneously with the purchase by the U.S. Underwriters of the Initial
U.S. Securities under this Agreement, the International Managers shall have
purchased the Initial International Securities under the International Purchase
Agreement.

(n) Conditions to Purchase of U.S. Option Securities. In the
event that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any subsidiary of
the Company hereunder shall be true and correct as of each Date of Delivery
and, at the relevant Date of Delivery, the U.S. Representatives shall have
received:

(i) Officers' Certificate. A certificate, dated such
Date of Delivery, executed on behalf of the Company by the President
or a Vice President of the Company and the chief financial or chief
accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(f) hereof remains
true and correct as of such Date of Delivery.

(ii) Certificate of Selling Stockholders. A certificate
dated such Date of Delivery, of an Attorney-in-Fact on behalf of each
Selling Stockholder, confirming that the certificate

-23-
<PAGE> 29
delivered at Closing Time pursuant to Section 5(g) remains true and
correct as of such Date of Delivery.

(iii) Opinion of Counsel for Company. The opinion of
Morgan, Lewis & Bockius LLP, counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, dated
such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(b) hereof.

(iv) Opinion of General Counsel and Other Special Counsel.
The opinions of Paul M. Nation, General Counsel of the Company, and
other counsel to the same effect as the opinions required by Section
5(c) hereof.

(v) Opinion of Counsel for the Selling Stockholders. The
opinions of Bracewell & Patterson, L.L.P., counsel for the Selling
Stockholders, and Stikeman, Elliott, counsel for the Canadian Selling
Stockholders, in form and substance satisfactory to counsel for the
U.S. Underwriters, dated such Date of Delivery, relating to the U.S.
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required in Section 5(d)
hereof.

(vi) Opinion of Counsel for U.S. Underwriters. The
opinion of Andrews & Kurth L.L.P., counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities to
be purchased on such Date of Delivery and otherwise to the same effect
as the opinion required by Section 5(e) hereof.

(vii) Bring-down Comfort Letters. A letter from each of
Ernst & Young and Coopers & Lybrand, in form and substance
satisfactory to the U.S. Representatives and dated such Date of
Delivery, substantially in the same form and substance as the letter
furnished to the U.S. Representatives pursuant to Section 5(h) hereof,
except that the "specified date" in the letter furnished pursuant to
this paragraph shall be a date not more than five days prior to such
Date of Delivery.

(o) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the transfer and sale of the Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the U.S. Representatives and
counsel for the U.S. Underwriters.

-24-
<PAGE> 30
(p) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party
to any other party except as provided in Section 4 and except that Sections 1,
6, 7 and 8 shall survive any such termination and remain in full force and
effect.

SECTION 6. Indemnification.

(a) Indemnification of U.S. Underwriters. The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act to the extent and in the manner set forth in
clauses (i), (ii) and (iii) below:

(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and

(iii) except as otherwise provided in Section 6(c) below,
against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above.

-25-
<PAGE> 31
Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act with respect to information furnished in writing
by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S.
Prospectus (or any amendment or supplement thereto). Notwithstanding anything
in this Agreement to the contrary, each Selling Stockholder's aggregate
liability under this indemnity shall be limited to an amount equal to the net
proceeds (after deducting the underwriters' discount but before deducting
expenses) received by such Selling Stockholder from the sale of Securities
pursuant to this Agreement.

Notwithstanding the foregoing in this Section 6(a), (i) the foregoing
indemnity agreements shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any U.S. Underwriter
through the U.S. Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
U.S. Prospectus (or any amendment or supplement thereto) and (ii) the foregoing
indemnity agreements with respect to any untrue statement contained in or
omission from a preliminary prospectus shall not inure to the benefit of any
U.S. Underwriter (or any person controlling such U.S. Underwriter) from whom
the person asserting any such loss, liability, claim, damage or expense
purchased any of the Securities which are the subject thereof if such person
was not sent or given a copy of the U.S. Prospectus (as amended or
supplemented, if applicable) (in each case exclusive of the documents from
which information is incorporated by reference) at or prior to the written
confirmation of the sale of such Securities to such person (other than as a
result of the failure by the Company to comply with its obligations under
Section 3(d) hereof) and the untrue statement contained in or omission from
such preliminary prospectus was corrected in the U.S. Prospectus (as amended or
supplemented, if applicable).

(b) Indemnification of Company, Directors and Officers and the
Selling Stockholders. Each U.S. Underwriter severally agrees to indemnify and
hold harmless the Company, its directors, each of its officers who signed the
Registration Statement, each of the Selling Stockholders, and each person, if
any, who controls the Company or such Selling Stockholder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
U.S. prospectus or the U.S. Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by such U.S. Underwriter through the U.S.

-26-
<PAGE> 32
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or
any amendment or supplement thereto).

(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the U.S. Representatives in the case of paragraph (a) of this
Section 6, representing the indemnified parties under such paragraph (a) who
are parties to such action or actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified party or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not
be liable for the costs and expenses of any settlement of such action effected
by such indemnified party without the consent of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential
parties thereto),

-27-
<PAGE> 33
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding
sentence, if at any time an indemnified party shall have requested in good
faith an indemnifying party to reimburse the indemnified party for specified
fees and expenses of counsel (the "Requested Expenses"), an indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
6(a)(ii) that is effected without its consent (after satisfaction of each of
the conditions set forth in the immediately preceding sentence) if, prior to
the date of such settlement, such indemnifying party determines in good faith
that the Requested Expenses are not reasonable, reimburses such indemnified
party in accordance with such request for the portion of the Requested Expenses
it considers to be reasonable and provides written notice to the indemnified
party substantiating the fact that the unpaid balance of the Requested Expenses
is unreasonable.

(e) Cumulative Agreements. With respect to the Company and the
Selling Stockholders, the provisions of this Section shall not affect any
agreement between the Company and the Selling Stockholder with respect to
indemnification; provided, any such agreements shall not affect the rights of
the U.S. Underwriters or the obligations or liabilities of the Company and the
Selling Stockholders to the U.S. Underwriters under this Agreement.

SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other hand from the offering of the Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Stockholders on the one hand and of the U.S.
Underwriters on

-28-
<PAGE> 34
the other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.

The relative benefits received by the Company and the Selling
Stockholders on the one hand and the U.S. Underwriters on the other hand in
connection with the offering of the U.S. Securities pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the U.S. Securities pursuant to this Agreement
(before deducting expenses) received by the Selling Stockholders and the total
underwriting discount received by the U.S. Underwriters, in each case as set
forth on the cover of the U.S. Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet, bear to the aggregate initial public
offering price of the U.S. Securities as set forth on such cover.

The relative fault of the Company and the Selling Stockholders on the
one hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company and the Selling
Stockholders or by the U.S. Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company and the U.S. Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the U.S. Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, (i) no Selling
Stockholder shall be required to contribute any amount in excess of the net
proceeds (after deducting the underwriters' discount but before deducting
expenses) received by such Selling Stockholder from the sale of Securities
pursuant to this Agreement and (ii) no Selling Stockholder shall be required to
contribute any amount under this Section 7 in excess of the losses,
liabilities, claims, damages or expenses resulting from a claim of untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relating to information furnished in writing by such
Selling Stockholder expressly for use in the Registration Statement, including
the Rule 430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the U.S. Prospectus (or any amendment or supplement
thereto).

-29-
<PAGE> 35
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
U.S. Underwriter or controlling person, or by or on behalf of the Company, and
shall survive delivery of the Securities to the U.S. Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The U.S. Representatives may terminate
this Agreement, by notice to the Company and the Selling Stockholders, at any
time at or prior to Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the U.S. Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such as to make it, in the judgment of the U.S. Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or

-30-
<PAGE> 36
if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such
system or by order of the Commission, the National Association of Securities
Dealers, Inc. or any other governmental authority, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.

SECTION 10. Default By One or More of the U.S. Underwriters. If one
or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the U.S. Representatives
shall have the right, but not the obligation, within 24 hours thereafter, to
make arrangements for one or more of the non-defaulting U.S. Underwriters, or
any other underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the U.S. Representatives shall not have
completed such arrangements within such 24-hour period, then:

(a) if the number of Defaulted Securities does not exceed
10% of the number of Securities to be purchased on such date, each of
the non-defaulting U.S. Underwriters shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting U.S. Underwriters, or

(b) if the number of Defaulted Securities exceeds 10% of
the number of Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the
Closing Time, the obligation of the U.S. Underwriters to purchase the
Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting
U.S. Underwriter.

No action pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the U.S. Underwriters to purchase the relevant Option
Securities, as the case may be, either the U.S. Representatives or the Selling
Stockholders shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not

-31-
<PAGE> 37
exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein, the term "U.S. Underwriter" includes any person
substituted for a U.S. Underwriter under this Section 10.

SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the U.S. Underwriters shall be directed to the U.S. Representatives c/o
Merrill Lynch & Co. at North Tower, World Financial Center, New York, New York
10281-1201, attention of Cara Londin, Vice President. Notices to the Company
shall be directed to it at 5555 San Felipe, Suite 1600, Houston, Texas 77056,
attention of Paul M. Nation, Vice President and General Counsel. Notices to
the Selling Stockholders shall be directed to Edgar J. Marston, Bracewell &
Patterson, L.L.P., South Tower, Pennzoil Place, 711 Louisiana, Suite 2900,
Houston, Texas 77002.

SECTION 12. Parties. This Agreement shall each inure to the
benefit of and be binding upon the U.S. Underwriters, the Selling Stockholders
and the Company and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the U.S. Underwriters, the Selling
Stockholders and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the U.S. Underwriters, the
Selling Stockholders and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Securities from any U.S. Underwriter shall be deemed to be a
successor by reason merely of such purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the U.S.
Underwriters, the Company and the Selling Stockholders in accordance with its
terms.

-32-
<PAGE> 38

Very truly yours,

NATIONAL-OILWELL, INC.

By:
------------------------------------
Name:
Title:

SELLING STOCKHOLDERS

By:
------------------------------------
As Attorney-in-Fact acting on behalf
of the Selling Stockholders named in
Schedule B hereto

-33-
<PAGE> 39

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, LLC
SIMMONS & COMPANY INTERNATIONAL

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By:
-----------------------------------
Authorized Signatory

For themselves and the other U.S. Representatives as
the U.S. Underwriters named in Schedule A hereto.

-34-
<PAGE> 40
SCHEDULE A

<TABLE>
<CAPTION>
Number of Initial
U.S.
Name of U.S. Underwriter Securities
------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . .
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . .
The Robinson-Humphrey Company, LLC . . . . . . . . . . . . . . . . . . . . . . . .
Simmons & Company International . . . . . . . . . . . . . . . . . . . . . . . . .
---------------------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,560,000
====================
</TABLE>

-35-
<PAGE> 41
SCHEDULE B

<TABLE>
<CAPTION>
Number of Number of
Name of Selling Stockholder Initial Securities Option Securities
--------------------------- ------------------ -----------------
<S> <C> <C>
James J. Fasnacht . . . . . . . . . . . . . . . . . . 120,000 18,000
W. Douglas Frame . . . . . . . . . . . . . . . . . . 16,000 2,400
Jerry N. Gauche . . . . . . . . . . . . . . . . . . . 160,000 24,000
Lynn L. Leigh. . . . . . . . . . . . . . . . . . . . 120,000 18,000
Frederick W. Pheasey . . . . . . . . . . . . . . . . 400,000 60,000
Robert L. Phillips . . . . . . . . . . . . . . . . . 240,000 36,000
Joel V. Staff . . . . . . . . . . . . . . . . . . . . 96,000 14,400
[Staff Trusts] . . . . . . . . . . . . . . . . . . . 416,000 62,400
First Reserve Fund V, Limited Partnership . . . . . . 105,603 15,840
First Reserve Fund VI, Limited Partnership . . . . . 2,428,800 364,320
First Reserve Fund V-2, Limited Partnership . . . . . 105,603 15,840
General Electric Capital Corporation 832,000 124,800
DPI Oil Service Partners Limited Partnership . . . . 3,008,294 451,244
DPI Partners II . . . . . . . . . . . . . . . . . . . 239,706 35,956
B.D. Berryhill . . . . . . . . . . . . . . . . . . . 88,000 13,200
Billy R. Hext . . . . . . . . . . . . . . . . . . . . 160,000 24,000
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . 8,560,000 1,284,000
========= =========
</TABLE>

-36-
<PAGE> 42
SCHEDULE C

NATIONAL-OILWELL, INC.

8,560,000 Shares of Common Stock

(Par Value $.01 Per Share)

1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $____.

2. The purchase price per share for the U.S. Securities to be
paid by the several U.S. Underwriters shall be $_____, being an amount equal to
the initial public offering price set forth above less $_____ per share;
provided that the purchase price per share for any U.S. Option Securities
purchased upon the exercise of the over-allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S.
Securities but not payable on the U.S. Option Securities.

-37-
<PAGE> 43
SCHEDULE D

List of Subsidiaries

U.S. Subsidiaries

Natoil, Inc.
NOW Oilfield Services, Inc
National-Oilwell, L.P.
National-Oilwell International, Inc.
Dreco, Inc.

Other Subsidiaries

Dreco Energy Services Ltd.

-38-
<PAGE> 44
SCHEDULE E

List of Persons and Entities
Subject to Lock-up

Edgar J. Marston III, on behalf of the Trust created pursuant to the
National-Oilwell
Supplemental Savings Plan
Steven W. Krablin
Paul M. Nation
Gail M. McGee
Merrill A. Miller
Howard I. Bull
James C. Comis III
W. McComb Dunwoody
William E. MacCaulay
Bruce M. Rothstein

-39-
<PAGE> 45
EXHIBIT A

LOCK-UP LETTER

November 10, 1997

MERRILL LYNCH & CO. Merrill Lynch International
Merrill Lynch, Pierce, Fenner & Smith Goldman Sachs International
Incorporated Morgan Stanley & Co. International
Goldman, Sachs & Co. Limited
Morgan Stanley & Co. Incorporated The Robinson-Humphrey Company, LLC
The Robinson-Humphrey Company, LLC Simmons & Company International
Simmons & Company International as Lead Managers for the several
as U.S. Representatives of the several International Managers
U.S. Underwriters c/o Merrill Lynch International
c/o Merrill Lynch & Co. Ropemaker Place
Merrill Lynch, Pierce, Fenner & Smith 25 Ropemaker Street
Incorporated London EC2Y 9LY
World Financial Center England
New York, New York 10281-1209

Re: Proposed Public Offering of National-Oilwell, Inc. Common Stock

Dear Sirs:

The undersigned stockholder and/or officer and/or director of
National-Oilwell, Inc., a Delaware corporation (the "COMPANY"), understands
that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MERRILL LYNCH"), Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, The
Robinson-Humphrey Company, LLC and Simmons & Company International propose to
enter into a U.S. Purchase Agreement and Merrill Lynch International, Goldman
Sachs International, Morgan Stanley & Co. International Limited, The
Robinson-Humphrey Company, LLC and Simmons & Company International propose to
enter into an International Purchase Agreement (collectively, the "PURCHASE
AGREEMENTS") with the Company and certain holders of securities of the Company
named therein (the "SELLING STOCKHOLDERS") providing for the public offering of
shares (the "SECURITIES") of the Company's common stock, par value $.01 per
share (the "COMMON STOCK"), by the Selling Stockholders. In recognition of the
benefit that such an offering will confer upon the undersigned as a stockholder
and/or officer and/or director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the undersigned agrees with each underwriter to be named in the Purchase
Agreements that, during a period of 90 days from the date of the Purchase
Agreements, the

Exhibit A-1
<PAGE> 46
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase any option, or contract to sell or grant any
option, right or warrant for the sale of, or otherwise dispose of or transfer
any shares of the Company's Common Stock or any securities convertible into, or
exchangeable or exercisable for, Common Stock, whether now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, or file any registration statement
under the Securities Act of 1933, as amended, with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise; provided, (i) shares of Common Stock may be sold by any
Affiliate (as defined below) of the undersigned pursuant to the Purchase
Agreements; (ii) any person with shares of Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock that are
currently pledged as collateral for a loan made to such person may pledge such
shares of Common Stock or securities convertible into, or exchangeable or
exercisable for, Common Stock as collateral for any loan of an equal or lesser
amount in connection with the prepayment and cancellation of such loan,
provided that the pledgee agrees to be bound by a similar lock-up agreement
with respect to such securities; (iii) shares of Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock may be
transferred by the undersigned in a private transaction to a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the undersigned (an
"AFFILIATE") if such Affiliate agrees prior to such transfer in writing to be
bound by a similar lock-up agreement; (iv) shares of Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock may be
transferred as bona fide gifts by stockholders to persons who agree prior to
such transfer to be bound by a similar lock-up agreement; and (v) shares of
Common Stock or securities convertible into, or exchangeable or exercisable
for, Common Stock held by the trust pursuant to the Company's Supplemental
Savings Plan may be transferred to a beneficial owner of such shares who is
subject to a similar lock-up agreement pursuant to an event of termination.

Very truly yours,

Signature:
----------------------------

Print Name:
--------------------------

Title (if applicable):
---------------

Exhibit A-2

<PAGE> 1
Draft of November 13, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NATIONAL-OILWELL, INC.
(a Delaware corporation)

2,140,000 Shares of Common Stock

INTERNATIONAL PURCHASE AGREEMENT

Dated: November __, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C>
INTERNATIONAL PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Representations and Warranties by the Company . . . . . . . . . . . . . . . . . . . . . . . . 4
(i) Compliance with Registration Requirements . . . . . . . . . . . . . . . . . . . . . . 4
(ii) Incorporated Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(iii) Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(iv) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(v) No Material Adverse Change in Business . . . . . . . . . . . . . . . . . . . . . . . 6
(vi) Good Standing of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(vii) Good Standing of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(viii) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ix) Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(x) Authorization and Description of Securities . . . . . . . . . . . . . . . . . . . . . 8
(xi) Absence of Defaults and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(xii) Absence of Labor Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xiii) Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xiv) Accuracy of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xv) Possession of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xvi) Absence of Further Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xvii) Possession of Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . 10
(xviii) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xix) Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Stockholders Consents and Agreements . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Representations and Warranties by the Selling Stockholders . . . . . . . . . . . . . . . . 12
(i) Accurate Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(ii) Authorization of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(iii) Good Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(iv) Due Execution of Power of Attorney and Custody Agreement . . . . . . . . . . . . . 13
(v) Absence of Manipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(vi) Absence of Further Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(vii) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 14
(viii) Certificates Suitable for Transfer . . . . . . . . . . . . . . . . . . . . . . . . 14
(ix) No Association with NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 2. Sale and Delivery to International Managers; Closing . . . . . . . . . . . . . . . . . . . 15
(a) Initial Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Option Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Denominations; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SECTION 3. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Compliance with Securities Regulations and Commission Requests . . . . . . . . . . . . . . 17
(b) Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Delivery of Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Continued Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Blue Sky Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Rule 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 5. Conditions of International Managers' Obligations . . . . . . . . . . . . . . . . . . . . . 21
(a) Effectiveness of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Opinion of Counsel for Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Opinions of General Counsel and Other Special Counsel . . . . . . . . . . . . . . . . . . . 21
(d) Opinion of Counsel for Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Opinion of Counsel for International Managers . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Certificate of Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Accountant's Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) Bring-down Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(j) Approval of Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(k) No Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(l) Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(m) Purchase of Initial U.S. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(n) Conditions to Purchase of International Option Securities . . . . . . . . . . . . . . . . . 23
(i) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(ii) Certificate of Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
(iii) Opinion of Counsel for Company . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(iv) Opinion of General Counsel and Other Special Counsel . . . . . . . . . . . . . . . 24
(v) Opinion of Counsel for the Selling Stockholders . . . . . . . . . . . . . . . . . . 24
(vi) Opinion of Counsel for International Managers . . . . . . . . . . . . . . . . . . . 24
(vii) Bring-down Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(o) Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(p) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SECTION 6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Indemnification of International Managers . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Indemnification of Company, Directors and Officers
and the Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Actions against Parties; Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Settlement without Consent if Failure to Reimburse . . . . . . . . . . . . . . . . . . . . 28
(e) Cumulative Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

SECTION 7. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

SECTION 8. Representations, Warranties and Agreements to Survive Delivery . . . . . . . . . . . . . . 30

SECTION 10. Default By One or More of the International Managers . . . . . . . . . . . . . . . . . . . 31

SECTION 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SECTION 12. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SECTION 13. Governing Law and Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SECTION 14. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>

EXHIBITS
Exhibit A - Form of Lock-up Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

(iv)
<PAGE> 6
NATIONAL-OILWELL, INC.

(a Delaware corporation)

2,140,000 Shares of Common Stock

(Par Value $.01 Per Share)

INTERNATIONAL PURCHASE AGREEMENT

November __, 1997

MERRILL LYNCH INTERNATIONAL
Goldman Sachs International
Morgan Stanley International Limited
The Robinson-Humphrey Company, LLC
Simmons & Company International
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England

Ladies and Gentlemen:

National-Oilwell, Inc., a Delaware corporation (the "Company") and the
persons listed in Schedule B hereto (the "Selling Stockholders") confirm their
respective agreements with Merrill Lynch International ("Merrill Lynch") and
each of the other international underwriters named in Schedule A hereto
(collectively, the "International Managers", which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), for whom
Merrill Lynch, Goldman Sachs International, Morgan Stanley International
Limited, The Robinson-Humphrey Company, LLC and Simmons & Company International
are acting as representatives (in such capacity, the "Lead Managers"), with
respect to (i) the sale by the Selling Stockholders, acting severally and not
jointly, and the purchase by the International Managers, acting severally and
not jointly, of the respective numbers of shares of Common Stock, par value
$.01 per share, of the Company ("Common Stock") set forth in said Schedule A
and B hereto, and (ii) with respect to the grant by the Selling Stockholders,
acting severally and not jointly, to the International Managers, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of 321,000 additional shares of Common Stock to cover
over-allotments, if any. The aforesaid
<PAGE> 7
2,140,000 shares of Common Stock (the "Initial International Securities") to be
purchased by the International Managers and all or any part of the 321,000
shares of Common Stock subject to the option described in Section 2(b) hereof
(the "International Option Securities") are hereinafter called, collectively,
the "International Securities."

It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by Selling Stockholders, acting severally and not jointly, of an
aggregate of 8,560,000 shares of Common Stock (the "Initial U.S. Securities")
through arrangements with certain underwriters in the United States and Canada
(the "U.S. Underwriters") for which Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, The Robinson-Humphrey Company, LLC and Simmons & Company
International acting as U.S. representatives (the "U.S. Representatives") and
the grant by certain Selling Stockholders, acting severally and not jointly, to
the U.S. Underwriters, acting severally and not jointly, of an option to
purchase all or any part of the U.S. Underwriters' pro rata portion of up to
1,284,000 additional shares of Common Stock solely to cover overallotments, if
any (the "U.S. Option Securities" and, together with the International Option
Securities, the "Option Securities"). The Initial U.S. Securities and the U.S.
Option Securities are hereinafter called the "U.S. Securities." It is
understood that the Selling Stockholders are not obligated to sell and the
International Managers are not obligated to purchase, any Initial International
Securities unless all of the Initial U.S. Securities are contemporaneously
purchased by the U.S. Underwriters.

The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial International Securities
and the Initial U.S. Securities are hereinafter collectively called the
"Initial Securities," and the International Securities and the U.S. Securities
are hereinafter collectively called the "Securities."

The Selling Stockholders understand that the International Managers
propose to make a public offering of the International Securities as soon as
the Lead Managers deem advisable after this Agreement has been executed and
delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-__________________)
covering the registration of the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), including the related preliminary prospectus or
prospectuses. Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule

-2-
<PAGE> 8
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form
of U.S. Prospectus"). The Form of International Prospectus is identical to the
Form of U.S. Prospectus, except for the front cover and back cover pages and
the information under the caption "Underwriting" and the inclusion in the Form
of International Prospectus of a section under the caption "Certain United
States Tax Considerations for Non-United States Holders." The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each Form of International Prospectus
and Form of U.S. Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto, schedules thereto, if any, and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final Form of International Prospectus and
the final Form of U.S. Prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
forms first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "International Prospectus" and
the "U.S. Prospectus," respectively, and collectively, the "Prospectuses." If
Rule 434 is relied on, the terms "International Prospectus" and "U.S.
Prospectus" shall refer to the preliminary International Prospectus dated
November ____, 1997 and preliminary U.S. Prospectus dated November ____, 1997,
respectively, each together with the applicable Term Sheet and all references
in this Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the International
Prospectus, the U.S. Prospectus or any Term Sheet or any amendment or supplement
to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary

-3-
<PAGE> 9

prospectus (including the Form of U.S. Prospectus and Form of International
Prospectus) or the Prospectuses (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information as and to the extent incorporated by reference in the Registration
Statement, any preliminary prospectus (including the Form of U.S. Prospectus
and Form of International Prospectus) or the Prospectuses, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement, any preliminary prospectus or the Prospectuses shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934 (the "1934 Act") as and to the extent incorporated by
reference in the Registration Statement, such preliminary prospectus or the
Prospectuses, as the case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each International Manager as of the date hereof, as
of the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b), hereof and agrees with each
International Manager, as follows:

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any
International Option Securities are purchased, at the Date of
Delivery), the Registration Statement, the Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. Neither of the Prospectuses nor any
amendments or supplements thereto, at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time
(and, if any International Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements

-4-
<PAGE> 10
of Rule 434. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the International Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
International Manager through the Lead Managers expressly for use in
the Registration Statement or the International Prospectus.

(ii) Incorporated Documents. The documents incorporated
or deemed to be incorporated by reference in the Registration
Statement and the Prospectuses, when they became effective or at the
time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations or the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 Act
Regulations"), as applicable, and, when read together with the other
information in the Prospectuses, at the time the Registration
Statement became effective, at the time the Prospectuses were issued
and at the Closing Time (and, if any International Option Securities
are purchased, at the Date of Delivery), did not and will not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.

(iv) Financial Statements. The financial statements of
the Company included or incorporated by reference in the Registration
Statement and the Prospectuses present fairly in all material respects
the financial position of the Company and its consolidated
subsidiaries, or such other entity, as the case may be, at the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries, or such
other entity, as the case may be, for the periods specified in
conformity with generally accepted accounting principles ("GAAP"),
except for the omission of detailed information and footnotes in the
case of unaudited interim financial statements included or
incorporated by reference therein. The selected financial data and
the summary financial information included in the Prospectuses present
fairly the information shown therein and

-5-
<PAGE> 11
have been compiled on a basis consistent with that of the financial
statements included or incorporated by reference in the Registration
Statement.

(vii) Good Standing of Subsidiaries. Each of the
subsidiaries of the Company identified on Schedule D hereto (each a
"Subsidiary" and, collectively, the "Subsidiaries"), which includes
each "significant subsidiary" of the Company (as such term is defined
in Rule 1-02 of Regulation S-X), has been duly organized and is
validly existing as a corporation or a limited partnership, as the
case may be, in good standing under the laws of the jurisdiction of
its incorporation or formation, has corporate (or partnership) power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and is duly qualified as a
foreign corporation or limited partnership, as the case may be, to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in
the Registration Statement, all of the issued and outstanding capital
stock or partnership interests of each such Subsidiary has been duly
authorized and validly issued, to the extent consisting of shares of
capital stock

-6-
<PAGE> 12
of a corporation, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of, and none
of the outstanding partnership interests in, any Subsidiary was issued
in violation of the preemptive or similar rights of any
securityholder or partner of such Subsidiary. The only subsidiaries
of the Company are (a) the subsidiaries listed on Schedule D hereto
and (b) certain other subsidiaries which, considered in the aggregate
as a single Subsidiary, do not constitute a "significant subsidiary"
as defined in Rule 1-02 of Regulation S-X.

(ix) Authorization of Agreement. This Agreement and the
U.S. Purchase Agreement have been duly authorized, executed and
delivered by the Company.

-7-
<PAGE> 13
(x) Authorization and Description of Securities. The
Securities to be purchased by the International Managers and the U.S.
Underwriters from the Selling Stockholders are duly authorized,
validly issued, fully paid and non-assessable, provided, in respect of
the Securities to be sold by the Selling Stockholders after the
exchange of the Exchangeable Shares or the exercise of options, such
Securities have been duly authorized, and when issued and delivered by
the Company prior to the Closing Time, will be validly issued, fully
paid and non-assessable. The Common Stock conforms in all material
respects to all statements relating thereto contained in the
Prospectuses and such description conforms in all material respects to
the rights set forth in the instruments defining the same; no holder
of the Securities will be subject to personal liability solely by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company or its subsidiaries.

(xi) Absence of Defaults and Conflicts. Neither the
Company nor any of its subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance
of this Agreement and the U.S. Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
U.S. Purchase Agreement and in the Registration Statement and
compliance by the Company with its obligations under this Agreement
and the U.S. Purchase Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any subsidiary pursuant to, the Agreements and Instruments (except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company
or any subsidiary.

-8-
<PAGE> 14
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which may
reasonably be expected to result in a Material Adverse Effect, or
which may reasonably be expected to materially and adversely affect
the consummation of the transactions contemplated in this Agreement
and the U.S. Purchase Agreement or the performance by the Company of
its obligations hereunder or thereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.

(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental

-9-
<PAGE> 15
authority or agency is necessary or required for the performance by
the Company of its obligations hereunder, in connection with the
offering or sale of the Securities by the Selling Stockholders under
this Agreement and the U.S. Purchase Agreement or the consummation of
the transactions contemplated by this Agreement and the U.S. Purchase
Agreement (including, without limitation, the exchange of the
Exchangeable Shares for and issuance of the Securities prior to the
Closing), except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations and foreign or
state securities or blue sky laws.

-10-
<PAGE> 16

(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement except to the extent
the Company is in compliance with such rights or such rights have been
waived.

(xxii) Insurance. The Company maintains reasonably adequate
insurance for the business conducted by the Company and its
subsidiaries.

(xxiii) Accounting Controls. The Company and the
Subsidiaries maintain a system of accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with the management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared

-11-
<PAGE> 17
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

-12-
<PAGE> 18
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over such Selling Stockholder or any of its properties.

(iii) Good Title. Such Selling Stockholder has (provided,
(i) if such Selling Stockholder currently holds Exchangeable Shares,
such Selling Stockholder represents as of the date of this Agreement
only with respect to such Exchangeable Shares and (ii) if such Selling
Stockholder currently holds options, such Selling Stockholder
represents as of the date of this Agreement only with respect to such
options and the current exercisability of such options) and in any
case will at the Closing Time and, if any Option Securities are
purchased, on the Date of Delivery have good title to the Securities
to be sold by such Selling Stockholder hereunder, free and clear of
any security interest, mortgage, pledge, lien, charge, claim, equity
or encumbrance of any kind, other than pursuant to this Agreement and
the U.S. Purchase Agreement; provided, the Securities are currently
subject to applicable restrictions on transfer under the 1933 Act and
upon delivery of such Securities and payment of the purchase price
therefor as herein contemplated assuming each such Underwriter has no
notice of any adverse claim, each of the Underwriters will receive
good title to the Securities purchased by it from such Selling
Stockholder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind.

(iv) Due Execution of Power of Attorney and Custody
Agreement. Such Selling Stockholder has duly executed and delivered,
in the forms heretofore furnished to the Lead Managers, the Power of
Attorney and Custody Agreement with W. McComb Dunwoody, William E.
MacCaulay and Joel V. Staff or any of them, as attorneys-in-fact (the
"Attorneys-in-Fact") and Texas Commerce Bank National Association, as
custodian (the "Custodian"); the Custodian is authorized to exchange
the Exchangeable Shares or exercise options under designated option
agreements, if applicable, and to deliver the Securities to be sold by
such Selling Stockholder hereunder and to accept payment therefor; and
the requisite Attorneys-in-Fact are authorized to execute and deliver
this Agreement and the certificate referred to in Section 5(f) or that
may be required pursuant to Section(s) 5(l) and 5(m) on behalf of such
Selling Stockholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Stockholder hereunder, to
determine the purchase price to be paid by the Underwriters to such
Selling Stockholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities to be sold by such Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of such Selling Stockholder in connection with this Agreement.

(v) Absence of Manipulation. Such Selling Stockholder
has not taken, and will not take, directly or indirectly, any action
which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.

-13-
<PAGE> 19
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification
or decree of, any court or governmental authority or agency, domestic
or foreign, is necessary or required for the performance by each
Selling Stockholder of its obligations hereunder or in the Power of
Attorney and Custody Agreement, or in connection with the sale and
delivery of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as may have
previously been made or obtained or as may be required under the 1933
Act or the 1933 Act Regulations or under applicable foreign or state
securities laws.

(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by such Stockholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment in blank with
signatures guaranteed, have been placed in custody with the Custodian
with irrevocable

-14-
<PAGE> 20
conditional instructions to deliver such Securities to the
Underwriters pursuant to this Agreement.

(c) Officer's Certificates. Any certificate signed by any officer
of the Company or any of its subsidiaries delivered to the Global Coordinator,
the Lead Managers or to counsel for the International Managers shall be deemed
a representation and warranty by the Company to each International Manager as
to the matters covered thereby.

SECTION 2. Sale and Delivery to International Managers; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, each Selling Stockholder, severally and not jointly, agrees to sell to
each International Manager, severally and not jointly, and each International
Manager, severally and not jointly, agrees to purchase from each Selling
Stockholder, severally and not jointly, at the price per share set forth in
Schedule B, the number of Initial International Securities set forth in
Schedule A opposite the name of such International Manager, plus any additional
number of Initial International Securities which such International Manager may
become obligated to purchase pursuant to the provisions of Section 10 hereof
bears to the total number of Initial International Securities, subject, in each
case, to such adjustments among the International Managers as the Lead Managers
in their sole discretion shall make to eliminate any sales or purchases of
fractional securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, each Selling Stockholder hereby grants an option
to the International Managers, severally and not jointly, to purchase up to an
additional 321,000 shares of Common Stock in the respective number of shares
set forth opposite their respective names on Schedule B at the price per share
set forth in Schedule C, less an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities. The option
hereby granted will expire 30 days after the date hereof and may be exercised
in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial International Securities upon notice by the Global
Coordinator to the Company setting forth the number of International Option
Securities as to which the several International Managers are then exercising
the option and the time and date of payment and delivery for such International
Option Securities. Any such time and date of delivery for the International

-15-
<PAGE> 21
Option Securities (a "Date of Delivery") shall be determined by the Global
Coordinator, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of
the International Option Securities, each of the International Managers, acting
severally and not jointly, will purchase that proportion of the total number of
International Option Securities then being purchased which the number of
Initial International Securities set forth in Schedule A opposite the name of
such International Manager bears to the total number of Initial International
Securities, subject in each case to such adjustments as the Global Coordinator
in its discretion shall make to eliminate any sales or purchases of fractional
shares.

In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global Coordinator and the Company, on each Date
of Delivery as specified in the notice from the Global Coordinator to the
Selling Stockholders and Company.

Payment shall be made to the Selling Stockholders by checks or wire
transfer of immediately available funds to a bank account designated by the
Selling Stockholders, against delivery to the Lead Managers for the respective
accounts of the International Managers of certificates for the International
Securities to be purchased by them. It is understood that each International
Manager has authorized the Lead Managers, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Initial
International Securities and the International Option Securities, if any, which
it has agreed to purchase. Merrill Lynch, individually and not as
representative of the International Managers, may (but shall not be obligated
to) make payment of the purchase price for the Initial International Securities
or the International Option Securities, if any, to be purchased by any
International Manager whose funds have not been received by the Closing Time or
the relevant Date of Delivery, as the case may be, but such payment shall not
relieve such International Manager from its obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such

-16-
<PAGE> 22
names as the Lead Managers may request in writing at least one full business
day before the Closing Time or the relevant Date of Delivery, as the case may
be. The certificates for the Initial International Securities and the
International Option Securities, if any, will be made available for examination
and packaging by the Lead Managers in the City of New York not later than 10:00
A.M. (Eastern time) on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants with
each International Manager and each Selling Stockholder as follows:

(b) Filing of Amendments. The Company will give the
Global Coordinator notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or to
the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise;
in addition, the Company will use its best efforts to furnish the Global
Coordinator with copies of any such documents a reasonable amount of time prior
to such proposed filing or use, as the case may be, and will not file or use
any such document to which the Global Coordinator or counsel for the
International Managers shall reasonably object during the period contemplated
in Section 3(e) hereto.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Lead Managers and counsel for the
International Managers, without charge, signed

-17-
<PAGE> 23
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein and documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts, and
will also deliver to the Lead Managers, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the International Managers. The copies of the
Registration Statement and each amendment thereto furnished to the
International Managers will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered
to each International Manager without charge, as many copies of each
preliminary prospectus as such International Manager reasonably requested, and
the Company hereby consents to the use of such copies for purposes permitted by
the 1933 Act. The Company will furnish to each International Manager, without
charge, during the period when the International Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of the
International Prospectus (as amended or supplemented) as such International
Manager may reasonably request. The International Prospectus and any
amendments or supplements thereto furnished to the International Managers will
be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement, the U.S.
Purchase Agreement and in the Prospectuses. If at any time when a prospectus
is required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of which
it is necessary, in the opinion of counsel for the International Managers or
for the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the
International Managers such number of copies of such amendment or supplement as
the International Managers may reasonably request; provided, however, that any
such amendment or supplement filed after nine months from the date hereof shall
be at the expense of the International Managers.

-18-
<PAGE> 24
(f) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the International Managers, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Global Coordinator
may designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been
so qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.

SECTION 4. Payment of Expenses. (a) Expenses. The Company
will pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the printing and delivery
to the Underwriters of this Agreement, any Agreement among International
Managers and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to
the Underwriters, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Securities to
the Underwriters and the transfer of the Securities between the U.S.
Underwriters and the International Managers, (iv) the fees and disbursements of
the Company's counsel, accountants and other advisors, (v) the qualification of
the Securities under securities laws in accordance with the provisions of
Section 3(f) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any supplement
thereto, (viii) the fees and expenses of any transfer agent or registrar for
the Securities and (ix) the filing fees incident to, and the reasonable fees
and disbursements of counsel to the Underwriters in connection with, the review
by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities, and (x) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange.

(b) Expenses of the Selling Stockholders. The Selling
Stockholders will pay all expenses incident to the performance of their
respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including any stamp duties, capital duties and
stock transfer taxes, if any, payable upon the sale of the Securities to the
International Managers, and their transfer between the International Managers
pursuant to an agreement between such International Managers; provided,
however, that the Company has advised the International Managers that the
Company is paying the fees and disbursements of counsel to the Selling
Stockholders.

(c) Termination of Agreement. If this Agreement is terminated by
the Lead Managers in accordance with the provisions of Section 5 (except
subparagraphs (m) and (n)), or Section 9(a)(i)

-20-
<PAGE> 26
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.

(d) Allocation of Expenses. The provisions of this Section shall
not affect any agreement that the Company and the Selling Stockholders may make
for the sharing of such costs and expenses.

SECTION 5. Conditions of International Managers' Obligations.
The obligations of the several International Managers hereunder are subject to
the accuracy of the representations and warranties of the Company and the
Selling Stockholders contained in Section 1 hereof or in certificates of any
officer of the Company or any subsidiary of the Company or on behalf of any
Selling Stockholder delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder,
and to the following further conditions:

(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the International Managers. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has elected
to rely upon Rule 434, a Term Sheet shall have been filed with the Commission
in accordance with Rule 424(b).

(b) Opinion of Counsel for Company. At Closing Time, the Lead
Managers shall have received the opinion, dated as of Closing Time, of Morgan,
Lewis & Bockius LLP, counsel for the Company, in form and substance
satisfactory to counsel for the International Managers, together with signed
or reproduced copies of such letter for each of the other International
Managers in the form previously agreed upon and to such further effect as
counsel to the International Managers may reasonably request.

(c) Opinions of General Counsel and Other Special Counsel. At
Closing Time, the Lead Managers shall have received the opinion, dated as of
Closing Time, of Paul M. Nation, General Counsel of the Company, in form and
substance satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other International
Managers in the form previously agreed upon and to such further effect as
counsel to the International Managers may reasonably request. In addition, the
Lead Managers shall have received the opinion, dated as of Closing Time, of
Robert H. Gillard, counsel for Dreco Energy Services Ltd., in the form
previously agreed upon.

-21-
<PAGE> 27
(d) Opinion of Counsel for Selling Stockholders. At Closing Time,
the Lead Managers shall have received the opinions, dated as of Closing Time,
of Bracewell & Patterson, L.L.P., counsel for the Selling Stockholders, and
Stikeman, Elliott, counsel for the Canadian Selling Stockholders, in form and
substance satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other International
Managers in the respective forms previously agreed upon and to such further
effect as counsel to the International Managers may reasonably request.

(e) Opinion of Counsel for International Managers. At Closing
Time, the Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Andrews & Kurth L.L.P., counsel for the International
Managers, together with signed or reproduced copies of such letter for each of
the other International Managers with respect to the matters requested by the
International Managers.

(f) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Lead Managers shall have received a certificate executed on behalf of the
Company by the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of Closing Time,
to the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct with
the same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or are contemplated by the Commission.

(g) Certificate of Selling Stockholders. At Closing Time, the
Lead Managers shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, severally and not jointly, dated as of
Closing Time, to the effect that (i) the representations and warranties of each
Selling Stockholder contained in Section 1(b) hereof are true and correct in
all respects with the same force and effect as though expressly made at and as
of Closing Time and (ii) each Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.

(h) Accountant's Comfort Letters. At the time of the execution of
this Agreement, the Lead Managers shall have received from each of Ernst &
Young and, with respect to historical financial information concerning Dreco,
Coopers & Lybrand a letter dated such date, in form and substance satisfactory
to the Lead Managers, together with signed or reproduced copies of such

-22-
<PAGE> 28
letters for each of the other International Managers containing statements and
information of the type ordinarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectuses.

(i) Bring-down Comfort Letters. At Closing Time, the Lead
Managers shall have received from each of Ernst & Young and Coopers & Lybrand a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (h) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to Closing Time.

(j) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.

(k) No Objection. The NASD has confirmed that it has not raised
any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

(l) Lock-up Agreements. At the date of this Agreement, the Lead
Managers shall have received an agreement substantially in the form of Exhibit
A hereto signed by the persons listed on Schedule E hereto.

(m) Purchase of Initial U.S. Securities. Contemporaneously with
the purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased the
Initial U.S. Securities under the U.S. Purchase Agreement.

(n) Conditions to Purchase of International Option Securities. In
the event that the International Managers exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the International Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company or any
subsidiary of the Company hereunder shall be true and correct as of each Date
of Delivery and, at the relevant Date of Delivery, the Lead Managers shall have
received:

(ii) Certificate of Selling Stockholders. A certificate
dated such Date of Delivery, of an Attorney-in-Fact on behalf of each
Selling Stockholder, confirming that the certificate

-23-
<PAGE> 29
delivered at Closing Time pursuant to Section 5(g) remains true and
correct as of such Date of Delivery.

(iii) Opinion of Counsel for Company. The opinion of
Morgan, Lewis & Bockius LLP, counsel for the Company, in form and
substance satisfactory to counsel for the International Managers,
dated such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(b) hereof.

(v) Opinion of Counsel for the Selling Stockholders. The
opinions of Bracewell & Patterson, L.L.P., counsel for the Selling
Stockholders, and Stikeman, Elliott counsel for the Canadian Selling
Stockholders, in form and substance satisfactory to counsel for the
International Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required in
Section 5(d) hereof.

(vi) Opinion of Counsel for International Managers. The
opinion of Andrews & Kurth L.L.P., counsel for the International
Managers, dated such Date of Delivery, relating to the International
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(e)
hereof.

(vii) Bring-down Comfort Letters. A letter from each of
Ernst & Young and Coopers & Lybrand, in form and substance
satisfactory to the Lead Managers and dated such Date of Delivery,
substantially in the same form and substance as the letter furnished
to the Lead Managers pursuant to Section 5(h) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of
Delivery.

(o) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the International Managers shall have been furnished with
such documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the transfer and sale of the Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Lead Managers and counsel
for the International Managers.

-24-
<PAGE> 30
(p) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several International Managers to purchase
the relevant Option Securities, may be terminated by the Lead Managers by
notice to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without liability
of any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.

SECTION 6. Indemnification.

(a) Indemnification of International Managers. The Company agrees
to indemnify and hold harmless each International Manager and each person, if
any, who controls any International Manager within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act to the extent and in the manner set
forth in clauses (i), (ii) and (iii) below:

-25-
<PAGE> 31

Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each International Manager and each person, if any,
who controls any International Manager within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act with respect to information furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto). Notwithstanding anything
in this Agreement to the contrary, each Selling Stockholder's aggregate
liability under this indemnity, shall be limited to an amount equal to the net
proceeds (after deducting the underwriters' discount but before deducting
expenses) received by such Selling Stockholder from the sale of Securities
pursuant to this Agreement.

Notwithstanding the foregoing in this Section 6(a), (i) the foregoing
indemnity agreements shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by any International Manager
through the Lead Managers expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto) and (ii) the foregoing
indemnity agreements with respect to any untrue statement contained in or
omission from a preliminary prospectus shall not inure to the benefit of any
International Manager (or any person controlling such International Manager)
from whom the person asserting any such loss, liability, claim, damage or
expense purchased any of the Securities which are the subject thereof if such
person was not sent or given a copy of the International Prospectus (as amended
or supplemented, if applicable) (in each case exclusive of the documents from
which information is incorporated by reference) at or prior to the written
confirmation of the sale of such Securities to such person (other than as a
result of the failure by the Company to comply with its obligations under
Section 3(d) hereof) and the untrue statement contained in or omission from
such preliminary prospectus was corrected in the International Prospectus (as
amended or supplemented, if applicable).

(b) Indemnification of Company, Directors and Officers and the
Selling Stockholders. Each International Manager severally agrees to indemnify
and hold harmless the Company, its directors, each of its officers who signed
the Registration Statement, each of the Selling Stockholders, and each person,
if any, who controls the Company or such Selling Stockholder within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
international prospectus or the International Prospectus (or any amendment or
supplement thereto)

-26-
<PAGE> 32
in reliance upon and in conformity with written information furnished to the
Company by such International Manager through the Lead Managers expressly for
use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the International Prospectus (or any amendment or
supplement thereto).

(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Lead Managers in the case of paragraph (a) of this Section 6,
representing the indemnified parties under such paragraph (a) who are parties
to such action or actions) or (ii) the indemnifying party does not promptly
retain counsel satisfactory to the indemnified party or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the consent of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim

-27-
<PAGE> 33
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.

(e) Cumulative Agreements. With respect to the Company and the
Selling Stockholders, the provisions of this Section shall not affect any
agreement between the Company and the Selling Stockholder with respect to
indemnification; provided, any such agreements shall not affect the rights of
the International Managers or the obligations or liabilities of the Company and
the Selling Stockholders to the International Managers under this Agreement.

SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the International
Managers on the other hand from the offering of the Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative

-28-
<PAGE> 34
fault of the Company and the Selling Stockholders on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company and the Selling
Stockholders on the one hand and the International Managers on the other hand
in connection with the offering of the International Securities pursuant to
this Agreement shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the International Securities pursuant
to this Agreement (before deducting expenses) received by the Selling
Stockholders and the total underwriting discount received by the International
Managers, in each case as set forth on the cover of the International
Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the International
Securities as set forth on such cover.

The relative fault of the Company and the Selling Stockholders on the
one hand and the International Managers on the other hand shall be determined
by reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company and the Selling
Stockholders or by the International Managers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company and the International Managers agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation (even if the International Managers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

-29-
<PAGE> 35
434 Information, if applicable, or any preliminary prospectus or the
International Prospectus (or any amendment or supplement thereto).

Notwithstanding the provisions of this Section 7, no International
Manager shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such International Manager has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission.

For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as the
Company. The International Managers' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the number of Initial
International Securities set forth opposite their respective names in Schedule
A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
International Manager or controlling person, or by or on behalf of the Company,
and shall survive delivery of the Securities to the International Managers.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Lead Managers may terminate this
Agreement, by notice to the Company and the Selling Stockholders, at any time
at or prior to Closing Time (i) if there has been, since the time of execution
of this Agreement or since the respective dates as of which information is
given in the International Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such

-30-
<PAGE> 36
as to make it, in the judgment of the Lead Managers, impracticable to market
the Securities or to enforce contracts for the sale of the Securities, or (iii)
if trading in any securities of the Company has been suspended or materially
limited by the Commission or the New York Stock Exchange, or if trading
generally on the American Stock Exchange or the New York Stock Exchange or in
the Nasdaq National Market has been suspended or materially limited, or minimum
or maximum prices for trading have been fixed, or maximum ranges for prices
have been required, by any of said exchanges or by such system or by order of
the Commission, the National Association of Securities Dealers, Inc. or any
other governmental authority, or (iv) if a banking moratorium has been declared
by either Federal or New York authorities.

SECTION 10. Default By One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time or a Date
of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Lead Managers
shall have the right, but not the obligation, within 24 hours thereafter, to
make arrangements for one or more of the non-defaulting International Managers,
or any other underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the Lead Managers shall not have completed such
arrangements within such 24-hour period, then: (a) if the number of Defaulted
Securities does not exceed 10% of the number of Securities to be purchased on
such date, each of the non-defaulting International Managers shall be
obligated, severally and not jointly, to purchase the full amount thereof in
the proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting International Managers,
or (b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase the Option Securities to be purchased and sold on such
Date of Delivery shall terminate without liability on the part of any
non-defaulting International Manager.

No action pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.

In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the International Managers to purchase the relevant Option
Securities, as the case may be, either the Lead Managers or the Selling
Stockholders shall have the right to postpone the Closing Time or the relevant
Date of Delivery, as the case may be, for a period

-31-
<PAGE> 37
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein the term "International Manager" includes any
person substituted for an International Manager under this Section 10.

SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the International Managers shall be directed to the Lead Managers c/o Merrill
Lynch & Co. at North Tower, World Financial Center, New York, New York
10281-1201, attention of Cara Londin, Vice President. Notices to the Company
shall be directed to it at 5555 San Felipe, Suite 1600, Houston, Texas 77056,
attention of Paul M. Nation, Vice President and General Counsel. Notices to
the Selling Stockholders shall be directed to Edgar J. Marston, Bracewell &
Patterson L.L.P., 2900 South Tower, Pennzoil Place, 711 Louisiana, Suite 2900,
Houston, Texas 77002.

SECTION 12. Parties. This Agreement shall each inure to the
benefit of and be binding upon the International Managers, the Selling
Stockholders and the Company and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the International Managers,
the Selling Stockholders and the Company and their respective successors and
the controlling persons and officers and directors referred to in Sections 6
and 7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the International
Managers, the Selling Stockholders and the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of Securities from any International Manager
shall be deemed to be a successor by reason merely of such purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

-32-
<PAGE> 38

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the International
Managers, the Company and the Selling Stockholders in accordance with its
terms.

Very truly yours,

NATIONAL-OILWELL, INC.

By:
--------------------------------------
Name:
Title:

SELLING STOCKHOLDERS

By:
--------------------------------------
As Attorney-in-Fact acting on behalf
of the Selling Stockholders named in
Schedule B hereto

-33-
<PAGE> 39
CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY INTERNATIONAL LIMITED
THE ROBINSON-HUMPHREY COMPANY, LLC
SIMMONS & COMPANY INTERNATIONAL
BY: MERRILL LYNCH INTERNATIONAL

By:
----------------------------
Authorized Signatory

For themselves and the other Lead Managers as
the International Managers named in Schedule A hereto.

-34-
<PAGE> 40
SCHEDULE A

<TABLE>
<CAPTION>
Number of Initial
International
Name of International Manager Securities
----------------------------- ----------
<S> <C>
Merrill Lynch International . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goldman Sachs International . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Morgan Stanley International Limited . . . . . . . . . . . . . . . . . . . . . . .
The Robinson-Humphrey Company, LLC . . . . . . . . . . . . . . . . . . . . . . . .
Simmons & Company International . . . . . . . . . . . . . . . . . . . . . . . . . .
----------

Total . . . . . . . . . . . . . 2,140,000
==========
</TABLE>

-35-
<PAGE> 41
SCHEDULE B

<TABLE>
<CAPTION>
Number of Number of
Name of Selling Stockholder Initial Securities Option Securities
--------------------------- ------------------ -----------------
<S> <C> <C>
James J. Fasnacht . . . . . . . . . . . . . 30,000 4,500
W. Douglas Frame . . . . . . . . . . . . . 4,000 600
Jerry N. Gauche . . . . . . . . . . . . . . 40,000 6,000
Lynn L. Leigh. . . . . . . . . . . . . . . 30,000 4,500
Frederick W. Pheasey . . . . . . . . . . . 100,000 15,000
Robert L. Phillips . . . . . . . . . . . . 60,000 9,000
Joel V. Staff . . . . . . . . . . . . . . . 24,000 3,600
[Staff Trusts] . . . . . . . . . . . . . . 104,000 15,600
First Reserve Fund V, Limited
Partnership . . . . . 26,401 3,960
First Reserve Fund VI, Limited
Partnership . . . . . 607,200 91,080
First Reserve Fund V-2, Limited
Partnership . . . . . 26,401 3,960
General Electric Capital Corporation 208,000 31,200
DPI Oil Service Partners Limited
Partnership . . . . . 752,073 112,810
DPI Partners II . . . . . . . . . . . . . . 59,927 8,990
B.D. Berryhill . . . . . . . . . . . . . . 22,000 3,300
Dean Foot . . . . . . . . . . . . . . . . . 26,000 900
Billy R. Hext . . . . . . . . . . . . . . . 40,000 6,000
--------- -------
Total . . . . . . . . . . . . . . . . . . . 2,140,000 321,000
========= =======
</TABLE>

-36-
<PAGE> 42
SCHEDULE C

NATIONAL-OILWELL, INC.

2,140,000 Shares of Common Stock

(Par Value $.01 Per Share)

1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $____.

2. The purchase price per share for the International
Securities to be paid by the several International Managers shall be $_____,
being an amount equal to the initial public offering price set forth above less
$_____ per share; provided that the purchase price per share for any
International Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities.

-37-
<PAGE> 43
SCHEDULE D

List of Subsidiaries

U.S. Subsidiaries

Natoil, Inc.
NOW Oilfield Services, Inc
National-Oilwell, L.P.
National-Oilwell International, Inc.
Dreco, Inc.

Other Subsidiaries

Dreco Energy Services Ltd.

-38-
<PAGE> 44
SCHEDULE E

List of Persons and Entities
Subject to Lock-up

-39-
<PAGE> 45
EXHIBIT A

LOCK-UP LETTER

November 10, 1997

Re: Proposed Public Offering of National-Oilwell, Inc. Common Stock

Dear Sirs:

Very truly yours,

Signature:
-------------------------------

Print Name:
------------------------------

Title (if applicable):
-------------------

Exhibit A-2

<PAGE> 1
EXHIBIT 5

Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993

November 14, 1997

National-Oilwell, Inc.
5555 San Felipe
Houston, Texas 77056

Re: National-Oilwell, Inc.
Registration Statement on Form S-3

Ladies and Gentlemen:

As counsel to National-Oilwell, Inc., a Delaware corporation (the "Company"), we
have assisted in the preparation of the subject Registration Statement on Form
S-3, as amended (the "Registration Statement"), to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), relating to the issuance of up to 6,152,500 shares (12,305,000 shares
after giving effect to the Company's one-for-one stock dividend (the "Stock
Dividend") to be paid on November 18, 1997) (the "Shares") of the Company's
Common Stock, par value $0.01 per share.

In rendering the opinion set forth below, we have reviewed (a) the Registration
Statement; (b) the Company's Amended and Restated Certificate of Incorporation
and Bylaws; (c) the Dreco Energy Services 1989 Amended and Restated Employee
Incentive Stock Option Plan (the "Plan") and related option agreements between
the Company and Robert L. Phillips and W. Douglas Frame, respectively (the
"Option Agreements"); (d) certain records of the Company's corporate proceedings
as reflected in its minute books; (e) the Combination Agreement, dated as of May
14, 1997 (as amended, the "Combination Agreement"), between the Company and
Dreco Energy Services Ltd.; and (f) such records, documents, statutes and
decisions as we have deemed relevant. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original of all documents submitted to
us as copies thereof.

Our opinion set forth below is limited to the Delaware General Corporation Law.

Based upon the foregoing, we are of the opinion that, when and to the extent (i)
the Registration Statement has become effective under the Act, (ii) those Shares
to be issued pursuant to the Plan and the Option Agreements are issued in
accordance with the terms and conditions of the Plan and the Option Agreements,
(iii) those Shares to be issued pursuant to the Exchangeable Share Provisions
(the "Exchangeable Share Provisions") (attached as Appendix A to the Plan of
Arrangement under Section 186 of the Alberta Business Corporations Act filed
with the Registrar of Corporations in the Province of Alberta, Canada on
September 25, 1997 pursuant to the Combination Agreement) are issued in
accordance with the terms and conditions of the Exchangeable Share Provisions
and (iv) the Stock Dividend has been paid. The Shares will be validly issued,
fully paid and nonassessable.

We hereby consent to the use of this opinion as Exhibit 5 to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the Registration Statement. In giving such opinion, we do not thereby admit
that we are acting within the category of persons whose consent is required
under Section 7 of the Act or the rules or regulations of the Securities and
Exchange Commission thereunder.

Very truly yours,

Morgan, Lewis & Bockius LLP

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of National-Oilwell,
Inc. for the registration of up to 6,152,500 (12,305,000 after the stock
dividend to be paid on November 18, 1997) shares of its common stock and to the
incorporation by reference therein of our report dated October 31, 1997, with
respect to the consolidated financial statements of National-Oilwell, Inc.
included in its Current Report (Form 8-K) dated November 7, 1997, filed with the
Securities and Exchange Commission.

ERNST & YOUNG LLP

Houston, Texas
November 13, 1997

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of National-Oilwell,
Inc. for the registration of up to 6,152,500 (12,305,000 after the stock
dividend to be paid on November 18, 1997) shares of its common stock and to the
incorporation by reference therein of our report dated November 3, 1995, except
as to Note 1 which is as of September 25, 1997, with respect to the consolidated
financial statements of National-Oilwell, Inc. included in its Current Report
(Form 8-K) dated November 7, 1997 filed with the Securities and Exchange
Commission.

Coopers & Lybrand
Chartered Accountants

Edmonton, Alberta
November 10, 1997