NATIONAL OILWELL INC, S-3, 1998-05-27

NATIONAL OILWELL INC
S-3, 1998-05-27
INDUSTRIAL MACHINERY & EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998

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>
<S> <C>
DELAWARE 76-0475815
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</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)
------------------------
STEVEN W. KRABLIN
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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>
<S> <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>
===========================================================================================================================
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share................... 5,750,000 shares $33.84 $194,580,000 $57,401.10
===========================================================================================================================
</TABLE>

(1) Includes 750,000 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments, if any.

(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 May 21, 1998.
------------------------

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

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 MAY 27, 1998

PROSPECTUS
5,000,000 SHARES

[LOGO]

NATIONAL-OILWELL, INC.

COMMON STOCK
------------------------
All of the 5,000,000 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 5,000,000 shares of Common Stock being offered hereby, 4,000,000
shares are being offered in the United States and Canada (the "U.S. Offering")
by the U.S. Underwriters (as defined herein) and 1,000,000 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 listed on the New York Stock Exchange (the "NYSE") under
the symbol "NOI." On May 26, 1998, the last reported sale price of the Common
Stock on the NYSE was $33.75 per share. See "Price Range of Common Stock and
Dividend Policy."

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) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Selling Stockholders have granted to the U.S. Underwriters and the
International Managers options, exercisable within 30 days after the date of
this Prospectus, to purchase up to an additional 600,000 and 150,000 shares
of Common Stock, respectively, 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 U.S. Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to certain 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 , 1998.
------------------------

MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.

THE ROBINSON-HUMPHREY COMPANY

SALOMON SMITH BARNEY

SIMMONS & COMPANY
INTERNATIONAL
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3

[Picture of Drilling Machinery and Equipment]

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

<TABLE>
<S> <C>
POWER SWIVEL [Picture of Power Swivel]
- - Rotates drill string.
- - Models up to 1,000 tons.

DRAWWORKS [Picture of Drawworks]
- - Hoists power swivel, drill string and
casing.
- - Models up to 7,800 hp.

MUD PUMPS [Picture of Mud Pumps]
- - Circulates drilling fluids.
- - Models up to 2,200 hp.
</TABLE>

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 OT 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.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

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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 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,(ii) all references to
activities of, and financial information with respect to, National-Oilwell are
presented on a combined basis, including with respect to periods prior to the
consummation of the September 25, 1997 business combination (the "Dreco
Combination") with Dreco Energy Services Ltd. ("Dreco") and (iii) all share
information concerning the Company's Common Stock assumes the exchange on a
one-for-one basis of all exchangeable shares of Dreco into shares of Common
Stock of the Company.

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
drilling rigs, as well as masts, derricks and substructures. 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 Dreco Combination, National-Oilwell expanded its
machinery and equipment capabilities and 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.

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,
thereby further increasing the incentive to explore for new reserves. As a
result of these industry conditions, drilling contractors have experienced
significant increases in the prices they charge for their services and
equipment. The higher cash flows resulting from these increased prices are
enabling these contractors 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 $273 million at March 31, 1998, up from $86
million at March 31, 1997. The Company expects to ship most of the current
backlog by the end of 1998.

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National-Oilwell believes that reasonably anticipated demand for the
Company's capital equipment in 1998 and 1999 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 Dreco
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.

RECENT DEVELOPMENTS

Phoenix Energy Products. On May 13, 1998, National-Oilwell announced that
it had entered into a definitive agreement to purchase all of the capital stock
of Phoenix Energy Products, Inc. ("Phoenix") for approximately $115 million in
cash. Phoenix manufactures and sells several lines of products that are
complementary to those of National-Oilwell including fluid end expendable
products, solids control equipment and pipe handling tools. The Company plans to
fund the purchase and replace approximately $35 million in existing debt of
Phoenix through the issuance of approximately $150 million in debt securities.

Roberds-Johnson Industries. Also on May 13, 1998, National-Oilwell
announced the signing of a letter-of-intent to purchase all of the capital stock
of Roberds-Johnson Industries, Inc. ("RJI") for 1.35 million shares of
National-Oilwell common stock. The transaction will be recorded in accordance
with the pooling-of-interests method of accounting. RJI manufactures a broad
range of equipment used on deep water drilling rigs, including modular packages
for production facilities, small platform drilling packages, mud tank and engine
packages and other fabricated equipment. In addition, RJI has designed and built
various models of highly automated land rigs. RJI also provides a full rig-up
facility with employees experienced in the engineering and construction of
conventional land drilling rigs.

BUSINESS STRATEGY

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

Leveraging Its Installed Base of Higher Capacity Drilling Machinery and
Equipment. National-Oilwell believes its market position presents substantial
opportunities to capture a significant portion of expenditures for the
construction of new, higher capacity 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
generate the demand for new equipment, especially in the higher capacity end of
the market. National-Oilwell's larger drawworks, mud pumps and power swivels
provide, in many cases, the largest capacities currently available in the
industry.

Expanding Its Downhole Products Business. National-Oilwell believes that
the strengthened marketing and distribution capabilities resulting from the
Dreco 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. 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. In addition, the strategic
integration of National-Oilwell's distribution expertise, extensive distribution
network and growing

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base of customer alliances provides an increased opportunity for cost-effective
marketing of National-Oilwell's manufactured parts and equipment.

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 businesses seek to align themselves
with other market participants in order to gain access to broader markets and
become affiliated with integrated product offerings, and National-Oilwell plans
to participate in this trend. During 1997, the Company made three acquisitions,
including the Dreco Combination, which have enabled the Company to provide a
more complete line of proprietary components in its rig packages. To date in
1998, the Company has completed the acquisition of Speciality Tools Ltd., a
company that designs and engineers downhole tools for thru-tubing applications,
and Versatech International Ltd., a company engaged in the manufacture of coiled
tubing tools and equipment. In addition, in May 1998, the Company announced the
execution of a definitive agreement to acquire Phoenix and the signing of a
letter of intent to acquire RJI.

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock offered by Selling Stockholders(1):
U.S. Offering............................................. 4,000,000 shares
International Offering.................................... 1,000,000 shares
---------
5,000,000 shares
Common Stock outstanding.................................... 51,640,876 shares(2)
New York Stock Exchange Symbol.............................. NOI
</TABLE>

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

(1) Excluding an aggregate of up to 750,000 shares of Common Stock subject to
purchase upon exercise by the Underwriters of their overallotment options.

(2) Based on shares outstanding as of May 22, 1998. Excludes 907,473 shares of
Common Stock issuable 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, statements that
are not historical facts or statements of current condition and are
forward-looking statements. Such statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"forecasts," "estimates," "plans," "continues," "may," "will," "should,"
"anticipates," or "intends," or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy or intentions. Such
statements 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. Given these uncertainties,
current or prospective investors are cautioned not to place undue reliance on
any such forward-looking statements. The Company disclaims any obligation or
intent to update any such factors or forward-looking statements to reflect
future events or developments.

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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 approximately 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. Oil prices have
generally been under pressure to date in 1998, with spot prices generally within
a range of $14-$16 per barrel. 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. Recent expectations of lower oil prices generally have the effect
of slowing production and new drilling, particularly in areas where the per
barrel cost of production is high. This slowdown has a more immediate effect on
parts of National-Oilwell's distribution business but can also affect the
downhole and products and technology segments if lower prices are expected to
continue for extended periods. 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

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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.

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, Southeast Asia
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 completed three acquisitions in 1997 and has completed two
acquisitions to date in 1998. In addition, the Company recently signed an
agreement to acquire Phoenix and a letter of intent to acquire RJI and expects
to evaluate and, where feasible, make additional strategic acquisitions in the
future. 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. In addition, the process of combining the organizations could
cause the interruption of, or a loss of momentum in, the

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activities of some or all of the companies' businesses, which could have an
adverse effect on their combined operations. The Dreco 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.

POTENTIAL FUTURE SALE OF SHARES COULD AFFECT MARKET PRICE

At May 22, 1998, the Company had outstanding options to purchase an
aggregate of 907,473 shares of Common Stock at prices ranging from $5.63 to
$42.38 per share. 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. Pursuant to
the Company's agreement by which it intends to acquire RJI, certain other
stockholders would 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, and assuming
consummation of the acquisition of RJI, Inverness, First Reserve and various
other stockholders will have registration rights with respect to 7,453,600,
6,120,494 and approximately 4,043,052 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, 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 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 a special stockholders' meeting. 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.

8
<PAGE> 10

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.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock was listed on the NYSE effective October 29,
1996 under the symbol "NOI." The following table sets forth the range of high
and low sales prices for the Common Stock since listing as reported by the NYSE
for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
Fourth Quarter.............................................. $15.38 $10.00
1997
First Quarter............................................... $19.32 $14.00
Second Quarter.............................................. 28.88 15.82
Third Quarter............................................... 37.50 25.07
Fourth Quarter.............................................. 44.44 27.88
1998
First Quarter............................................... $34.44 $22.75
Second Quarter (to May 26, 1998)............................ 40.44 33.00
</TABLE>

On May 26, 1998, the last reported sale price of the Common Stock on the
NYSE was $33.75 per share. As of May 22, 1998, there were approximately 245
holders of record of the Company's Common Stock.

The Company has not paid any dividends on its Common Stock during the
periods indicated and does not anticipate paying any dividends in the
foreseeable future. Any future payment of dividends will depend upon the
financial condition, capital requirements, earnings and any loan covenant
restrictions of the Company, as well as upon other factors that the Board of
Directors may deem relevant.

9
<PAGE> 11

NATIONAL-OILWELL, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA

As a result of the differing year ends of National-Oilwell and Dreco prior
to the Dreco Combination, the balance sheet and results of operations for
dissimilar year ends have been combined pursuant to pooling of interest
accounting. National-Oilwell's results of operations for the year ended December
31, 1997 include Dreco's results of operations for the six months ended May 31,
1997 and the six months ended December 31, 1997. 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 three months ended March
31, 1997 includes the operations of National-Oilwell for the three months ended
and as of March 31, 1997 combined pursuant to pooling-of-interests accounting
with the operations of Dreco for the three months ended and as of February 28,
1997. The unaudited consolidated financial statements of National-Oilwell
include, in the opinion of National-Oilwell's management, all adjustments,
consisting of normal recurring accruals, necessary to present fairly the results
of such periods. The foregoing data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 and from the Company's Quarterly
Report on Form 10-Q for the three months ended March 31, 1998.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31, YEAR ENDED AUGUST 31,(1)
------------------- --------------------- ---------------------------
1998 1997 1997(2) 1996(3) 1995 1994 1993
-------- -------- ---------- -------- ------- ------- -------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues......................................... $301,852 $206,670 $1,005,572 $761,816 $86,875 $79,663 $93,981
Operating income (loss) before special items
(4)............................................ 35,299 16,696 97,899 44,110 10,059 (9,253) 3,133
Operating income (loss)(4)....................... 35,299 16,696 87,239 27,499 10,059 (9,253) 3,133
Income (loss) before taxes and extraordinary
loss(5)........................................ 33,546 15,096 82,482 16,718 12,196 (6,709) 6,061
Income (loss) before extraordinary loss(5)....... 21,137 9,699 51,281 10,147 7,789 (6,682) 7,386
Net income (loss)................................ 21,137 9,699 50,658 6,147 7,789 (6,682) 7,386
Income (loss) per share before extraordinary
loss(5):
Basic.......................................... 0.41 0.19 1.00 0.25 0.69 (0.59) 0.66
Diluted........................................ 0.40 0.19 .99 0.25 0.68 (0.59) 0.64
Net income (loss) per share:
Basic.......................................... 0.41 0.19 0.99 0.15 0.69 (0.59) 0.66
Diluted........................................ 0.40 0.19 0.98 0.15 0.68 (0.59) 0.64
OTHER DATA:
Depreciation and amortization.................... 4,258 2,899 14,744 8,775 4,558 4,926 4,481
Capital expenditures............................. 4,925 5,657 32,605 15,166 6,435 5,932 6,167
BALANCE SHEET DATA:
Working capital.................................. 268,394 226,719 252,137 168,897 32,992 18,292 27,725
Total assets..................................... 587,531 415,429 567,511 352,518 72,355 69,323 74,047
Long-term debt, less current maturities.......... 57,172 58,997 61,565 39,136 1,987 1,440 2,857
Stockholders' equity............................. 302,390 225,985 277,688 169,016 48,957 38,690 46,626
</TABLE>

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

(1) Data for the three 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 (diluted) 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

10
<PAGE> 12

November 30, 1995 have been included directly in stockholders' equity.
Dreco's revenues, net income and net income per share (diluted) were $33.4
million, $3.2 million and $0.28 for such period.

(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
costs.

11
<PAGE> 13

BUSINESS

GENERAL

As a result of the Dreco Combination, National-Oilwell expanded its
machinery and equipment capabilities and also 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 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>
THREE MONTHS ENDED MARCH 31, 1998
Total revenues................................... $148,034 $17,810 $156,189
Operating income................................. 25,128 6,263 5,238
YEAR ENDED DECEMBER 31, 1997
Total revenues................................... $371,841 $69,012 $630,899
Operating income................................. 53,453 25,551 27,581
</TABLE>

CURRENT INDUSTRY ENVIRONMENT

12
<PAGE> 14

Oilwell is a leading supplier. The Company's orders for new equipment have
increased dramatically over the last nine quarters as shown below:

[Chart Showing Capital Equipment Backlog and Revenues
In the Nine Quarters Ending March 31, 1998 ($Millions)]

DATA POINTS FOR BACKLOG AND REVENUE GRAPH
($MILLIONS)

<TABLE>
<CAPTION>
MAR-96 JUN-96 SEP-96 DEC-96 MAR-97 JUN-97 SEP-97 DEC-97 MAR-98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Backlog................. 43.4 33.8 39.2 38.2 86.0 140.8 238.6 271.2 273.0
Revenue................. 27.5 41.4 36.0 34.5 32.4 39.5 55.1 62.1 67.4
</TABLE>

BUSINESS STRATEGY

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

Leveraging Its Installed Base of Higher Capacity Drilling Machinery and
Equipment. National-Oilwell believes its market position presents substantial
opportunities to capture a significant portion of expenditures for the
construction of new, higher capacity 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
generate demand for new equipment, especially in the higher capacity end of the
market. National-Oilwell's larger drawworks, mud pumps and power swivels
provide, in many cases, the largest capacities currently available in the
industry.

13
<PAGE> 15

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. 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. In addition, 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 parts and
equipment.

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 businesses seek to align themselves with
other market participants in order to gain access to broader markets and become
affiliated with integrated product offerings, and National-Oilwell plans to
participate in this trend. During 1997, the Company made three acquisitions,
including the Dreco Combination, which have enabled the Company to provide a
more complete line of proprietary components in its rig packages. To date in
1998 the Company has completed the acquisition of Speciality Tools Ltd., a
company that designs and engineers downhole tools for thru-tubing applications,
and Versatech International Ltd., a company engaged in the manufacture of coiled
tubing tools and equipment. In addition, in May 1998, the Company announced the
execution of a definitive agreement to acquire Phoenix and the signing of a
letter of intent to acquire RJI as described under "Prospectus Summary -- Recent
Developments."

OPERATIONS

Products and Technology

National-Oilwell designs, manufactures and sells the major mechanical
components for both land and offshore drilling rigs, as well as complete land
drilling and well servicing rigs. The major 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
drilling 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 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 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.

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.

14
<PAGE> 16

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 that is placed low in the drill string and is 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, bumper subs,
reamers, stabilizers and kelly and tubing safety valves.

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 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. Substantially all of
National-Oilwell's sales of tubular goods are made through National-Oilwell's
direct sales force and have historically been concentrated in North America.

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 smaller pumps and
parts sales, are made through National-Oilwell's direct sales force and through
National-Oilwell's distribution service centers. Sales to foreign state-owned
oil companies are typically made in conjunction with agent or representative
arrangements. Distribution sales are made through the Company's network of
distribution service centers. National-Oilwell's downhole products are rented in
Canada and Venezuela and marketed worldwide through its own sales force and
through commission representatives. Customers for all of National-Oilwell's
products and services include drilling and other service

15
<PAGE> 17

contractors, exploration and production companies, supply companies and
nationally owned or controlled drilling and production companies.

COMPETITION

The oilfield services and 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, none of which is dominant in that particular segment.

MANUFACTURING AND BACKLOG

National-Oilwell has numerous principal manufacturing facilities located in
the United States and Canada. National-Oilwell also outsources the manufacture
of parts or purchases components from qualified subcontractors. The Company'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 Company's backlog for equipment at March 31,
1998 was $273 million as compared to $86 million at March 31, 1997. 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.
Most of the current backlog is expected to be shipped by the end of 1998. See
"-- Current Industry Environment."

DISTRIBUTION SUPPLIERS

National-Oilwell obtains products sold by its Distribution Services
business from a number of suppliers, including its own 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, 1997,
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 the Company, although order lead times for
tubular goods have increased over the last year due to higher demand for these
products.

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, and 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. The Company
enjoys significant product name-brand recognition, principally through its
NATIONAL-OILWELL(R), DRECO(R), ROSS HILL, TRUDRIL(R), VECTOR(R), GRIFFITH(R) and
MISSION-FLUID KING(R) trade names.

16
<PAGE> 18

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)....................... 54 Chairman of the Board, President and Chief 1999
Executive Officer
James J. Fasnacht...................... 43 Vice President and Group President, --
Distribution Services
W. Douglas Frame....................... 56 Vice President and Group President, --
Downhole Products
Jerry N. Gauche........................ 50 Vice President -- Organizational --
Effectiveness
Steven W. Krablin...................... 48 Vice President and Chief Financial Officer --
Merrill A. Miller, Jr.................. 47 Vice President and Group President, --
Products and Technology
Frederick W. Pheasey................... 55 Executive Vice President and Director 2001
Howard I. Bull(2)(3)................... 57 Director 2001
James C. Comis III..................... 33 Director 2001
James T. Dresher(2)(3)................. 79 Director 2000
W. McComb Dunwoody(1).................. 53 Director 1999
William E. Macaulay(1)................. 52 Director 1999
Bruce M. Rothstein..................... 46 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. Mr. Staff also serves as a director of Denali
Incorporated, a provider of products and services for handling critical fluids.

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.

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.

17
<PAGE> 19

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.

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.

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 from 1972 to
September 1997, most recently as its Chairman.

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 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.

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
since 1994.

James T. Dresher has served as a Director of National-Oilwell since January
1996. Mr. Dresher was Chairman/Chief Executive Officer and principal owner of
Unidata, Inc., a Denver-based software company, from December 1991 until
February 1998 and has been Chairman and owner of Glenangus, a residential real
estate development company, since 1972. Mr. Dresher serves as a director of
Ardent Software, Inc., a data management company. Mr. Dresher has an interest in
one of the funds managed by Inverness/Phoenix LLC, a principal stockholder of
the Company.

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 since 1994 and
has been Chief Executive Officer of The Inverness Group Incorporated since 1981.

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. 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, Cal Dive
International, Inc., a provider of subsea services in the Gulf of Mexico, 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. Mr. Macaulay formerly served as a director of Phoenix, which is being
acquired by the Company

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. 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.

18
<PAGE> 20

SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of May 22, 1998 and as adjusted to
reflect the sale of the shares offered pursuant to this Prospectus. This
information has been provided by each of the Selling Stockholders as of May 22,
1998, at the request of National-Oilwell.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED
OWNED SUBSEQUENT TO
PRIOR TO OFFERING(1) OFFERING(1)
-------------------- SHARES BEING --------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED(2) NUMBER PERCENT
--------------------------- ---------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
First Reserve Corporation(3)........... 8,370,494 16.2% 2,250,000 6,120,494 11.9%
Inverness/Phoenix LLC(4)............... 10,203,600 19.8% 2,750,000 7,453,600 14.4%
---------
Total Shares Being Offered............. 5,000,000
=========
</TABLE>

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

(1) Based on 51,640,876 shares of Common Stock outstanding at May 22, 1998.

(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 750,000 shares), solely to cover over-allotments, if any.

(3) Represents shares beneficially owned 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 may be deemed to
have beneficial ownership of the shares held by such partnerships because it
is the managing general partner of the partnerships and 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 held by the partnerships as a
result of controlling interest in the common stock of First Reserve
Corporation and their positions as managing directors 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.

(4) Represents shares beneficially owned 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, have a 5.714% and 4.082%
interest, respectively, in DPI Partners I, a general partnership which holds
a limited partnership interest in DPI Oil Service Partners Limited
Partnership. Additionally, Messrs. Bull and Dresher each hold a limited
partnership interest in DPI Oil Service Partners Limited Partnership, which
holds 9,450,562 shares of National-Oilwell's Common Stock. The interests of
Mr. Bull, Mr. Dresher and DPI Partners I in DPI Oil Service Partners Limited
Partnership, after the return of the original investment plus interest, are
approximately 1.3%, 3.3% and 20.0%, respectively. Messrs. Bull and Dresher
each disclaim beneficial ownership of all such shares. The partnerships are
selling shares on a pro rata basis.

CERTAIN RELATIONSHIPS WITH SELLING STOCKHOLDERS

In January 1996, the Selling Stockholders and certain other investors and
members of the Company's management, including Joel V. Staff, President and
Chief Executive Officer, purchased the Company from its former owners. Two of
the directors of the Company, Messrs. Macaulay and Rothstein, are officers of
First Reserve. Two other directors, Messrs. Dunwoody and Comis, are officers of
Inverness/Phoenix LLC.

19
<PAGE> 21

Pursuant to the Stockholders Agreement, the Selling Stockholders have certain
demand and piggyback registration rights with respect to shares of Common Stock
owned by them. See "Rick Factors -- Potential Future Sale of Shares Could Affect
Market Price."

In connection with the acquisition of the Company in January 1996,
Inverness/Phoenix LLC and First Reserve were paid transaction fees of $1,800,000
and $1,200,000, respectively. The Company also entered into certain agreements
with Inverness/Phoenix LLC and First Reserve in connection with the provision of
management and acquisition services to the Company. In connection with the
Company's initial public offering, this agreement was terminated pursuant to a
Deferred Fee Agreement which provides for cash payments of up to $4.4 million.
During 1997 and 1996, cash payments aggregating $2.5 million were made to
Inverness/Phoenix LLC and First Reserve Corporation in connection with the
Deferred Fee Agreement. Future quarterly payments of $250,000 will continue to
be made to Inverness/Phoenix LLC through December 31, 1999.

Certain affiliates of First Reserve own substantially all of Phoenix, which
is proposed to be acquired by the Company for approximately $115 million cash
and the assumption of approximately $35 million in debt. The proposed
acquisition was approved by the directors of the Company not affiliated with
First Reserve.

20
<PAGE> 22

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.
21
<PAGE> 23

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.

22
<PAGE> 24

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
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Goldman, Sachs & Co.........................................
The Robinson-Humphrey Company, LLC..........................
Smith Barney Inc. ..........................................
Simmons & Company International.............................
---------
Total........................................... 4,000,000
=========
</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 4,000,000 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 1,000,000 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.
23
<PAGE> 25

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 600,000 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
4,000,000 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 150,000
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 Offering, 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 such persons or with respect to which
such persons have or hereafter acquire 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 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, during such period, 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.

24
<PAGE> 26

Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

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.

Simmons & Company International represents as financial advisor the sellers
of each of Phoenix and RJI in connection with the sales of those companies for
which it will receive customary compensation upon the closing of each of the
acquisitions by the Company.

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 Dreco Combination, for which it
received customary compensation. Merrill Lynch also has acted as financial
advisor for the Company in connection with the proposed acquisition of Phoenix
and provided a fairness opinion, for which it will receive customary
compensation.

25
<PAGE> 27

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,
1997 and for each of the two years then ended, appearing in National-Oilwell's
Annual Report on Form 10-K for the year ended December 31, 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, for the year ended December 31, 1996, 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 the year then ended, appearing in National-Oilwell's Annual Report
on Form 10-K for the year ended December 31, 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.

26
<PAGE> 28

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, 1997.

2. National-Oilwell's Quarterly Report on Form 10-Q for the period
ended March 31, 1998.

3. 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, as updated by National-Oilwell's Current
Report on Form 8-K filed on November 17, 1997.

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 termination of the Offerings 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).

27
<PAGE> 29

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

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 STOCKHOLDER 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......................... 9
Price Range of Common Stock and Dividend
Policy................................ 9
National-Oilwell, Inc. and Subsidiaries
Selected Consolidated Financial
Data.................................. 10
Business................................ 12
Management.............................. 17
Selling Stockholders.................... 19
Certain United States Federal Tax
Consequences to Non-U.S. Holders...... 21
Underwriting............................ 23
Legal Matters........................... 26
Experts................................. 26
Available Information................... 26
Incorporation of Certain Documents by
Reference............................. 27
</TABLE>

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

5,000,000 SHARES

[LOGO]

NATIONAL-OILWELL, INC.

COMMON STOCK
----------------

PROSPECTUS
----------------

MERRILL LYNCH & CO.

GOLDMAN, SACHS & CO.

THE ROBINSON-HUMPHREY COMPANY

SALOMON SMITH BARNEY

SIMMONS & COMPANY
INTERNATIONAL
, 1998

======================================================
<PAGE> 30

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 27, 1998
PROSPECTUS
- --------------------

5,000,000 SHARES

[LOGO]
NATIONAL-OILWELL, INC.

COMMON STOCK
------------------------
All of the 5,000,000 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 5,000,000 shares of Common Stock being offered hereby, 1,000,000
shares are being offered initially outside the United States and Canada (the
"Offering") by the International Managers (as defined herein) and 5,000,000
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."

The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "NOI." On May 26, 1998, the last reported sale price of the Common
Stock on the NYSE was $33.75 per share.

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Selling Stockholders have granted to the U.S. Underwriters and the
International Managers options, exercisable within 30 days after the date of
this Prospectus, to purchase up to an additional 600,000 and 150,000 shares
of Common Stock, respectively, 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
certain 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 , 1998.
------------------------

MERRILL LYNCH INTERNATIONAL

GOLDMAN SACHS INTERNATIONAL

THE ROBINSON-HUMPHREY COMPANY

SALOMON SMITH BARNEY INTERNATIONAL

SIMMONS & COMPANY
INTERNATIONAL
------------------------
The date of this Prospectus is , 1998.
<PAGE> 31

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

[Picture of Drilling Machinery and Equipment]

NATIONAL-OILWELL DESIGNS AND BUILDS COMPLETE LAND DRILLING RIGS
INCLUDING THE PRIMARY MACHINERY COMPONENTS HIGHLIGHTED.

<TABLE>
<S> <C>
POWER SWIVEL [Picture of Power Swivel]
- - Rotates drill string.
- - Models up to 1,000 tons.

DRAWWORKS [Picture of Drawworks]
- - Hoists power swivel, drill string and
casing.
- - Models up to 7,800 hp.

MUD PUMPS [Picture of Mud Pumps]
- - Circulates drilling fluids.
- - Models up to 2,200 hp.
</TABLE>

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."

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 1996 or is a person to
whom the Prospectus may otherwise lawfully be passed on.
Alt-2
<PAGE> 32

[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 Managers 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 OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International.................................
Goldman Sachs International.................................
The Robinson-Humphrey Company, LLC..........................
Smith Barney Inc............................................
Simmons & Company International.............................
---------
Total.......................................... 1,000,000
=========
</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
1,000,000 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 4,000,000 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.

Alt-3
<PAGE> 33
[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 150,000 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 1,000,000 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 600,000 additional shares of Common Stock solely to cover
over-allotments, if any, on terms similar to those granted to the International
Managers.

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 Offering, 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 such persons or with respect to which
such persons have or hereafter acquire 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 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.

Alt-4
<PAGE> 34
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

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 Dreco Combination, for which it
received customary compensation. Merrill Lynch also has acted as financial
advisor for the Company in connection with the proposed acquisition of Phoenix
and provided a fairness opinion, for which it will receive customary
compensation.

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.

Alt-5
<PAGE> 35
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

No action has been or will be taken in any jurisdiction (except in the
United States and Canada) 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.

Alt-6
<PAGE> 36

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

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

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

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

5,000,000 SHARES

[LOGO]

NATIONAL-OILWELL, INC.

COMMON STOCK
----------------

PROSPECTUS
----------------

MERRILL LYNCH INTERNATIONAL

GOLDMAN SACHS INTERNATIONAL

THE ROBINSON-HUMPHREY COMPANY

SALOMON SMITH BARNEY INTERNATIONAL

SIMMONS & COMPANY
INTERNATIONAL
, 1998

======================================================
<PAGE> 37

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......... $57,401
NASD Filing Fee.............................................
Printing Expenses...........................................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Transfer Agent Fees and Expenses............................
Miscellaneous Expenses......................................
-------
Total............................................. $ *
=======
</TABLE>

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

* To be completed by amendment

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.

II-1
<PAGE> 38

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 Company has agreed to indemnify the Selling Stockholders against
certain liabilities in connection with the Offerings.

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 Underwriting Agreement *
1.2 -- Form of International Purchase Agreement *
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>

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

* 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.

II-2
<PAGE> 39

(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-3
<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 May 27, 1998.

NATIONAL-OILWELL, INC.

By: /s/ JOEL V. STAFF
----------------------------------
Joel V. Staff
Chairman, President and Chief
Executive Officer

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 Joel V. Staff, 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 post-effective 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 May 27, 1998
- ----------------------------------------------------- Directors (Principal Executive
Joel V. Staff Officer)

/s/ STEVEN W. KRABLIN Vice President and Chief May 27, 1998
- ----------------------------------------------------- Financial Officer (Principal
Steven W. Krablin Financial Officer and Principal
Accounting Officer)

/s/ HOWARD I. BULL Director May 27, 1998
- -----------------------------------------------------
Howard I. Bull

/s/ JAMES C. COMIS III Director May 27, 1998
- -----------------------------------------------------
James C. Comis III

/s/ JAMES T. DRESHER Director May 27, 1998
- -----------------------------------------------------
James T. Dresher

/s/ W. MCCOMB DUNWOODY Director May 27, 1998
- -----------------------------------------------------
W. McComb Dunwoody

/s/ WILLIAM E. MACAULAY Director May 27, 1998
- -----------------------------------------------------
William E. Macaulay

/s/ FREDERICK W. PHEASEY Director May 27, 1998
- -----------------------------------------------------
Frederick W. Pheasey

/s/ BRUCE M. ROTHSTEIN Director May 27, 1998
- -----------------------------------------------------
Bruce M. Rothstein
</TABLE>

II-4
<PAGE> 41

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 -- Form of U.S. Purchase Agreement*
1.2 -- Form of International Purchase Agreement*
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>

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

* To be filed by amendment

<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 5,750,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 5, 1998 included
in its Annual Report (Form 10-K) for the year ended December 31, 1997 filed with
the Securities and Exchange Commission. We also consent to the incorporation
by reference of our report dated January 31, 1996 with respect to the
consolidated financial statements of National-Oilwell, a general partnership,
and subsidiaries (the predecessor) for the year ended December 31, 1995 also
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1997.

ERNST & YOUNG LLP

Houston, Texas
May 26, 1998

<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 5,750,000 shares of its common stock and to the
incorporation by reference therein of our report dated November 1, 1996, except
as to Note 1 which is as of September 25, 1997, with respect to the consolidated
financial statements of National-Oilwell, Inc. for the year ended August 31,
1995 and the three months ended November 30, 1995 included in its Annual Report
(Form 10-K) for the year ended December 31, 1997 filed with the Securities and
Exchange Commission.

We also consent to the incorporation by reference therein of our report
dated October 21, 1997 with respect to the consolidated financial statements of
Dreco Energy Services Ltd. for the twelve months ended November 30, 1996
included in the Annual Report (Form 10-K) of National-Oilwell, Inc. for the
year ended December 31, 1997 filed with the Securities and Exchange Commission.

COOPERS & LYBRAND
Chartered Accountants

Edmonton, Alberta
May 27, 1998