With operations in over 1160 locations worldwide, National Oilwell Varco (NOV -1.46%) is a leading provider of equipment and services to the oil and gas industry through its three segments; Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission. CEO Merrill "Pete" Miller has held a number of senior executive positions with NOV, beginning in 1996. Miller also serves on the boards of Chesapeake Energy Corporation (CHKA.Q), Offshore Energy Center, Petroleum Equipment Suppliers Association, and Spindletop International.

In this video segment Miller discusses rig building, rig upgrades -- especially in the wake of new regulations post Macondo -- where the oil industry as a whole is headed in coming years, and how National Oilwell Varco is positioned to help it get there. The full version of the interview can be found here.

A full transcript follows the video.

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

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

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

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

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

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

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

Miller: A combination of both.

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

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

But I would say a lot of that is just going to be replacing the old fleet because, remember, some of those can only drill in 1000 feet of water, 1500 feet of water, and you have to have the rigs that can go into a New Horizon, which is going to be 10-12,000 feet of water.

But remember the rigs that drill in 12,000 feet of water can also drill in 1000 feet of water, so the flexibility and the enhanced flexibility of those rigs is what matters the most.

Muckerman: OK. You mentioned the jack-up rigs being a big portion of the business. The Gulf of Mexico seems like the growth there is kind of slowing down a little bit, but internationally do you see the jack-up rig market ready to take off, or is it in a similar state as the Gulf of Mexico right now?

Miller: No, I think it's taking off. When I say "ready to take off," it's taken off. We're seeing a lot of orders in that regard, and it's because people want the best equipment.

Again, it comes back to the same thing I was talking about earlier with the floaters. If you take a look at, say, a super 116-C jack-up rig, it can drill in 400 feet of water, but it can also drill in 50 feet of water. If you take an older jack-up rig, it can drill in 50 feet of water, but it can't necessarily drill in 400 feet of water, so that flexibility is really what people are seeing today, and that's why they want the new rigs.

Muckerman: Post Macondo, rig upgrading has been a huge business for you all. I was just wondering, do you see an endgame in that, or is that something that's just going to continually be part of your business now that added blowout preventers and high-specification equipment is really becoming more and more important and required, and the higher day rates have become a bigger portion of that?

Miller: Yeah. That's going to be a continuing phenomenon. There's no way that ... once people have got that religion, they can't stop it, and they've got it. You're going to have to have five-year upgrades on everything you're doing out there, whether it's a top drive, whether it's a BOP, and you're going to have to go to the OEM to get it done.

For us to have the wonderful installed base we have, then that's kind of a gift that keeps on giving, because every five years we're going to be back out there doing business with our customers.