##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-15423
 Grant Prideco, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

76-0312499(State or Other Jurisdiction
    of Incorporation or Organization)

(I.R.S. Employer
    Identification No.)400 N. Sam Houston Pkwy. East
    Suite 900 Houston, Texas(Address of Principal
    Executive Offices)

77060(Zip Code)   (281) 878-8000
 (Registrants telephone
    number, including area code)
  Securities to be registered pursuant to Section 12(b) of
    the Act:
  Title of Each Class

Name of Each Exchange On Which RegisteredCommon Stock, par value $0.01 per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
    Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3General


3Drilling Products and Services Segment


4ReedHycalog Segment


5Other Segment


7Corporate Segment


8Other Business Data


8Item 1A.


Risk Factors


10Item 1B.


Unresolved Staff Comments


14Item 2.


Properties


15Item 3.


Legal Proceedings


15Item 4.


Submission of Matters to a Vote of Security
    Holders


16PART IIItem 5.


Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


16Item 6.


Selected Financial Data


19Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


20General


20Market Trends


21Future Market Trends and Expectations


22Results of Operations


23Liquidity and Capital Resources


27Related-Party Transactions


30Off-Balance Sheet Financing


31Recent Accounting Pronouncements


31Critical Accounting Policies and Estimates


32Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 8.


Financial Statements and Supplementary Data


37Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


95Item 9A.


Controls and Procedures


95PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance of the Registrant


96Item 11.


Executive Compensation


96Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


96Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


96Item 14.


Principal Accountant Fees and Services


97PART IVItem 15.


Exhibits and Financial Statement Schedules


97Valuation and Qualifying Accounts


100Signatures


101Consent of Deloitte & Touche LLPCertification of Michael McShaneCertification of Matthew D. FitzgeraldSection 906 Certification   2




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##### Table of Contents



Form 10-K
 PART I  Item 1.
    Business General         3




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##### Table of Contents



Form 10-K.
 Drilling
    Products and Services Segment      ® ®
      Drill
    Pipe
     4




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##### Table of Contents



® tm 7 8 1 2 5 8
  Drill
    Collars
    Heavyweight
    Drill Pipe and Other Drill Stem Products
      Voest-Alpine
    Tubulars
    Operations
   ReedHycalog
    Segment   5




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##### Table of Contents



cost-per-foot
    ® tm tm tm
  ®
    Fixed-Cutter
    Bits
     6




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##### Table of Contents



® tm tm
  Roller-Cone
    Bits
  tm
  tm tm tm
  Andergauge
  tm tm
  Operations
     Other
    Segment  XL
    Systems
  tm
 7




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##### Table of Contents



IntelliServ
  ®
 Corporate
    Segment   Other
    Business Data  Research
    and Engineering
    Patents
    Backlog
    Insurance
    Federal
    Regulation and Environmental Matters
   8




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##### Table of Contents



i.e.
  Employees
    Available
    Information
  1-800-SEC-0330. (http://www.sec.gov)
  (http://www.grantprideco.com) Form 10-K, Form 10-Q, Form 8-K,
 9




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##### Table of Contents



Item 1A.
    Risk
    Factors  Risk
    Factors and Exposures
    A
    decline in domestic and worldwide oil and gas drilling activity
    would adversely affect our results of operations.
    
    the level of North American and worldwide oil and gas
    exploration and production activity;
    worldwide economic conditions, particularly economic conditions
    in North America;
    oil and gas production costs;
    the expected costs of developing new reserves;
    national government political requirements and the policies of
    the OPEC;
    the price and availability of alternative fuels;
    environmental regulation; and
    tax policies.    An
    economic downturn could adversely affect demand for our products
    and services and our results of operations.
    Increases
    in the prices of our raw materials could affect our results of
    operations.
     10




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##### Table of Contents



Interruptions
    of supply of raw materials could materially adversely affect our
    results of operations.
    Due to
    intense competition in our industry, our revenues may decline if
    we do not develop, produce and commercialize new competitive
    technologies and products or if we are unable to adequately
    protect our current and future intellectual property rights
    relating to our technologies and products.
    start-up
   11




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Our
    results of operations and financial condition are dependent upon
    our ability to successfully increase and decrease, without
    material disruption, our manufacturing capacity and expense in
    response to changes in demand and to maintain prices for our
    products, which can be adversely affected by changes in industry
    conditions and competitive forces.
    Our
    results of operations can be adversely affected by adverse
    weather conditions and unexpected stoppages in
    production.
    Our
    international operations may experience severe interruptions due
    to political, economic or other risks, which could adversely
    affect our results of operations and financial
    condition.
    
    changes in foreign tax laws;
    changes in regulations and labor practices;
    currency fluctuations and devaluations;
    currency restrictions, banking crises and limitations on
    repatriation of profits; and
    political instability or military conflict.         12




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In
    connection with our business operations, we could be subject to
    substantial liability claims that adversely affect our results
    of operations.
        We are
    subject to environmental, health and safety laws and regulations
    that expose us to potential financial liability.
       13




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Our
    results of operations could be adversely affected by actions
    under U.S. trade laws and new foreign entrants into U.S.
    markets.
  U.S.-based U.S.-based
  Item 1B.
    Unresolved
    Staff Comments   14




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##### Table of Contents



Item 2.
    Properties    Facility SizeLocation

Tenure

(Sq.Ft.)


UtilizationDrilling Products and ServicesNavasota, Texas

Owned


347,000


Manufacture of drill stem productsVeracruz, Mexico

Leased


303,400


Manufacture of tool joints and processing of drill pipeBaimi Town, Jiangyan, Jiangsu China

Leased


49,428


Manufacture of drill stem productsTianjin, China

Leased


100,912


Manufacture of upset to grade and finished drill pipeTurin, Italy

Owned


60,400


Manufacture of tool jointsJurong, Singapore

Leased


33,600


Manufacture of drill collars, accessories and threading servicesBatam Island, Indonesia

Owned


25,984


Manufacture of drill pipeReedHycalogConroe, Texas

Owned


348,288


Manufature of roller-cone, fixed-cutter and bi-center bits and
    PDC cuttersHouston, Texas

Leased


11,095


Assembly and machining of downhole toolsLeased


33,800


Assembly and machining of downhole toolsStonehouse, U.K

Owned


76,900


Manufacture of fixed-cutter bitsJurong, Singapore

Leased


370,461


Manufacture of roller-cone bitsAberdeen, Scotland

Owned


29,740


Assembly and machining of downhole toolsOtherBeaumont, Texas

Owned


39,877


Premium threading services and manufacture of conductorsVlissingen, The Netherlands

Leased


71,344


Premium threading services and manufacture of conductorsBatam Island, Indonesia

Owned


14,761


Premium threading services and manufacture of conductorsProvo, Utah

Owned


105,604


Manufacture of IntelliServ
    ®
    Network productsCorporateHouston, Texas

Leased


42,534


Corporate headquartersThe Woodlands, Texas

Leased


61,831


Sales and administrative offices   Item 3.
    Legal
    Proceedings   15




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##### Table of Contents



Form 10-K, Mark Bornstein, On Behalf of Himself and All
    Others Similarly Situated vs. Grant Prideco, Inc., et al. No. 2007-76092, Catholic Medical Mission Board, On Behalf of Itself
    and All Others Similarly Situated vs. Grant Prideco, Inc.,
    et al. No. 2007-76418, Thomas Gray, On Behalf of Himself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. Cause No. 2007-76419, Roslyn Feder, On Behalf of Herself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. Kenneth Engberg, On Behalf of Himself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. No. 2008-02244,
  Bornstein Bornstein
    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    High


Low2007First quarter

$
50.71


$
35.61Second quarter


59.99



48.00Third quarter


59.50



48.38Fourth quarter


56.94



44.672006First quarter

$
51.47


$
35.67Second quarter


55.43



39.70Third quarter


48.33



34.32Fourth quarter


45.32



33.11  16




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##### Table of Contents



1 8
    Share
    Repurchases
    Number of





Total Number of SharesShares


Average Price


Purchased as Part of aPeriod

Purchased(a)


per Share


Publicly Announced Plan(b)October 1  31, 2007


3,173


$
47.56



November 1  30, 2007


1,794,383



47.25



1,791,021December 1  31, 2007


1,181,527



48.36



1,178,685Total


2,979,083


$
47.69



2,969,706     (a)
    
    Of the 2,979,083 shares purchased during the three-month
    period ended December 31, 2007, 9,377 shares were
    purchased by the trustee for our executive deferred compensation
    plan for the benefit of the plan participants using funds
    directed by the plan participants and funds matched by us as
    provided in the plan. These share purchases were not part of a
    publicly announced program to purchase common shares.(b)
    
    In 2006, our Board of Directors approved a stock repurchase
    program that authorizes the repurchase of up to
    $350 million of our common stock with no established
    expiration date. In 2007, our Board of Directors approved an
    increase in our stock repurchase program by $300 million
    (to $650 million from $350 million). For the
    three-month period ended December 31, 2007, we repurchased
    3.0 million shares at a total cost of $141.6 million.
    Such shares are reflected in the accompanying Consolidated
    Balance Sheets as Treasury Stock. At
    December 31, 2007, there was $244.0 million remaining
    under this program for future repurchases. 17




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Five-Year
    Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN
    Among Grant Prideco, Inc., The S&P 500 Index
 And The PHLX Oil Service Sector Index
  
  12/02


12/03


12/04


12/05


12/06


12/07Grant Prideco, Inc.



100.00




111.86




172.25




379.04




341.67




476.89S & P 500



100.00




128.68




142.69




149.70




173.34




182.87PHLX Oil Service Sector



100.00




116.44




157.54




236.42




267.49




395.88  18




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K.
  Year Ended December 31,2007(a)


2006(a)(b)


2005(c)


2004(d)


2003(e)(In thousands, except per share data)Operating Data:Revenues

$
1,908,634


$
1,530,259


$
1,089,266


$
767,572


$
628,481Operating Income


580,729



470,724



233,929



121,340



36,174Income (Loss) from Continuing Operations


478,197



404,106



139,553



50,849



(3,404
)Net Income


519,236



464,584



189,004



55,266



5,190Income (Loss) Per Share:Income (Loss) from Continuing Operations:Basic


3.73



3.10



1.10



0.41



(0.03
)Diluted


3.69



3.05



1.07



0.40



(0.03
)Net Income:Basic


4.05



3.56



1.49



0.45



0.04Diluted


4.01



3.50



1.45



0.44



0.04Balance Sheet Data (At End of Period):Total Assets

$
2,350,704


$
2,022,067


$
1,540,284


$
1,344,466


$
1,262,061Long-Term Debt


176,095



237,212



217,484



377,773



426,853Stockholders Equity


1,709,801



1,362,883



996,155



705,541



606,114     (a)
    
    See discussion of other operating items related to 2007 and 2006
    in Note 6 to the consolidated financial statements for
    further discussion.(b)
    
    Includes a license and royalty payment in 2006 of
    $20.0 million we received in exchange for the use of
    ReedHycalogs patented technology for the shallow leaching
    of PDC cutters (see Note 5 to the consolidated financial
    statements for further discussion).(c)
    
    Includes total refinancing charges of $57.1 million in
    2005, which includes $35.4 million related to replacing our
    previous $190 million credit facility with a new
    $350 million credit facility, and an early redemption of
    our $200 million
    95/8% Senior
    Notes due 2007 and $21.7 million related to the repurchase
    of substantially all of our 9% Senior Notes.(d)
    
    Includes $9.0 million of charges in 2004, which include
    $3.8 million related to the relocation of the
    Companys Corporate offices, $2.0 million due to lease
    termination, severance and other exit costs related to the
    Drilling Products rationalization program and $3.2 million
    of severance costs related to the Tubular Technology and
    Services organizational restructuring.(e)
    
    Includes $37.8 million of charges in 2003, which includes
    $24.9 million related to fixed asset write-downs,
    $6.4 million related to inventory reserves for exited
    product lines, $6.4 million related to asset impairments,
    $1.5 million related to stock-based compensation expense
    offset by a benefit of $1.4 million related to the
    settlement of a contingent liability. 19




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
   General    Discontinued
    Operations
    Pending
    Merger
   20




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##### Table of Contents



License
    and Royalty Agreement
    Acquisition
  tm
 Market
    Trends   21




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##### Table of Contents



Year Ended December 31,2007


2006


2005WTI Oil(a)Average

$
72.23


$
66.09


$
56.59Ending


96.00



61.05



61.04Henry Hub Gas(b)Average

$
6.97


$
6.73


$
8.89Ending


7.16



5.50



9.52North American Rig Count(c)Average


2,111



2,118



1,838Ending


2,171



2,174



2,045International Rig Count(c)Average


1,005



925



908Ending


1,036



951



948     (a)
    
    Price per barrel of West Texas Intermediate (WTI) crude as of
    the dates presented above. Source:
    Bloomberg Energy/Commodity Service.(b)
    
    Price per MMBtu as of the dates presented above. Source:
    Bloomberg Energy/Commodity Service.(c)
    
    Source: Baker Hughes Rig Count (International Rig Count excludes
    China and the Former Soviet Union). Future
    Market Trends and Expectations       22




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##### Table of Contents



Results
    of Operations  Year
    Ended December 31, 2007 Compared to the Year Ended
    December 31, 2006
    Year Ended December 31,2007


2006


$ Change


% Change(In thousands)Revenues:Drilling Products and Services

$
1,175,632


$
888,661


$
286,971



32
%ReedHycalog


610,738



504,648



106,090



21
%Other


122,264



136,950



(14,686
)


(11
)%Total Revenues


1,908,634



1,530,259



378,375



25
%Operating Income (Loss):Drilling Products and Services


470,142



323,189



146,953



45
%ReedHycalog


169,567
(a)


185,087
(b)


(15,520
)


(8
)%Other


3,878



9,018



(5,140
)


(57
)%Corporate


(62,858
)(a)


(46,570
)(c)


(16,288
)


35
%Total Operating Income


580,729



470,724



110,005



23
%Interest Expense


(14,202
)


(16,021
)


1,819



(11
)%Other Expense, Net


(1,641
)


(3,803
)


2,162



(57
)%Equity Income in Unconsolidated Affiliate


124,332



125,597



(1,265
)


(1
)%Income from Continuing OperationsBefore Income Taxes and Minority Interests


689,218



576,497



112,721



20
%Income Tax Provision


(201,088
)


(162,030
)


(39,058
)


24
%Minority Interests


(9,933
)


(10,361
)


428



(4
)%Income from Continuing Operations


478,197



404,106



74,091



18
%Discontinued Operations, Net of Tax


41,039



60,478



(19,439
)


(32
)%Net Income

$
519,236


$
464,584


$
54,652



12
%     (a)
    
    Includes $4.3 million of ReedHycalog plant relocation costs
    and $2.1 million in legal and professional fees, included
    in our Corporate segment, related to the pending merger with
    National Oilwell Varco (see Note 6 to the consolidated
    financial statements for further discussion).(b)
    
    Includes a license and royalty payment of $20.0 million we
    received in exchange for the use of ReedHycalog patented
    technology for the shallow leaching of PDC cutters (see
    Note 5 to the consolidated financial statements for further
    discussion).(c)
    
    Includes a $3.9 million benefit from the settlement of a
    trade credit dispute (see Note 6 to the consolidated
    financial statements for further discussion).     23




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Segment
    Results
  Drilling
    Products and Services
    ReedHycalog
    Other
    Corporate
    Other
    Items
       24




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##### Table of Contents



Year
    Ended December 31, 2006 Compared to the Year Ended
    December 31, 2005
    Year Ended December 31,2006


2005


$ Change


% Change(In thousands)Revenues:Drilling Products and Services

$
888,661


$
593,066


$
295,595



50
%ReedHycalog


504,648



398,227



106,421



27
%Other


136,950



97,973



38,977



40
%Total Revenues


1,530,259



1,089,266



440,993



40
%Operating Income (Loss):Drilling Products and Services


323,189



175,091



148,098



85
%ReedHycalog


185,087
(a)


98,616



86,471



88
%Other


9,018



7,396



1,622



22
%Corporate


(46,570
)(b)


(47,174
)


604



(1
)%Total Operating Income


470,724



233,929



236,795



101
%Interest Expense


(16,021
)


(28,881
)


12,860



(45
)%Other Income (Expense), Net


(3,803
)


7,036



(10,839
)


(154
)%Equity Income in Unconsolidated Affiliates


125,597



58,259



67,338



116
%Refinancing Charges






(57,086
)


57,086



(100
)%Income from Continuing OperationsBefore Income Taxes and Minority Interests


576,497



213,257



363,240



170
%Income Tax Provision


(162,030
)


(63,755
)


(98,275
)


154
%Minority Interests


(10,361
)


(9,949
)


(412
)


4
%Income from Continuing Operations


404,106



139,553



264,553



190
%Discontinued Operations, Net of Tax


60,478



49,451



11,027



22
%Net Income

$
464,584


$
189,004


$
275,580



146
%     (a)
    
    Includes a license and royalty payment of $20.0 million we
    received in exchange for the use of ReedHycalog patented
    technology for the shallow leaching of PDC cutters (see
    Note 5 to the consolidated financial statements for further
    discussion).(b)
    
    Includes a $3.9 million benefit from the settlement of a
    trade credit dispute (see Note 6 to the consolidated
    financial statements for further discussion).   25




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Segment
    Results
  Drilling
    Products and Services
    ReedHycalog
    Other
    Corporate
    Other
    Items
     26




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##### Table of Contents



5 8
     Liquidity
    and Capital Resources          Year Ended December 31,2007


2006


2005(In thousands)Net Cash Provided by Operating Activities

$
488,291


$
394,100


$
194,676Net Cash Used in Investing Activities


(116,361
)


(210,644
)


(69,672
)Net Cash Used in Financing Activities


(269,057
)


(154,609
)


(144,180
)   Operating
    Activities
   27




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##### Table of Contents



Investing
    Activities
      Financing
    Activities
      Short-Term
    Debt
  Singapore
    Credit Facility
   28




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##### Table of Contents



Long-Term
    Debt
  Credit
    Facility
        61/8% Senior
    Notes Due 2015
  1 8 1 8 1 8
  1 8 1 8 1 8
  1 8 1 8
  Liquidity
    Outlook
   29




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##### Table of Contents



AfterTotal


1 Year


2-4 Years


5-6 Years


6 Years(In thousands)Contractual Obligations:Long-Term Debt(a)

$
261,549


$
10,965


$
32,759


$
21,853


$
195,972Capital Lease Obligations(a)


823



355



468







Non-Cancellable Operating Leases


49,909



10,284



16,279



6,021



17,325Purchase Obligations(b)


242,198



242,187



11







Total Contractual Obligations(c)

$
554,479


$
263,791


$
49,517


$
27,874


$
213,297   AfterTotal


1 Year


2-4 Years


5-6 Years


6 Years(In thousands)Commercial Commitments:Letters of Credit(c)

$
6,649


$
6,063


$
586


$



$
     (a)
    
    Long-term debt and capital lease obligations above include
    estimated interest payments based on principal balances and
    interest rates as of December 31, 2007.(b)
    
    Purchase obligations include agreements to purchase goods or
    services that are enforceable and legally binding and that
    specify all significant terms, including: fixed or minimum
    quantities to be purchased, fixed, minimum or variable price
    provisions, and the appropriate timing of the transaction.(c)
    
    Includes amounts related to our discontinued operations as we
    are still contractually obligated at December 31, 2007.   Related-Party
    Transactions     30




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Off-Balance
    Sheet Financing   Recent
    Accounting Pronouncements       31




---



##### Table of Contents



Critical
    Accounting Policies and Estimates  Form 10-K.
  Revenue
    Recognition
    Stock-Based
    Compensation
     32




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##### Table of Contents



Allowance
    for Doubtful Accounts
    Inventories
  first-in,
  Business
    Combinations
    Valuation
    of Long-Lived Assets
   33




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##### Table of Contents



Goodwill
    and Intangible Assets
    Valuation
    Allowance for Deferred Tax Assets
    Contingent
    Liabilities
     34




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##### Table of Contents



Pension
    Plans
      Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Financial
    Instruments
  Form 10-K
  Foreign
    Currency Risk
         35




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##### Table of Contents



Interest
    Rates
    2008


2009


2010


2011


2012


Thereafter(In thousands)2007Long-term debt:Fixed rate

$
490


$
489


$
359


$
226


$
242


$
174,779Average interest rate


6.14
%


6.13
%


6.13
%


6.13
%


6.12
%


6.13
%   2006

2007


2008


2009


2010


2011


Thereafter(In thousands)Long-term debt:Fixed rate

$
8,640


$
535


$
530


$
484


$
294


$
201,034Average interest rate


6.12
%


6.12
%


6.12
%


6.12
%


6.12
%


6.12
%     1 8
  December 31,2007


2006Carrying


Fair


Carrying


FairValue


Value


Value


Value(In millions)61/8% Senior
    Notes due 2015

$
174.6


$
180.3


$
200.0


$
194.8  36




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data     
 Managements Annual Report on Internal
    Control Over Financial Reporting


38Report of Independent Registered Public
    Accounting Firm on Internal Control Over Financial
    Reporting  Deloitte & Touche LLP


39Report of Independent Registered Public
    Accounting Firm  Deloitte & Touche LLP


40Consolidated Statements of Operations for each of
    the three years in the period ended December 31, 2007


41Consolidated Balance Sheets at December 31,
    2007 and 2006


42Consolidated Statements of Cash Flows for each of
    the three years in the period ended December 31, 2007


43Consolidated Statements of Stockholders
    Equity for each of the three years in the period ended
    December 31, 2007


44Notes to Consolidated Financial Statements


45   37




---



##### Table of Contents



GRANT
    PRIDECO, INC.MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL
    OVER FINANCIAL REPORTING
    Rules 13a-15(f) 15d-15(f). Internal Control 
    Integrated Framework
      Internal
    Control  Integrated Framework
    
    38




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
  Share-based
    Payment,
  
    39




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm            Share-based Payment,
  Internal Control-Integrated
    Framework
  
    40




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2007


2006


2005(In thousands, except per share data)Income:Revenues

$
1,908,634


$
1,530,259


$
1,089,266License and royalty income






20,000



1,908,634



1,550,259



1,089,266Operating Expenses:Cost of sales


975,383



794,645



610,179Sales and marketing


180,966



152,191



130,637General and administrative


126,933



103,026



90,819Research and engineering


38,177



33,573



23,702Other operating items


6,446



(3,900
)


1,327,905



1,079,535



855,337Operating Income


580,729



470,724



233,929Interest Expense


(14,202
)


(16,021
)


(28,881
)Other Income (Expense), Net


(1,641
)


(3,803
)


7,036Equity Income in Unconsolidated Affiliates


124,332



125,597



58,259Refinancing Charges










(57,086
)Income From Continuing Operations Before Income Taxes and
    Minority Interests


689,218



576,497



213,257Income Tax Provision


(201,088
)


(162,030
)


(63,755
)Minority Interests


(9,933
)


(10,361
)


(9,949
)Income from Continuing Operations


478,197



404,106



139,553Income from Discontinued Operations, Net of Tax


41,039



60,478



49,451Net Income

$
519,236


$
464,584


$
189,004Basic Net Income Per Share:Income from continuing operations

$
3.73


$
3.10


$
1.10Income from discontinued operations


0.32



0.46



0.39Net income

$
4.05


$
3.56


$
1.49Basic weighted average shares outstanding


128,060



130,510



127,236Diluted Net Income Per Share:Income from continuing operations

$
3.69


$
3.05


$
1.07Income from discontinued operations


0.32



0.45



0.38Net income

$
4.01


$
3.50


$
1.45Diluted weighted average shares outstanding


129,610



132,674



130,467    41




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  CONSOLIDATED
    BALANCE SHEETS
 (In thousands, except par value amounts)
  December 31,2007


2006ASSETSCurrent Assets:Cash and cash equivalents

$
160,988


$
57,344Accounts receivable, net of allowance for doubtful accounts of
    $2,846 and $3,523 for 2007 and 2006, respectively


415,525



368,695Inventories


471,357



454,947Deferred charges


2,977



3,964Current deferred tax assets


41,005



48,101Prepaid expenses


40,136



13,364Assets held for sale


186,558



Other current assets


2,081



1,031Total Current Assets


1,320,627



947,446Property, Plant and Equipment, Net


329,482



305,524Goodwill


458,758



520,992Other Intangible Assets, Net


81,958



89,827Investment in Unconsolidated Affiliate


134,731



135,428Other Assets


25,148



22,850Total Assets

$
2,350,704


$
2,022,067LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term borrowings and current portion of long-term debt

$
490


$
8,640Accounts payable


127,536



138,942Accrued payroll and benefits


58,819



74,952Deferred revenues


20,893



18,190Income taxes payable


77,915



33,039Liabilities held for sale


16,477



Other current liabilities


39,872



33,576Total Current Liabilities


342,002



307,339Long-Term Debt


176,095



237,212Deferred Tax Liabilities


72,705



68,310Other Long-Term Liabilities


29,224



28,801Commitments and Contingencies (Note 18 and 19)Minority Interests


20,877



17,522Stockholders Equity:Preferred stock, $0.01 par value; authorized
    10,000 shares; no shares issued in 2007 or 2006






Common stock, $0.01 par value; authorized
    300,000 shares; issued 134,733 and 132,706 in 2007 and
    2006, respectively


1,347



1,327Capital in excess of par value


748,435



687,384Retained earnings


1,364,243



845,877Accumulated other comprehensive income (loss)


11,798



(960
)Treasury stock, at cost, 10,258 and 5,017 shares in 2007
    and 2006, respectively


(426,617
)


(180,557
)Deferred compensation obligation


10,595



9,812Total Stockholders Equity


1,709,801



1,362,883Total Liabilities and Stockholders Equity

$
2,350,704


$
2,022,067    42




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007


2006


2005(In thousands)Cash Flows From Operating Activities:Net income

$
519,236


$
464,584


$
189,004Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


58,786



50,255



46,632Non-cash items


6,889



1,423



1,928Debt refinancing charges










51,834Deferred income tax


6,327



9,627



(12,769
)Equity income in unconsolidated affiliates, net of dividends


20,279



(37,878
)


(46,218
)Stock-based compensation expense


13,486



11,420



5,564Excess tax benefits on stock option exercises


(23,597
)


(15,556
)


Deferred compensation expense


2,420



2,279



2,263Minority interests in consolidated subsidiaries, net of dividends


1,704



4,726



3,688(Gain) loss on sale of assets, net


(3,973
)


(363
)


1,338Gain on sale of businesses, net










(1,577
)Change in operating assets and liabilities, net of effects of
    businesses acquired:Accounts receivable


(70,114
)


(79,428
)


(68,638
)Inventories


(58,041
)


(89,172
)


(68,192
)Other current assets


(5,144
)


1,989



4,397Other assets


(5,417
)


(6,086
)


(1,220
)Accounts payable


6,421



45,041



18,320Income taxes payable


30,772



23,080



61,558Other current liabilities


(17,957
)


5,286



(4,636
)Other, net


6,214



2,873



11,400Net cash provided by operating activities


488,291



394,100



194,676Cash Flows From Investing Activities:Acquisition of businesses, net of cash acquired


(3,394
)


(111,998
)


(39,232
)Proceeds from sale of short-term investments


523,495







2,521Purchases of short-term investments


(523,545
)






Investments in and advances to unconsolidated affiliate










(5,273
)Capital expenditures for property, plant and equipment


(123,512
)


(100,238
)


(29,501
)Proceeds from sale of fixed assets


10,595



1,592



1,813Net cash used in investing activities


(116,361
)


(210,644
)


(69,672
)Cash Flows From Financing Activities:Borrowings (repayments) on credit facility, net


(34,600
)


23,400



11,200Repayments on debt


(34,681
)


(48,139
)


(379,315
)Debt refinancing costs










(43,778
)Issuance of debt










200,000Excess tax benefits on stock option exercises


23,597



15,556



Repurchases of common stock


(247,890
)


(165,122
)


(3,385
)Proceeds from issuance of common stock


23,953



20,728



77,139Other, net


564



(1,032
)


(6,041
)Net cash used in financing activities


(269,057
)


(154,609
)


(144,180
)Effect of Exchange Rate Changes on Cash


771



333



(212
)Net Increase (Decrease) in Cash


103,644



29,180



(19,388
)Cash at Beginning of Year


57,344



28,164



47,552Cash at End of Year

$
160,988


$
57,344


$
28,164    43




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 (In thousands)
  AccumulatedCapital in








Other





DeferredCommon


Excess of


Unearned


Retained


Comprehensive


Treasury


CompensationStock


Par Value


Compensation


Earnings


Income(Loss)


Stock


Obligation


TotalBalance at January 1, 2005

$
1,245


$
528,188


$
(5,801
)

$
192,289


$
(12,291
)

$
(8,483
)

$
10,394


$
705,541Components of Comprehensive Income:Net income














189,004















189,004Currency translation adjustment


















(1,233
)










(1,233
)Other comprehensive income for unconsolidated affiliate, net of
    tax of ($2,610)


















(4,847
)










(4,847
)Minimum pension liability, net of tax of ($606)


















(1,125
)










(1,125
)Total Comprehensive Income






























181,799Stock Options Exercised


56



75,187























75,243Tax Benefit of Options Exercised






35,517























35,517Compensation Expense for Accelerated Vesting






1,129























1,129Issuance of Restricted Stock


5



5,202



(5,207
)










(5,365
)






(5,365
)Amortization of Restricted Stock, Net










4,435



















4,435Employee Stock Purchase Plan Issuance


2



1,894























1,896Deferred Compensation Obligation


1



94















(629
)


(3,506
)


(4,040
)Purchase of Treasury Stock for Executive Deferred Compensation
    Plan






















(3,385
)


3,385



Balance at December 31, 2005

$
1,309


$
647,211


$
(6,573
)

$
381,293


$
(19,496
)

$
(17,862
)

$
10,273


$
996,155Components of Comprehensive Income:Net income














464,584















464,584Currency translation adjustment


















8,569











8,569Other comprehensive income for unconsolidated affiliate, net of
    tax of $3,574


















6,638











6,638Minimum pension liability, net of tax of $293


















544











544Total Comprehensive Income






























480,335Adjustment to Initially Apply SFAS No. 158, net of tax
    of $1,500


















2,785











2,785Stock Options Exercised


16



17,953























17,969Tax Benefit of Options Exercised






14,321























14,321Share Repurchases






















(161,713
)






(161,713
)Issuance of Restricted Stock






49















(234
)






(185
)Employee Stock Purchase Plan Issuance


2



2,757























2,759Stock-Based Compensation






11,420























11,420Adoption of SFAS 123 (R) (Note 1)






(6,573
)


6,573



















Deferred Compensation Obligation






246















2,661



(3,870
)


(963
)Purchase of Treasury Stock for ExecutiveDeferred Compensation Plan






















(3,409
)


3,409



Balance at December 31, 2006

$
1,327


$
687,384


$



$
845,877


$
(960
)

$
(180,557
)

$
9,812


$
1,362,883Components of Comprehensive Income:Net income














519,236















519,236Currency translation adjustment


















369











369Other comprehensive income for unconsolidated affiliate, net of
    tax of $6,849


















12,720











12,720Defined benefit pension plans, net of tax of ($449)


















(834
)










(834
)Unrealized gains resulting from changes in fair values of
    derivative instruments, net of tax of $468


















869











869Realized gains on derivative instruments reclassified into
    earnings, net of tax of ($197)


















(366
)










(366
)Total Comprehensive Income






























531,994Stock Options Exercised


15



21,027























21,042Tax Benefit of Options Exercised






23,634























23,634Share Repurchases






















(244,264
)






(244,264
)Issuance of Restricted Stock


4



(4
)














(694
)






(694
)Employee Stock Purchase Plan Issuance


1



2,910























2,911Stock-Based Compensation






13,486























13,486Adoption of FIN 48 (Note 17)














(870
)














(870
)Deferred Compensation Obligation






66















2,275



(3,161
)


(820
)Issuance of Treasury Shares for CertainDeferred Compensation Plans






(68
)














249



318



499Purchase of Treasury Stock for ExecutiveDeferred Compensation Plan






















(3,626
)


3,626



Balance at December 31, 2007

$
1,347


$
748,435


$



$
1,364,243


$
11,798


$
(426,617
)

$
10,595


$
1,709,801    44




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Summary of Significant Accounting Policies  Nature
    of Operations
    Pending
    Merger
    Principles
    of Consolidation
    % OwnershipTianjin Grant TPCO (TGP)


60
%H-Tech


54
%Tianjin Grant Prideco (GPT)


85
%    45




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates
    Revenue
    Recognition
      Cash
    and Cash Equivalents
    Allowance
    for Doubtful Accounts
   46




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in,
    December 31,2007


2006(In thousands)Raw Materials, Components and Supplies

$
192,430


$
203,368Work in Process


134,761



129,966Finished Goods


111,809



97,565Rental Bits(a)


32,357



24,048$
471,357


$
454,947     (a)
    
    The Company manufactures its rental bit inventory and the cost,
    which includes direct and indirect manufacturing costs, is
    capitalized and carried in inventory. Prior to 2006, the Company
    expensed the cost of rental bits upon the first rental and usage
    of the bit. During the first quarter of 2006, the Company
    completed an analysis of historical rental bit usage to
    determine an estimate of rental bit useful life. Effective
    January 1, 2006, manufactured rental bits are now
    depreciated, based upon analysis of historical usage, over their
    estimated useful life of approximately one year.    Property,
    Plant and Equipment
    LifeBuildings and Improvements


15  30 yearsMachinery and Equipment


2  15 yearsFurniture and Fixtures


2  10 years  47




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Land

$
23,038


$
24,915Buildings and Improvements


100,688



101,809Machinery and Equipment


300,994



332,401Furniture and Fixtures


47,759



44,267Construction in Progress


59,831



42,864532,310



546,256Less: Accumulated Depreciation


(202,828
)


(240,732
)$
329,482


$
305,524     Valuation
    of Long-Lived Assets
    Goodwill
    and Identifiable Intangible Assets
    Derivative
    Instruments
  Accounting for Derivative Instruments and
    Hedging Activities
 48




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Stock-Based
    Compensation
     49




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31, 2005(In thousands, except pershare amounts)Net Income As Reported

$
189,004Add: stock-based employee compensation expense included in
    reported net income, net of related tax effects


6,806Deduct: stock-based employee compensation expense determined
    under the fair value method for all awards, net of related tax
    effects


(11,370
)Pro Forma Net Income

$
184,440Net Income Per Share:Basic, as reported

$
1.49Basic, pro forma


1.45Diluted, as reported


1.45Diluted, pro forma


1.42   Pension
    Plans
    Contingent
    Liabilities
    Foreign
    Currency Translation
   50




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value of Financial Instruments Other Than
    Derivatives
    Off-Balance
    Sheet Financing
    Accounting
    for Income Taxes
    Net
    Income Per Share
   51




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006


2005(In thousands)Basic Weighted Average Number of Shares Outstanding


128,060



130,510



127,236Dilutive Effect of Stock Options and Restricted Stock, Net of
    Assumed Repurchase of Treasury Shares


1,550



2,164



3,231Dilutive Weighted Average Number of Shares Outstanding


129,610



132,674



130,467   Recently
    Issued Accounting Pronouncements
         52




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      No. 06-03, (EITF 06-03) 06-3 EITF 06-3 EITF 06-3
  2.
    Discontinued
    Operations     53




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2007


2006


2005(In thousands)Revenues

$
210,028


$
285,434


$
260,731Income Before Income Taxes


60,494



93,663



75,376Income Tax Provision


(19,455
)


(33,185
)


(25,925
)Income from Discontinued Operations, Net of Tax

$
41,039


$
60,478


$
49,451     December 31,2007


2006(In thousands)Accounts Receivable

$
28,494


$
35,585Inventories


41,602



44,950Other Current Assets


2,431



483Total Current Assets


72,527



81,018Property, Plant, and Equipment, Net


40,878



45,563Goodwill


72,799



72,799Other Assets


354



393Total Assets

$
186,558


$
199,773Accounts Payable

$
12,520


$
16,897Accrued Payroll and Benefits


1,480



2,500Other Current Liabilities


2,477



2,744Total Liabilities

$
16,477


$
22,141   3.
    Stock-Based
    Compensation     54




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Option and Restricted Stock Plans
          Stock
    Option Plans
   55




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,20052007


2006


(Pro Forma)Valuation Assumptions Expected Option Term (Years)


5.0



5.0



5.0Expected Volatility


40.00
%


40.02
%


41.00
%Expected Dividend Rate










Risk Free Interest Rate


4.66
%


4.72
%


3.87
%Weighted-Average Grant Date Fair Value

$
18.82


$
15.61


$
9.10   5-year 10-year
  WeightedWeighted


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual


IntrinsicShares


Price


Term


ValueOutstanding at the Beginning of the Year


3,461,233


$
15.76Options Granted During the Year


326,000



44.68Options Exercised


(1,521,383
)


13.90Options Forfeited


(41,326
)


37.14Options Expired


(3,546
)


18.42Outstanding at the End of the Period


2,220,978


$
20.88



6.85


$
76,917,813Exercisable at the End of the Period


1,606,295


$
14.29



6.22


$
66,210,976       Restricted
    Stock Plans
    gross-up
 56




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2005 Restricted Stock Award
  2006 Restricted Stock Award
  007 Restricted Stock Award
    2007Valuation Assumptions Expected Award Term (Years)


3-5Expected Volatility


44.46
%Expected Dividend Rate


Risk Free Interest Rate


4.71
%     WeightedAverageNumber of


Grant-DateShares


Fair ValueOutstanding at the Beginning of the Year


836,040


$
24.62Awarded


381,199



37.97Vested


(401,175
)


15.42Forfeited


(26,533
)


25.53Outstanding at the End of the Period


789,531


$
35.71  57




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  gross-up
  Employee
    Stock Purchase Plan
        Year Ended December 31,20052007


2006


(Pro Forma)Valuation Assumptions Expected Option Term (Years)


1



1



1Expected Volatility


40
%


40
%


41
%Expected Dividend Rate










Risk Free Interest Rate


5.38
%


4.74
%


2.79
%Weighted-Average Grant Date Fair Value

$
9.73


$
12.07


$
6.05     4.
    Accumulated
    Other Comprehensive Income (Loss)   58




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    As of December 31,2007


2006


2005(In thousands)Foreign Currency Translation Adjustments

$
(8,950
)

$
(9,319
)

$
(17,888
)Other Comprehensive Income (Loss) for Unconsolidated Affiliate,
    Net


18,877



6,157



(481
)Gain on Derivative Instruments, Net


503







Unrecognized Pension Benefit (Cost), Net


1,368



2,202



(1,127
)Total Accumulated Other Comprehensive Income (Loss)

$
11,798


$
(960
)

$
(19,496
)   5.
    License
    and Royalty Agreement    6.
    Other
    Operating Items  2007
    Charges
    2006
    Benefit
    7.
    Acquisitions  tm
 59




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    20-year
  5-year
       60




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    8.
    Dispositions    9.
    Investment
    in Unconsolidated Affiliate      December 31,2007


2006(In thousands)Current Assets

$
280,843


$
276,484Other Assets


77,771



54,370$
358,614


$
330,854Current Liabilities

$
89,959


$
64,602Other Liabilities


34,341



28,283Stockholders Equity


234,314



237,969$
358,614


$
330,854   Year Ended December 31,2007


2006


2005(In thousands)Net Sales

$
755,983


$
721,880


$
537,865Gross Profit


243,684



261,329



141,803Net Income


248,597



250,753



127,101Companys Equity Income


124,332



125,597



63,978Dividends Received


144,611



87,719



12,041   Rule 3-09 Regulation S-X Form 10-K
 61




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        10.
    Debt  Short-Term
    Debt
  Singapore
    Credit Facility
       62




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Long-Term
    Debt
    December 31,2007


2006(In thousands)Credit Facility (7.4% at December 31, 2006)

$



$
34,60061/8% Senior
    Notes due 2015


174,585



200,000Capital Lease Obligations


747



1,311Other


1,253



9,941176,585



245,852Less: Current Portion of Long-Term Debt


490



8,640$
176,095


$
237,212     2008

$
4902009


4892010


3592011


2262012


242Thereafter


174,779$
176,585   Capital
    Leases
    2008

$
3552009


3162010


152Total Minimum Lease Payments

$
823Less: Amounts Representing Interest


76Present Value of Minimum Lease Payments


747Less: Current Portion of Obligations Under Capital Lease


307Long-Term Portion of Obligations Under Capital Lease

$
440   Credit
    Facility
   63




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            61/8% Senior
    Notes Due 2015
  1 8 1 8 1 8 1 8
  Year

Percentage2010


103.063
%2011


102.042
%2012


101.021
%2013 and thereafter


100.000
%  64




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  1 8 1 8
  1 8 1 8
  Treasury
    Rate Locks
    11.
    Goodwill
    and Other Intangible Assets     65




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    DrillingProducts andServices


ReedHycalog


Other


Total(In thousands)Balance, December 31, 2005

$
130,885


$
174,769


$
115,973


$
421,627Acquisitions


201



100,996



20



101,217Translation and Other Adjustments


1,117



163



(3,132
)


(1,852
)Balance, December 31, 2006


132,203



275,928



112,861



520,992Acquisitions






3,394







3,394Discontinued Operations Allocation










(72,799
)


(72,799
)Translation and Other Adjustments


1,055



4,826



1,290



7,171Balance, December 31, 2007

$
133,258


$
284,148


$
41,352


$
458,758   EITF 93-7,
    December 31, 2007


December 31, 2006Gross


Accumulated


Net


Gross


Accumulated


NetIntangibles


Amortization


Intangibles


Intangibles


Amortization


Intangibles(In thousands)Patents

$
71,858


$
(19,622
)

$
52,236


$
71,843


$
(14,449
)

$
57,394Customer Relationships


33,195



(4,533
)


28,662



32,410



(1,514
)


30,896Trademarks


1,610



(1,456
)


154



1,610



(1,250
)


360Covenants Not To Compete


2,285



(1,999
)


286



2,300



(1,890
)


410Technology Licenses


1,308



(688
)


620



1,424



(657
)


767$
110,256


$
(28,298
)

$
81,958


$
109,587


$
(19,760
)

$
89,827    66




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  12.
    Derivative
    Instruments      Cash
    Flow Hedges
    Other
    Derivative Instruments
    13.
    Supplemental
    Cash Flow Information    Year Ended December 31,2007


2006


2005(In thousands)Interest Paid

$
15,737


$
15,772


$
24,417Income Taxes Paid, Net of Refunds


183,599



162,934



40,515  67




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2007


2006


2005(In thousands)Fair Value of Assets, Net of Cash Acquired

$



$
74,723


$
20,569Goodwill


3,394



101,217



26,731Fair Value of Liabilities Assumed






(63,942
)


(16,263
)Minority Interests Acquired










8,195Cash Consideration, Net of Cash Acquired

$
3,394


$
111,998


$
39,232     14.
    Stockholders
    Equity  Stock
    Repurchase Program
      15.
    Pension
    Plans       68




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Prior to


Effect of


As ReportedAdopting


Adopting


atSFAS No. 158


SFAS No. 158


December 31, 2006(In thousands)Other Intangible Assets, Net

$
90,026


$
(199
)

$
89,827Other Assets


22,054



796



22,850Accrued Payroll and Benefits


78,639



(3,687
)


74,952Deferred Tax Liabilities


66,810



1,500



68,310Accumulated Other Comprehensive Income (Loss)


(3,745
)


2,785



(960
)     U.S.
    Pension Plan
   69




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Obligations
    and Funded Status
    2007


2006(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year

$
15,948


$
15,718Service cost


381



408Interest cost


991



844Benefits paid


(906
)


(654
)Actuarial (gain) loss


1,332



(368
)Benefit obligation at end of year

$
17,746


$
15,948Change in Plan Assets:Fair value of plan assets at beginning of year

$
15,075


$
10,464Actual return on plan assets


1,075



1,377Employer contributions


1,000



3,986Benefits paid


(906
)


(654
)Administrative expenses


(98
)


(98
)Fair value of plan assets at end of year

$
16,146


$
15,075Funded Status at End of Year

$
(1,600
)

$
(873
)Amounts Recognized in the Consolidated Balance Sheets:Other Long-Term Liabilities

$
(1,600
)

$
(873
)Amounts Recognized in Accumulated Other Comprehensive Income
    (Loss):Net loss

$
2,231


$
897Prior sevice cost






199$
2,231


$
1,096     2007


2006(In thousands)Projected Benefit Obligation

$
17,746


$
15,948Accumulated Benefit Obligation


17,746



15,948Fair Value of Plan Assets


16,146



15,075  70




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Components of Net Periodic Cost and Other Amounts
    Recognized in Other Comprehensive Income (Loss):
    2007


2006


2005(In thousands)Service Cost

$
381


$
408


$
382Interest Cost


991



844



841Expected Return on Plan Assets


(1,141
)


(895
)


(595
)Amortization of Prior Service Cost


23



23



Amortization of Net Loss


65



25



11Administration Expenses


98



60



108Curtailment Loss Recognized


175







Net Periodic Cost

$
592


$
465


$
747   :
  2007


2006


2005(In thousands)Net (Gain) Loss

$
1,398


$
(812
)

$
1,741Amortization of Net Loss


(65
)


(25
)


(11
)Prior Service Cost


(199
)


199



Total Recognized in Other Comprehensive Income (Loss)

$
1,134


$
(638
)

$
1,730Total Recognized in Net Periodic Cost and Other Comprehensive
    Income (Loss)

$
1,726


$
(173
)

$
2,477   Assumptions
    2007


2006Discount rate


6.00
%


5.75
%Rate of compensation increase


N/A



N/A     2007


2006


2005Discount rate


5.75
%


5.50
%


5.78
%Expected return on plan assets


7.50
%


7.50
%


6.58
%Rate of compensation increase


N/A



N/A



N/A  71




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Asset
    Categories
    ActualDecember 31,Asset Category

Target


2007


2006Equity Securities


50
%


58
%


58
%Fixed Income


40
%


42
%


42
%Other


10
%


0
%


0
%100
%


100
%


100
%     Cash
    Flow
      Fiscal Year Ending

Payments2008

$
9582009


9372010


9632011


1,0302012


1,097Next 5 years


5,370Total

$
10,355   Non-U.S.
    Pension Plan
   72




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Obligations
    and Funded Status
    2007


2006(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year

$
22,545


$
21,686Service cost






17Interest cost


1,080



940Benefits paid


(337
)


(1,214
)Actuarial gain


(355
)


(1,392
)Exchange rate changes


213



2,508Benefit obligation at end of year

$
23,146


$
22,545Change in Plan Assets:Fair value of plan assets at beginning of year

$
23,340


$
21,388Actual return on plan assets


764



(216
)Employer contributions


2,656



838Benefits paid


(337
)


(1,214
)Exchange rate changes


143



2,545Fair value of plan assets at end of year

$
26,566


$
23,341Funded Status at End of Year

$
3,420


$
796Amounts Recognized in the Consolidated Balance Sheets:Other Assets

$
3,420


$
796Amounts Recognized in Accumulated Other Comprehensive Income
    (Loss):Net gain

$
(4,336
)

$
(4,535
)Prior sevice cost






52$
(4,336
)

$
(4,483
)     2007


2006(In thousands)Accumulated Benefit Obligation

$
23,146


$
22,545  73




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Components of Net Periodic Benefit and Other Amounts
    Recognized in Other Comprehensive Income (Loss):
    2007


2006


2005(In thousands)Service Cost

$



$
16


$
Interest Cost


1,081



941



917Expected Return on Plan Assets


(1,211
)


(924
)


(939
)Amortization of Prior Service Cost


53



118



235Amortization of Net Actuarial Gain


(159
)


(151
)


(213
)Net Periodic Benefit

$
(236
)

$



$
     2007


2006(In thousands)Net Loss (Gain)

$
40


$
(4,535
)Amortization of Net Actuarial Gain


159



Prior Service Cost






52Amortization of Prior Sevice Cost


(52
)


Total Recognized in Other Comprehensive Income (Loss)

$
147


$
(4,483
)Total Recognized in Net Periodic Benefit and Other
    Comprehensive Income (Loss)

$
(89
)

$
(4,483
)     Additional
    Information
    Assumptions
    2007


2006Discount rate


4.80
%


4.65
%Rate of compensation increase


N/A



N/A     2007


2006


2005Discount rate


4.65
%


4.25
%


4.75
%Expected return on plan assets


4.65
%


4.25
%


4.75
%Rate of compensation increase


N/A



N/A



N/A  74




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Asset
    Categories
    ActualDecember 31,Asset Category

Target


2007


2006Equity Securities


0
%


0
%


0
%Fixed Income


100
%


100
%


100
%Other


0
%


0
%


0
%100
%


100
%


100
%   Cash
    Flow
      Fiscal Year Ending

Payments2008

$
2802009


3022010


3192011


3392012


357Next 5 years


2,976Total

$
4,573   16.
    Other
    Retirement and Employee Benefit Plans  Executive
    Deferred Compensation Plan
     75




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-Qualified
    Deferred Compensation Plans
  Long-Term
  Defined
    Contribution Plans
    17.
    Income
    Taxes    Year Ended December 31,2007


2006


2005(In thousands)Domestic

$
309,230


$
210,550


$
8,287Foreign


379,988



365,947



204,970Total Income Before Income Taxes

$
689,218


$
576,497


$
213,257     Year Ended December 31,2007


2006


2005(In thousands)Current:U.S. federal and state income taxes

$
(109,430
)

$
(60,956
)

$
(31,069
)Foreign


(87,968
)


(93,164
)


(47,259
)(197,398
)


(154,120
)


(78,328
)Deferred:U.S. federal and state income taxes


(929
)


(12,849
)


18,444Foreign


(2,761
)


4,939



(3,871
)(3,690
)


(7,910
)


14,573Total Income Tax Provision(a)

$
(201,088
)

$
(162,030
)

$
(63,755
)  76




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    Excludes discontinued operation amounts of $18.2 million,
    $31.5 million and $24.1 million of current taxes for
    the years ended December 31, 2007, 2006 and 2005,
    respectively, and also excludes $1.3 million,
    $1.7 million and $1.8 million of deferred taxes for
    the years ended December 31, 2007, 2006 and 2005,
    respectively (see Note 2 for further discussion).    Year Ended December 31,2007


2006


2005(In thousands)Provision for Income Taxes at Statutory Rates

$
(241,226
)

$
(201,774
)

$
(74,640
)Effect of Foreign Income Tax, Net


31,646



22,650



8,208Change in Valuation Allowance






14,749



1,726Increased Research Expenditures Credit


828



4,578



Preferred Supplier Credit










1,421Extraterritorial Income and Manufacturing Deduction Benefit


5,635



4,200



1,157Amortization of Restricted Stock Award


3,730



(3,887
)


(423
)State and Local Income Taxes, Net of U.S. Federal Income Tax
    Benefit


(2,426
)


(2,355
)


Tax Exempt Interest


1,210







Other Permanent Items


(485
)


(191
)


(1,204
)Provision for Income Taxes

$
(201,088
)

$
(162,030
)

$
(63,755
)      77




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Deferred Tax Assets:Foreign tax credits

$



$
7,604Domestic and foreign operating losses


963



3,034Accrued liabilities and reserves


18,693



14,409Inventory basis differences


5,945



24,347Investments in unconsolidated subs


4,997



5,734Tax on non-repatriated foreign income


13,315



3,209Other


97



Total Deferred Tax Assets


44,010



58,337Deferred Tax Liabilities:Goodwill and other intangible assets


(30,740
)


(33,855
)Property and equipment and other


(34,770
)


(25,048
)Foreign taxes


(11,882
)


(18,243
)Total Deferred Tax Liabilities


(77,392
)


(77,146
)Valuation Allowance:Foreign net operating loss


(605
)


Total valuation allowance


(605
)


Net Deferred Tax Liabilities

$
(33,987
)

$
(18,809
)   one-time
       78




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Balance at January 1, 2007

$
12,657Additions based on tax positions related to the current year


281Additions for tax positions of prior year


311Reductions for tax positions of prior year


(2,326
)Settlements


(1,800
)Balance at December 31, 2007

$
9,123           18.
    Disputes,
    Litigation and Contingencies  Litigation
    and Other Disputes
   79




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 10-K, Mark Bornstein, On
    Behalf of Himself and All Others Similarly Situated vs. Grant
    Prideco, Inc., et al. No. 2007-76092, Catholic Medical Mission Board, On Behalf of Itself
    and All Others Similarly Situated vs. Grant Prideco, Inc., et
    al. No. 2007-76418, Thomas Gray, On Behalf of Himself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. No. 2007-76419, Roslyn Feder, On Behalf of Herself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. Kenneth Engberg, On Behalf of Himself and All Others
    Similarly Situated vs. Grant Prideco, Inc., et al. No. 2008-02244,
  Bornstein Bornstein
    Insurance
    19.
    Commitments  Operating
    Leases
   80




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008

$
10,2842009


6,6632010


5,6292011


3,9872012


3,376Thereafter


19,970$
49,909   Other
    Commitments
  30-year
  20.
    Related
    Parties      21.
    Segment
    Information  Business
    Segments
     81




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      82




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Drilling Productsand Services


ReedHycalog


Other


Corporate


Total(In thousands)2007Revenues from Unaffiliated Customers

$
1,175,632


$
610,738


$
122,264


$



$
1,908,634Intersegment Revenues


3,333



10



586







3,929Depreciation and Amortization(f)


15,124



27,150



5,441



4,824



52,539Other Operating Items






4,341
(a)






2,105
(a)


6,446Operating Income (Loss)(b)


470,142



169,567



3,878



(62,858
)


580,729Interest Expense


137



289



186



13,590



14,202Equity Income in Unconsolidated Affiliate


124,332















124,332Income (Loss) from Continuing Operations(b)


400,563



93,028



1,007



(16,401
)


478,197Capital Expenditures for Property, Plant and Equipment(f)


33,732



55,145



28,108



5,380



122,365Total Assets


927,672



847,558



416,499



158,975



2,350,7042006Revenues from Unaffiliated Customers

$
888,661


$
504,648


$
136,950


$



$
1,530,259Intersegment Revenues


671



91



4,895







5,657Depreciation and Amortization(f)


13,495



18,620



6,031



3,937



42,083Other Operating Items














3,900
(c)


3,900Operating Income (Loss)(b)


323,189



185,087
(d)


9,018



(46,570
)


470,724Interest Expense


(87
)


354



326



15,428



16,021Equity Income in Unconsolidated Affiliate


125,597















125,597Income (Loss) from Continuing Operations(b)


295,761



118,866
(d)


(1,035
)


(9,486
)


404,106Capital Expenditures for Property, Plant and Equipment(f)


28,019



24,847



25,661



4,398



82,925Total Assets


801,830



780,635



376,860



62,742



2,022,0672005Revenues from Unaffiliated Customers

$
593,066


$
398,227


$
97,973


$



$
1,089,266Intersegment Revenues


17



99



4,878







4,994Depreciation and Amortization(f)


13,248



15,939



5,042



3,462



37,691Operating Income (Loss)


175,091



98,616



7,396



(47,174
)(e)


233,929Interest Expense


342



240



185



28,114



28,881Equity Income (Loss) in Unconsolidated Affiliates


63,977







(5,718
)






58,259Income (Loss) from Continuing Operations


159,161



60,258



(7,037
)


(72,829
)(e)


139,553Capital Expenditures for Property, Plant and Equipment(f)


10,456



6,224



4,408



2,972



24,060Total Assets


592,054



538,734



354,500



54,996



1,540,284     (a)
    
    Includes $4.3 million of ReedHycalog relocation costs and
    $2.1 million in legal and professional fees related to the
    pending merger. See Note 6 for further discussion.(b)
    
    Includes non-cash items of $13.5 million and
    $11.4 million in 2007 and 2006, respectively, related to
    stock-based
    compensation.(c)
    
    Includes a $3.9 million benefit from the settlement of a
    trade credit dispute.(d)
    
    Includes a license and royalty payment in ReedHycalog of
    $20.0 million the Company received in exchange for the use
    of ReedHycalog patented technology for the shallow leaching of
    PDC cutters. See Note 5 for further discussion. 83




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (e)
    
    Includes non-cash items in Corporate and Other of
    $57.1 million related refinancing charges and
    $5.6 million related to stock-based compensation.(f)
    
    Reconciliation to the Consolidated Statements of Cash Flows:  Year Ended December 31,2007


2006


2005(In thousands)Depreciation and Amortization-From Continuing Operations

$
52,539


$
42,083


$
37,691From Discontinued Operations


6,247



8,172



8,941Per Consolidated Statements of Cash Flows

$
58,786


$
50,255


$
46,632   Year Ended December 31,2007


2006


2005(In thousands)Capital Expenditures for -Property Plant and Equipment from Continuing Operations

$
122,365


$
82,925


$
24,060Property Plant and Equipment from Discontinued Operations


1,147



17,313



5,441Per Consolidated Statements of Cash Flows

$
123,512


$
100,238


$
29,501   Foreign
    Operations and Export Sales
      Year Ended December 31,2007


2006


2005(In thousands)United States

$
1,104,446


$
843,939


$
616,541Canada


57,811



65,554



55,940Italy


22,987



55,834



39,561China


134,108



110,895



69,382Singapore


186,132



161,406



99,361Other Countries


403,150



292,631



208,481Total

$
1,908,634


$
1,530,259


$
1,089,266  84




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)United States

$
530,312


$
614,392Canada


44,804



33,250Mexico


91,522



79,363Italy


40,069



40,533China


42,887



38,756Singapore


49,318



49,496United Kingdom


186,953



183,925Other Countries


42,964



33,506Total

$
1,028,829


$
1,073,221   Major
    Customers and Credit Risk
     85




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  22.
    Selected
    Quarterly Financial Data (Unaudited)    2007First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Revenues

$
456,115


$
460,466


$
486,637


$
505,416Gross Profit


229,919



235,998



226,010



241,324Selling, General and Administrative and Research and Engineering


85,564



85,428



80,630



94,454Other Operating Items(a)


602



534



1,286



4,024Operating Income


143,753



150,036



144,094



142,846Income from Continuing Operations


125,091



122,536



114,279



116,291Income from Discontinued Operations,Net of Tax


6,458



12,416



9,960



12,205Net Income

$
131,549


$
134,952


$
124,239


$
128,496Basic Net Income Per Share:Income from Continuing Operations

$
0.98


$
0.95


$
0.89


$
0.91Income from Discontinued Operations


0.05



0.10



0.08



0.10Net Income

$
1.03


$
1.05


$
0.97


$
1.01Basic Weighted Average Shares Outstanding


128,085



128,434



128,585



127,155Diluted Net Income Per Share:Income from Continuing Operations

$
0.96


$
0.94


$
0.88


$
0.91Income from Discontinued Operations


0.05



0.10



0.08



0.09Net Income

$
1.01


$
1.04


$
0.96


$
1.00Diluted Weighted Average Shares Outstanding


129,928



130,071



129,818



128,161     (a)
    
    Includes $4.3 million of ReedHycalog relocation costs and
    $2.1 million in legal and professional fees related to the
    pending merger. See Note 6 for further discussion.  86




---



##### Table of Contents



GRANT
    PRIDECO, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2006First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share data)Revenues

$
340,406


$
355,616


$
382,028


$
452,209Gross Profit


155,606



175,412



186,929
(a)


217,667Selling, General and Administrative and Research and Engineering


67,246



70,055



67,370



84,119Operating Income


88,360



105,357



139,559
(a)


137,448
(b)Income from Continuing Operations


75,705



89,558



113,055



125,788Income from Discontinued Operations,Net of Tax


16,725



16,029



13,417



14,307Net Income

$
92,430


$
105,587


$
126,472
(a)

$
140,095
(b)Basic Net Income Per Share:Income from Continuing Operations

$
0.58


$
0.68


$
0.87


$
0.98Income from Discontinued Operations


0.13



0.12



0.10



0.11Net Income

$
0.70


$
0.80


$
0.97


$
1.09Basic Weighted Average Shares Outstanding


131,388



131,472



130,606



128,615Diluted Net Income Per Share:Income from Continuing Operations

$
0.57


$
0.67


$
0.85


$
0.96Income from Discontinued Operations


0.12



0.12



0.10



0.11Net Income

$
0.69


$
0.79


$
0.95


$
1.07Diluted Weighted Average Shares Outstanding


133,929



133,659



132,649



130,658     (a)
    
    Includes a license and royalty payment of $20.0 million the
    Company received from a competitor in exchange for the use of
    ReedHycalogs patented technology for the shallow leaching
    of PDC cutters (see Note 5 for further discussion).(b)
    
    Includes a $3.9 million benefit from the settlement of a
    trade credit dispute (see Note 6 for further discussion)  23.
    Subsidiary
    Guarantor Financial Information  1 8
 87




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF OPERATIONS
 Year
    Ended December 31, 2007
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Revenues

$



$
1,364,328


$
929,638


$
(385,332
)


1,908,634Operating Expenses:Cost of sales






823,273



487,390



(335,280
)


975,383Selling, general and administrative and research and engineering


229



235,558



110,289







346,076Other operating items






5,844



602







6,446229



1,064,675



598,281



(335,280
)


1,327,905Operating Income (Loss)


(229
)


299,653



331,357



(50,052
)


580,729Interest Expense


(15,619
)


1,864



(447
)






(14,202
)Other Income (Expense), Net


4,753



30,884



(37,278
)






(1,641
)Equity Income in Unconsolidated Affiliate






123,983







349



124,332Equity in Subsidiaries, Net of Taxes


557,026



28,691







(585,717
)


546,160



185,422



(37,725
)


(585,368
)


108,489Income Before Income Taxes and Minority Interest


545,931



485,075



293,632



(635,420
)


689,218Income Tax Provision


(26,695
)


(121,126
)


(53,267
)






(201,088
)Minority Interests










(9,933
)






(9,933
)Income from Continuing Operations


519,236



363,949



230,432



(635,420
)


478,197Income from Discontinued Operations, Net of Tax






39,353



1,686







41,039Net Income

$
519,236


$
403,302


$
232,118


$
(635,420
)

$
519,236  88




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    BALANCE SHEET
 As of
    December 31, 2007
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)ASSETSCurrent Assets:Cash and cash equivalents

$



$
82,319


$
78,669


$



$
160,988Accounts receivable, net






249,221



166,304







415,525Inventories






310,379



217,649



(56,671
)


471,357Deferred charges






2,977











2,977Current deferred tax assets


101



37,664



3,240







41,005Assets held for sale






182,059



4,499







186,558Other current assets






17,502



24,715







42,217101



882,121



495,076



(56,671
)


1,320,627Property, Plant and Equipment, Net






177,492



151,990







329,482Goodwill






187,041



271,717







458,758Investment In and Advances to Subsidiaries


2,141,713



120,113







(2,261,826
)


Investment In Unconsolidated Affiliate






134,731











134,731Other Assets


5,331



46,036



55,739







107,106$
2,147,145


$
1,547,534


$
974,522


$
(2,318,497
)

$
2,350,704LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term borrowings and current portion of long-term debt

$



$
490


$



$



$
490Accounts payable


146



77,029



50,361







127,536Deferred revenues






19,095



1,798







20,893Income taxes payable


(87,263
)


165,833



(655
)






77,915Intercompany liabilities (assets)


343,317



(546,308
)


202,991



Liabilities held for sale






15,792



685







16,477Other current liabilities


4,189



59,940



34,562







98,691260,389



(208,129
)


289,742







342,002Long-Term Debt


174,585



1,510











176,095Deferred Tax Liabilities


2,370



28,736



41,599







72,705Other Long-Term Liabilities






28,372



852







29,224Commitments and ContingenciesMinority Interests










20,877







20,877Stockholders Equity


1,709,801



1,697,045



621,452



(2,318,497
)


1,709,801$
2,147,145


$
1,547,534


$
974,522


$
(2,318,497
)

$
2,350,704  89




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF CASH FLOWS
 Year
    Ended December 31, 2007
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Cash Flows From Operating Activities:Net cash provided by operating activities

$
236,490


$
169,013


$
99,118


$
(16,330
)

$
488,291Cash Flows From Investing Activities:Acquisition of businesses, net of cash acquired


(3,394
)














(3,394
)Proceeds from sale of short-term investments






523,495











523,495Purchases of short-term investments






(523,545
)










(523,545
)Capital expenditures for property, plant and equipment






(93,728
)


(29,784
)






(123,512
)Proceeds from sale of fixed assets






4,776



5,819







10,595Net cash used in investing activities


(3,394
)


(89,002
)


(23,965
)






(116,361
)Cash Flows From Financing Activities:Repayments on credit facility, net






(34,600
)










(34,600
)Repayments on debt


(33,415
)


(1,266
)










(34,681
)Borrowings (repayments) on debt between subs, net


995



25,645



(26,640
)






Excess tax benefits on stock option exercises


23,597















23,597Repurchase of common stock


(247,890
)














(247,890
)Proceeds from issuance of common stock


23,953















23,953Dividends paid










(16,330
)


16,330



Other, net


(336
)






900







564Net cash used in financing activities


(233,096
)


(10,221
)


(42,070
)


16,330



(269,057
)Effect of Exchange Rate Changes on Cash










771







771Net Increase in Cash






69,790



33,854







103,644Cash at Beginning of Period






12,529



44,815







57,344Cash at End of Period

$



$
82,319


$
78,669


$



$
160,988  90




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF OPERATIONS
 Year
    Ended December 31, 2006
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Income:Revenues

$



$
1,074,947


$
781,922


$
(326,610
)


1,530,259License and royalty income










20,000







20,000



1,074,947



801,922



(326,610
)


1,550,259Operating Expenses:Cost of sales






660,090



407,006



(272,451
)


794,645Selling, general and administrative and research and engineering


220



202,078



86,492







288,790Other operating items






(3,900
)










(3,900
)220



858,268



493,498



(272,451
)


1,079,535Operating Income (Loss)


(220
)


216,679



308,424



(54,159
)


470,724Interest Expense


(15,394
)


(428
)


(199
)






(16,021
)Other Income (Expense), Net


5,219



7,380



(16,402
)






(3,803
)Equity Income in Unconsolidated Affiliates






125,772







(175
)


125,597Equity in Subsidiaries, Net of Taxes


533,385



24,275







(557,660
)


523,210



156,999



(16,601
)


(557,835
)


105,773Income Before Income Taxes and Minority Interest


522,990



373,678



291,823



(611,994
)


576,497Income Tax Provision


(58,406
)


(47,520
)


(56,104
)






(162,030
)Minority Interests










(10,361
)






(10,361
)Income from Continuing Operations


464,584



326,158



225,358



(611,994
)


404,106Income from Discontinued Operations, Net of Tax






58,879



1,599







60,478Net Income

$
464,584


$
385,037


$
226,957


$
(611,994
)

$
464,584  91




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    BALANCE SHEET
 As of
    December 31, 2006
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)ASSETSCurrent Assets:Cash and cash equivalents

$



$
12,529


$
44,815


$



$
57,344Restricted cash


















Accounts receivable, net






240,407



128,288







368,695Inventories






334,242



178,667



(57,962
)


454,947Deferred charges






3,712



252







3,964Current deferred tax assets


131



28,082



19,888







48,101Other current assets






6,450



7,945







14,395131



625,422



379,855



(57,962
)


947,446Property, Plant and Equipment, Net






170,965



134,559







305,524Goodwill






249,976



271,016







520,992Investment In and Advances to Subsidiaries


1,569,776



79,185







(1,648,961
)


Investment In Unconsolidated Affiliate






135,428











135,428Other Assets


6,830



61,376



44,471







112,677$
1,576,737


$
1,322,352


$
829,901


$
(1,706,923
)

$
2,022,067LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term borrowings and current portion of long-term debt

$
7,924


$
716


$



$



$
8,640Accounts payable






94,649



44,293







138,942Deferred revenues






14,259



3,931







18,190Income taxes payable


(48,719
)


59,800



21,958







33,039Intercompany liabilities (assets)


61,345



(302,256
)


240,911







Other current liabilities


4,815



70,031



33,682







108,52825,365



(62,801
)


344,775







307,339Long-Term Debt


200,000



37,212











237,212Deferred Tax Liabilities


(11,511
)


40,916



38,905







68,310Other Long-Term Liabilities






28,151



650







28,801Commitments and ContingenciesMinority Interests










17,522







17,522Stockholders Equity


1,362,883



1,278,874



428,049



(1,706,923
)


1,362,883$
1,576,737


$
1,322,352


$
829,901


$
(1,706,923
)

$
2,022,067  92




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF CASH FLOWS
 Year
    Ended December 31, 2006
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Cash Flows From Operating Activities:Net cash provided by operating activities

$
285,420


$
143,919


$
50,750


$
(85,989
)

$
394,100Cash Flows From Investing Activities:Acquisition of businesses, net of cash acquired


(111,797
)






(201
)






(111,998
)Capital expenditures for property, plant and equipment






(76,103
)


(24,135
)






(100,238
)Other, net






1,462



130







1,592Net cash used in investing activities


(111,797
)


(74,641
)


(24,206
)






(210,644
)Cash Flows From Financing Activities:Borrowings (repayments) on revolver debt, net






34,600



(11,200
)






23,400Repayments on debt, net


(46,272
)


(1,867
)










(48,139
)Borrowings (repayments) on debt between subs, net


2,519



(102,570
)


100,051







Debt issue costs


(1,032
)














(1,032
)Excess tax benefits on stock option exercises


15,556















15,556Repurchase of common stock


(165,122
)














(165,122
)Proceeds from issuance of common stock


20,728















20,728Dividends paid










(85,989
)


85,989



Net cash (used in) provided by financing activities


(173,623
)


(69,837
)


2,862



85,989



(154,609
)Effect of Exchange Rate Changes on Cash










333







333Net (Decrease) Increase in Cash






(559
)


29,739







29,180Cash at Beginning of Period






13,088



15,076







28,164Cash at End of Period

$



$
12,529


$
44,815


$



$
57,344  93




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF OPERATIONS
 Year
    Ended December 31, 2005
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Revenues

$



$
817,866


$
539,972


$
(268,572
)

$
1,089,266Operating Expenses:Cost of sales






551,676



276,523



(218,020
)


610,179Selling, general and administrative and research and engineering






168,950



76,208







245,158



720,626



352,731



(218,020
)


855,337Operating Income






97,240



187,241



(50,552
)


233,929Interest Expense


(27,284
)


(1,175
)


(422
)






(28,881
)Other Income (Expense), Net


2,269



61,540



(56,773
)






7,036Equity Income in Unconsolidated Affiliates






58,259











58,259Refinance Charges


(49,541
)


(7,545
)










(57,086
)Equity in Subsidiaries, Net of Taxes


281,213



17,400







(298,613
)


Income Before Income Taxes and Minority Interest


206,657



225,719



130,046



(349,165
)


213,257Income Tax Provision


(17,653
)


(9,911
)


(36,191
)






(63,755
)Minority Interests










(9,949
)






(9,949
)Income from Continuing Operations


189,004



215,808



83,906



(349,165
)


139,553Income from Discontinued Operations, Net of Tax






48,098



1,353







49,451Net Income

$
189,004


$
263,906


$
85,259


$
(349,165
)

$
189,004  94




---



##### Table of Contents



GRANT
    PRIDECO INC.
  CONDENSED
    STATEMENT OF CASH FLOWS
 Year
    Ended December 31, 2005
  Non-Parent


Guarantors


Guarantors


Eliminations


Total(In thousands)Cash Flows From Operating Activities:Net cash provided by operating activities

$
172,285


$
297


$
37,094


$
(15,000
)

$
194,676Cash Flows From Investing Activities:Acquisition of businesses, net of cash acquired


(28,725
)






(10,507
)






(39,232
)Proceeds from sale of businesses, net of cash disposed






2,521











2,521Investment in unconsolidated affiliates






(5,273
)










(5,273
)Capital expenditures for property, plant and equipment






(18,806
)


(10,695
)






(29,501
)Other, net






1,682



131







1,813Net cash used in investing activities


(28,725
)


(19,876
)


(21,071
)






(69,672
)Cash Flows From Financing Activities:Borrowings on revolver debt, net










11,200







11,200Repayments on debt, net


(174,905
)


(4,410
)










(179,315
)Borrowings (repayments) between subsidiaries, net


7,410



6,356



(13,766
)






Debt refinancing costs


(43,778
)














(43,778
)Debt issue costs


(6,041
)














(6,041
)Repurchases of common stock


(3,385
)














(3,385
)Proceeds from stock option exercises


77,139















77,139Dividends paid










(15,000
)


15,000



Net cash (used in) provided by financing activities


(143,560
)


1,946



(17,566
)


15,000



(144,180
)Effect of Exchange Rate Changes on Cash










(212
)






(212
)Net Decrease in Cash






(17,633
)


(1,755
)






(19,388
)Cash at Beginning of Period






30,721



16,831







47,552Cash at End of Period

$



$
13,088


$
15,076


$



$
28,164   Item 9.
    Changes
    in and Disagreements With Accountants On Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(f) 15d-15(f)
 95




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##### Table of Contents



Design
    and Evaluation of Internal Control Over Financial
    Reporting
  Form 10-K
  Changes
    in Internal Control Over Financial Reporting
   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance of the
    Registrant    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   96




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##### Table of Contents



Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  The following documents are filed as a part of this
    report or incorporated herein by reference:
        Regulation S-X
    Exhibits:
  2
.1

Distribution Agreement, dated as of March 22, 2000, between
    Weatherford and Grant Prideco, Inc. (incorporated by Reference
    to Exhibit 2.1 to Grant Prideco, Inc.s Registration
    Statement on
    Form S-3,
    Reg.
    No. 333-35272).2
.2

Purchase Agreement, dated as of October 25, 2002, among
    Grant Prideco, Inc., as purchaser, and Schlumberger Technology
    Corporation, as seller, (incorporated by reference to
    Exhibit 2.1 to Grant Prideco, Inc.s Current
    Report on
    Form 8-K,
    File
    No. 001-15423,
    filed on October 28, 2002).2
.3

Plan of Merger Agreement, dated as of December 16, 2007, by
    and between National Oilwell Varco, Inc., NOV Sub, Inc. and
    Grant Prideco, Inc. (incorporated by reference to
    Exhibit 2.1 of Grant Prideco, Inc.s Quarterly Report
    on
    Form 8-K
    filed December 17, 2007, File
    No. 1-15423).3
.1

Restated Certificate of Incorporation of Grant Prideco, Inc.
    (incorporated by reference to Exhibit 3.1 to Grant Prideco,
    Inc.s Registration Statement on
    Form S-3,
    Reg.
    No. 333-35272)3
.2

Restated Bylaws of Grant Prideco, Inc. (incorporated by
    reference to Exhibit 3.2 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File
    No. 1-15423,
    as amended).4
.1

Indenture for
    95/8% Senior
    Notes due 2007 (incorporated by Reference to Exhibit 4.7 to
    Grant Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2000, File
    No. 1-15423).4
.2

Form of
    95/8% Senior
    Notes due 2007 (included as part of Exhibit 4.1 above).4
.3*

Grant Prideco, Inc. 2000 Non-Employee Director Stock Option Plan
    (incorporated by reference to Exhibit 10.6 to Grant
    Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2000, File
    No. 1-15423).4
.4*

Grant Prideco, Inc. 2000 Employee Stock Option and Stock Plan
    (incorporated by reference to Exhibit 10.5 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.5*

Grant Prideco, Inc. Executive Deferred Compensation Plan
    (incorporated by reference to Exhibit 10.9 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.6*

Grant Prideco, Inc. Foreign Executive Deferred Compensation Plan
    (incorporated by reference to Exhibit 10.8 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.7*

Grant Prideco, Inc. Deferred Compensation Plan for Non-Employee
    Directors (incorporated by reference to Exhibit 10.10 to
    Grant Prideco, Inc.s Registration Statement on
    Form 10, File
    No. 1-15423,
    as amended).4
.8*

Grant Prideco, Inc. 401(k) Savings Plan (incorporated by
    reference to Exhibit 10.11 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File
    No. 1-15423,
    as amended). 97




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##### Table of Contents



4
.9*

Grant Prideco, Inc. 2001 Stock Option and Restricted Stock Plan
    (incorporated by reference to Exhibit 10.16 to Grant
    Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2001, File
    No. 1-15423).4
.10

Indenture relating to the 61/8% Senior Notes due 2015,
    dated as of July 27, 2005, among Grant Prideco, Inc.,
    certain subsidiary guarantors and Wells Fargo Bank, N.A., as
    Trustee (including form of note) (incorporated by reference to
    Exhibit 4.1 to Grant Prideco, Inc.s Current Report on
    Form 8-K,
    filed on July 29, 2005).4
.11

Supplemental Indenture relating to the 9% Senior Notes due
    2009, dated as of July 27, 2005, among Grant Prideco,
    Inc., certain subsidiary guarantors and Wells Fargo Bank, N.A.,
    as Trustee (incorporated by reference to Exhibit 4.3 to
    Grant Prideco, Inc.s Current Report on
    Form 8-K,
    filed on July 29, 2005).4
.12

Credit Facility, dated as of May 12, 2005, among Grant
    Prideco, Inc., certain subsidiaries of Grant Prideco, Inc. party
    thereto, each lender from time to time party thereto, Bank of
    America, N.A., as Syndication Agent, Wells Fargo Bank, National
    Association, as Administrative Agent, US Swing Line Lender and
    an L/C Issuer, HSBC Bank Plc, as UK Swing Line Lender and an L/C
    Issuer, and Deutsche Bank Securities Inc., as Documentation
    Agent (incorporated by reference to Exhibit 99.2 to Grant
    Prideco, Inc.s Current Report on
    Form 8-K,
    filed on May 23, 2005).4
.13

Form of Subsidiary Guarantee by certain of Grant Prideco,
    Inc.s subsidiaries in favor of Deutsche Bank
    Trust Company Americas, as agent (incorporated by reference
    to Exhibit 4.10 to Grant Prideco, Inc.s Current
    Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on January 3, 2003).4
.14*

Employee Stock Purchase Plan (incorporate by reference to
    Exhibit 4.21 of Grant Pridecos Annual Report on
    Form 10K for the year ended December 31, 2003, File
    No. 1-15423).4
.15*

Grant Prideco 2006 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 99.1 to Grant Pridecos Current
    Report on
    Form 10-K,
    File
    No. 1-5423,
    filed on May 11, 2006).10
.1

See Exhibits 2.1 and 4.1 through 4.24 for certain items
    material contracts.10
.2*

Employment Agreement with Michael McShane dated June 26,
    2002 (incorporated by reference to Exhibit 10.1 to Grant
    Prideco, Inc.s Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002, File
    No. 1-15423).10
.3*

Employment Agreement with Matthew Fitzgerald dated
    January 12, 2004 (incorporated by reference from
    Exhibit 10.3 to the Grant Prideco Annual Report on
    Form 10-K
    for the year ended December 31, 2004).10
.4*

Employment Agreement with Philip Choyce dated April 14,
    2000 (incorporated by reference to Exhibit 10.26 to Grant
    Prideco, Inc.s Registration Statement on
    Form S-4,
    Reg.
    No. 333-102635).10
.5*

Form of Change of Control Agreement with Philip Choyce
    (incorporated by reference to Exhibit 10.6 to Grant
    Prideco, Inc.s Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2000,
    File No. 1-15423).10
.6*

Form of Change of Control Agreement with David Black, Jim
    Breihan, Greg Boane, and John Deane (incorporated by reference
    to Exhibit 10.12 to Grant Prideco, Inc.s Annual
    Report on
    10-K for the
    year ended December 31, 2001, File
    No. 1-15423)10
.7

Tax Allocation Agreement dated April 14, 2000 between Grant
    Prideco, Inc. and Weatherford (incorporated by reference to
    Exhibit 10.13 to Weatherford International, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2000, File
    No. 1-13086).10
.8

Investment Agreement, dated as of April 29, 1999, by and
    between Grant Prideco, Inc. and VAT Schienen GmbH & Co
    KG (incorporated by reference to Exhibit 10.12 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).10
.9

Operating Agreement, dated as of July 23, 1999, by and
    Grant Prideco, Inc. and VAT Schienen GmbH & CoKG
    (incorporated by reference to Exhibit 10.13 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File No. 1 -15423, as amended).10
.10

Master Technology License Agreement, dated as of June 19,
    1998, by and between Grant Prideco, Inc. and DST Distributors of
    Steel Tubes Limited (incorporated by reference to
    Exhibit 10.17 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File
    No. 1-15423,
    as amended).10
.11*

Nonqualified Deferred Compensation Plan (incorporated by
    reference to Exhibit 10.17 of Grant Pridecos Annual
    Report on Form 10K for the year ended December 31,
    2003, File
    No. 1-15423). 98




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##### Table of Contents



10
.12

Supply Agreement, dated as of September 13, 2007, by and
    between voestalpine Tubulars GmbH & Co KG and Grant
    Prideco, Inc. (incorporated by reference to Exhibit 10.1 to
    Grant Prideco, Inc.s Current Report on
    Form 10-Q
    for the quarter ended September 30, 2007, File
    No. 1-15423).10
.13

Purchase and Sale Agreement, dated as of October 29, 2007,
    by and among Vallourec S.A. and Vallourec & Mannesmann
    Holdings, Inc. and Grant Prideco, Inc. (incorporated by
    reference to Exhibit 10.2 to Grant Prideco, Inc.s
    Current Report on
    Form 10-Q
    for the quarter ended September 30, 2007, File
    No. 1-15423).10
.14*

Change of Control Agreement, dated April 16, 2007, with
    Quintin Kneen (incorporated by reference to Exhibit 99.1 to
    Grant Prideco, Inc.s Current Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on April 20, 2007).10
.15*

Grant Prideco, Inc. Supplemental Executive Retirement Plan
    (incorporated by reference to Exhibit 99.1 to Grant
    Prideco, Inc.s Current Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on April 3, 2007).21
.1

Subsidiaries of Registrant (incorporated by reference to
    Exhibit 21.1 of Grant Pridecos Annual Report on
    Form 10-K for the year ended December 31, 2003, File
    No. 1-15423)..23
.1

Consent of Deloitte & Touche LLP.31
.1

Certification of Michael McShane.31
.2

Certification of Matthew D. Fitzgerald.32
.1

Section 906 Certification.     *
    
    Designates a management or compensatory plan or arrangement. 99




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##### Table of Contents



SCHEDULE II
 VALUATION
    AND QUALIFYING ACCOUNTS
    For the Years Ended December 31, 2007, 2006 and
    2005  AdditionsBalance at


Charged to


Charged to





BalanceBeginning


Cost and


Other





at EndDescriptions

of Year


Expenses


Accounts(a)


Deductions(b)


of Year(In thousands)2007:Allowance for Doubtful Accounts

$
3,523


$
2,349


$
90


$
3,116
(c)

$
2,846Inventory Reserves


20,995



5,749







3,243
(c)


23,5012006:Allowance for Doubtful Accounts

$
5,856


$
1,805


$
135


$
4,273


$
3,523Inventory Reserves


17,600



8,514







5,119



20,9952005:Allowance for Doubtful Accounts

$
8,024


$
1,682


$
210


$
4,060


$
5,856Inventory Reserves


13,013



9,572



6



4,991



17,600     (a)
    
    Represents currency translation adjustments and reclasses.(b)
    
    Primarily represents the elimination of accounts receivable and
    inventory deemed uncollectible or worthless and, for accounts
    receivable, represents reversals of prior accruals as
    receivables are collected or deemed collectible.(c)
    
    Includes $0.1 million and $1.7 million in the
    Allowance for Doubtful Accounts and Inventory Reserves,
    respectively, as amounts related to Discontinued Operations. See
    Note 2 for further discussion. 100




---



##### Table of Contents



SIGNATURES      MICHAEL
    MCSHANE
   Chief Executive Officer, President,
 and Chairman of the Board
      Signature

Capacity in Which Signed

Date/s/  MICHAEL
    MCSHANEMichael
    McShane

Chief Executive Officer, President and Chairman of the Board
    (Principal Executive Officer)

February 28, 2008./s/  MATTHEW
    D. FITZGERALDMatthew
    D. Fitzgerald

Sr. Vice President, Chief Financial Officer and Treasurer
    (Principal Financial Officer)

February 28, 2008./s/  GREG
    L. BOANEGreg
    L. Boane

Vice President and Controller
    (Principal Accounting Officer)

February 28, 2008./s/  DAVID
    J. BUTTERSDavid
    J. Butters

Director

February 28, 2008./s/  DENNIS
    R. HENDRIXDennis
    R. Hendrix

Director

February 28, 2008./s/  HAROLD
    E. LAYMANHarold
    E. Layman

Director

February 28, 2008./s/  GORDON
    T. HALLGordon
    T. Hall

Director

February 28, 2008./s/  ROBERT
    K. MOSES, JR.Robert
    K. Moses, Jr.

Director

February 28, 2008./s/  JOSEPH
    E. REIDJoseph
    E. Reid

Director

February 28, 2008./s/  DAVID
    A. TRICEDavid
    A. Trice

Director

February 28, 2008  101




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##### Table of Contents



Exhibit Index
  2
.1

Distribution Agreement, dated as of March 22, 2000, between
    Weatherford and Grant Prideco, Inc. (incorporated by Reference
    to Exhibit 2.1 to Grant Prideco, Inc.s Registration
    Statement on
    Form S-3,
    Reg.
    No. 333-35272).2
.2

Purchase Agreement, dated as of October 25, 2002, among
    Grant Prideco, Inc., as purchaser, and Schlumberger Technology
    Corporation, as seller, (incorporated by reference to
    Exhibit 2.1 to Grant Prideco, Inc.s Current
    Report on
    Form 8-K,
    File
    No. 001-15423,
    filed on October 28, 2002).2
.3

Plan of Merger Agreement, dated as of December 16, 2007, by
    and between National Oilwell Varco, Inc., NOV Sub, Inc. and
    Grant Prideco, Inc. (incorporated by reference to
    Exhibit 2.1 of Grant Prideco, Inc.s Quarterly Report
    on
    Form 8-K
    filed December 17, 2007, File
    No. 1-15423).3
.1

Restated Certificate of Incorporation of Grant Prideco, Inc.
    (incorporated by reference to Exhibit 3.1 to Grant Prideco,
    Inc.s Registration Statement on
    Form S-3,
    Reg.
    No. 333-35272)3
.2

Restated Bylaws of Grant Prideco, Inc. (incorporated by
    reference to Exhibit 3.2 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File
    No. 1-15423,
    as amended).4
.1

Indenture for
    95/8% Senior
    Notes due 2007 (incorporated by Reference to Exhibit 4.7 to
    Grant Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2000, File
    No. 1-15423).4
.2

Form of
    95/8% Senior
    Notes due 2007 (included as part of Exhibit 4.1 above).4
.3*

Grant Prideco, Inc. 2000 Non-Employee Director Stock Option Plan
    (incorporated by reference to Exhibit 10.6 to Grant
    Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2000, File
    No. 1-15423).4
.4*

Grant Prideco, Inc. 2000 Employee Stock Option and Stock Plan
    (incorporated by reference to Exhibit 10.5 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.5*

Grant Prideco, Inc. Executive Deferred Compensation Plan
    (incorporated by reference to Exhibit 10.9 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.6*

Grant Prideco, Inc. Foreign Executive Deferred Compensation Plan
    (incorporated by reference to Exhibit 10.8 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).4
.7*

Grant Prideco, Inc. Deferred Compensation Plan for Non-Employee
    Directors (incorporated by reference to Exhibit 10.10 to
    Grant Prideco, Inc.s Registration Statement on
    Form 10, File
    No. 1-15423,
    as amended).4
.8*

Grant Prideco, Inc. 401(k) Savings Plan (incorporated by
    reference to Exhibit 10.11 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File
    No. 1-15423,
    as amended).4
.9*

Grant Prideco, Inc. 2001 Stock Option and Restricted Stock Plan
    (incorporated by reference to Exhibit 10.16 to Grant
    Prideco, Inc.s Annual Report on
    Form 10-K
    for the year ended December 31, 2001, File
    No. 1-15423).4
.10

Indenture relating to the 61/8% Senior Notes due 2015,
    dated as of July 27, 2005, among Grant Prideco, Inc.,
    certain subsidiary guarantors and Wells Fargo Bank, N.A., as
    Trustee (including form of note) (incorporated by reference to
    Exhibit 4.1 to Grant Prideco, Inc.s Current Report on
    Form 8-K,
    filed on July 29, 2005).4
.11

Supplemental Indenture relating to the 9% Senior Notes due
    2009, dated as of July 27, 2005, among Grant Prideco,
    Inc., certain subsidiary guarantors and Wells Fargo Bank, N.A.,
    as Trustee (incorporated by reference to Exhibit 4.3 to
    Grant Prideco, Inc.s Current Report on
    Form 8-K,
    filed on July 29, 2005).4
.12

Credit Facility, dated as of May 12, 2005, among Grant
    Prideco, Inc., certain subsidiaries of Grant Prideco, Inc. party
    thereto, each lender from time to time party thereto, Bank of
    America, N.A., as Syndication Agent, Wells Fargo Bank,
    National Association, as Administrative Agent, US Swing Line
    Lender and an L/C Issuer, HSBC Bank Plc, as UK Swing Line Lender
    and an L/C Issuer, and Deutsche Bank Securities Inc., as
    Documentation Agent (incorporated by reference to
    Exhibit 99.2 to Grant Prideco, Inc.s Current Report
    on
    Form 8-K,
    filed on May 23, 2005).4
.13

Form of Subsidiary Guarantee by certain of Grant Prideco,
    Inc.s subsidiaries in favor of Deutsche Bank
    Trust Company Americas, as agent (incorporated by reference
    to Exhibit 4.10 to Grant Prideco, Inc.s Current
    Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on January 3, 2003).4
.14*

Employee Stock Purchase Plan (incorporate by reference to
    Exhibit 4.21 of Grant Pridecos Annual Report on
    Form 10K for the year ended December 31, 2003, File
    No. 1-15423). 102




---



##### Table of Contents



4
.15*

Grant Prideco 2006 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 99.1 to Grant Pridecos
    Current Report on
    Form 10-K,
    File
    No. 1-5423,
    filed on May 11, 2006).10
.1

See Exhibits 2.1 and 4.1 through 4.24 for certain items
    material contracts.10
.2*

Employment Agreement with Michael McShane dated June 26,
    2002 (incorporated by reference to Exhibit 10.1 to Grant
    Prideco, Inc.s Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002, File
    No. 1-15423).10
.3*

Employment Agreement with Matthew Fitzgerald dated
    January 12, 2004 (incorporated by reference from
    Exhibit 10.3 to the Grant Prideco Annual Report on
    Form 10-K
    for the year ended December 31, 2004).10
.4*

Employment Agreement with Philip Choyce dated April 14,
    2000 (incorporated by reference to Exhibit 10.26 to Grant
    Prideco, Inc.s Registration Statement on
    Form S-4,
    Reg.
    No. 333-102635).10
.5*

Form of Change of Control Agreement with Philip Choyce
    (incorporated by reference to Exhibit 10.6 to Grant
    Prideco, Inc.s Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2000,
    File No. 1-15423).10
.6*

Form of Change of Control Agreement with David Black, Jim
    Breihan, Greg Boane, and John Deane (incorporated by reference
    to Exhibit 10.12 to Grant Prideco, Inc.s Annual
    Report on
    10-K for the
    year ended December 31, 2001, File
    No. 1-15423)10
.7

Tax Allocation Agreement dated April 14, 2000 between Grant
    Prideco, Inc. and Weatherford (incorporated by reference to
    Exhibit 10.13 to Weatherford International, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2000, File
    No. 1-13086).10
.8

Investment Agreement, dated as of April 29, 1999, by and
    between Grant Prideco, Inc. and VAT Schienen GmbH & Co
    KG (incorporated by reference to Exhibit 10.12 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File
    No. 1-15423,
    as amended).10
.9

Operating Agreement, dated as of July 23, 1999, by and
    Grant Prideco, Inc. and VAT Schienen GmbH & CoKG
    (incorporated by reference to Exhibit 10.13 to Grant
    Prideco, Inc.s Registration Statement on Form 10,
    File No. 1 -15423, as amended).10
.10

Master Technology License Agreement, dated as of June 19,
    1998, by and between Grant Prideco, Inc. and DST Distributors of
    Steel Tubes Limited (incorporated by reference to
    Exhibit 10.17 to Grant Prideco, Inc.s Registration
    Statement on Form 10, File
    No. 1-15423,
    as amended).10
.11*

Nonqualified Deferred Compensation Plan (incorporated by
    reference to Exhibit 10.17 of Grant Pridecos Annual
    Report on Form 10K for the year ended December 31,
    2003, File
    No. 1-15423).10
.12

Supply Agreement, dated as of September 13, 2007, by and
    between voestalpine Tubulars GmbH & Co KG and Grant
    Prideco, Inc. (incorporated by reference to Exhibit 10.1 to
    Grant Prideco, Inc.s Current Report on
    Form 10-Q
    for the quarter ended September 30, 2007, File
    No. 1-15423).10
.13

Purchase and Sale Agreement, dated as of October 29, 2007,
    by and among Vallourec S.A. and
    Vallourec & Mannesmann Holdings, Inc. and Grant
    Prideco, Inc. (incorporated by reference to Exhibit 10.2 to
    Grant Prideco, Inc.s Current Report on
    Form 10-Q
    for the quarter ended September 30, 2007, File
    No. 1-15423).10
.14*

Change of Control Agreement, dated April 16, 2007, with
    Quintin Kneen (incorporated by reference to Exhibit 99.1 to
    Grant Prideco, Inc.s Current Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on April 20, 2007).10
.15*

Grant Prideco, Inc. Supplemental Executive Retirement Plan
    (incorporated by reference to Exhibit 99.1 to Grant
    Prideco, Inc.s Current Report on
    Form 8-K,
    File
    No. 1-15423,
    filed on April 3, 2007).21
.1

Subsidiaries of Registrant (incorporated by reference to
    Exhibit 21.1 of Grant Pridecos Annual Report on
    Form 10-K for the year ended December 31, 2003, File
    No. 1-15423).23
.1

Consent of Deloitte & Touche LLP.31
.1

Certification of Michael McShane.31
.2

Certification of Matthew D. Fitzgerald.32
.1

Section 906 Certification.     *
    
    Designates a management or compensatory plan or arrangement. 103