##### 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 1934    
| 
|  |  | For the Fiscal Year Ended December 31, 2005                                                 
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the transition period
    from           to                                             

Commission file number: 001-15423


Grant Prideco, Inc.


(Exact name of registrant as specified in its charter)


|                                                                                                       |  |                                                   
|------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------
|Delaware(State or Other Jurisdiction
    of Incorporation or Organization)                             |  | 76-0312499(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 Registered
|                                        |  |                                          
|Common 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


S-K 10-K 10-K. o


12b-2


þ o o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS


|                                       |  |                                                                                                                      |  |      |    | 
|-------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                       |  |                                                                                                                      |  | Page |   
|                                       |  |                                                                                                                      |  |      |   
|PART I                                
|Item 1.                                |  | Business                                                                                                             |  |      | 2  | 
|                                       |  | General                                                                                                              |  |      | 2  | 
|                                       |  | Drilling Products and Services Segment                                                                               |  |      | 2  | 
|                                       |  | Drill Bits Segment                                                                                                   |  |      | 4  | 
|                                       |  | Tubular Technology and Services Segment                                                                              |  |      | 6  | 
|                                       |  | Corporate and Other Segment                                                                                          |  |      | 7  | 
|                                       |  | Other Business Data                                                                                                  |  |      | 8  | 
|Item 1A.                               |  | Risk Factors                                                                                                         |  |      | 10 | 
|Item 1B.                               |  | Unresolved Staff Comments                                                                                            |  |      | 14 | 
|Item 2.                                |  | Properties                                                                                                           |  |      | 15 | 
|Item 3.                                |  | Legal Proceedings                                                                                                    |  |      | 16 | 
|Item 4.                                |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 16 | 
|                                      
|PART II                               
|Item 5.                                |  | Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 16 | 
|Item 6.                                |  | Selected Financial Data                                                                                              |  |      | 16 | 
|Item 7.                                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 18 | 
|                                       |  | General                                                                                                              |  |      | 18 | 
|                                       |  | Market Trends                                                                                                        |  |      | 19 | 
|                                       |  | Future Market Trends and Expectations                                                                                |  |      | 20 | 
|                                       |  | Results of Operations                                                                                                |  |      | 20 | 
|                                       |  | Liquidity and Capital Resources                                                                                      |  |      | 24 | 
|                                       |  | Related-Party Transactions                                                                                           |  |      | 28 | 
|                                       |  | Off-Balance Sheet Financing                                                                                          |  |      | 29 | 
|                                       |  | Recent Accounting Pronouncements                                                                                     |  |      | 29 | 
|                                       |  | Critical Accounting Policies and
    Estimates                                                                       |  |      | 30 | 
|                                       |  | Forward-Looking Statements and Exposures                                                                             |  |      |    | 
|Item 7A.                               |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 32 | 
|Item 8.                                |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 34 | 
|Item 9.                                |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 86 | 
|Item 9A.                               |  | Controls and Procedures                                                                                              |  |      | 86 | 
|                                      
|PART III                              
|Item 10.                               |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 88 | 
|Item 11.                               |  | Executive Compensation                                                                                               |  |      | 88 | 
|Item 12.                               |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 88 | 
|Item 13.                               |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 88 | 
|Item 14.                               |  | Principal Accounting Fees and Services                                                                               |  |      | 88 | 
|                                      
|PART IV                               
|Item 15.                               |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 88 | 
|                                       |  | Valuation and Qualifying Accounts                                                                                    |  |      | 92 | 
|                                       |  | Signatures                                                                                                           |  |      | 93 | 
|Consent of Deloitte & Touche LLP      
|Consent of Ernst & Young LLP          
|Certification of Michael McShane      
|Certification of Matthew D. Fitzgerald
|Section 906 Certification             



1



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##### Table of Contents



FORM 10-K





PART I







|        |         
|------- | --------
|Item 1. | Business




General




® tm ®


10-K.





Drilling Products and Services Segment






®


2



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®








| |                    
| | -------------------
| | Drill Pipe Products





57/8-inch 51/2-inch 65/8-inch




| |              
| | -------------
| | Drill Collars





| |                                                         
| | --------------------------------------------------------
| | Heavyweight Drill Pipe and Other Drill Stem
    Products







| |           
| | ----------
| | Operations



3



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U.S.-based





Drill Bits Segment












®




4



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®






| |                  
| | -----------------
| | Fixed-Cutter Bits





® tm ®




| |                 
| | ----------------
| | Roller-Cone Bits

tm.


tm tm tm.




| |           
| | ----------
| | Operations





5



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Tubular Technology and Services Segment






year-to






| |                                                         
| | --------------------------------------------------------
| | Atlas
    Bradford®
    Premium Connections and Services

tm








| |                             
| | ----------------------------
| | Tube-AlloyTM
    Accessories



6



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| |                        
| | -----------------------
| | TCA®
    Premium Casing



tm




| |           
| | ----------
| | XL Systems

tm


95/8-inches 133/8-inches






| |           
| | ----------
| | Operations






Corporate and Other Segment




7



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| |             
| | ------------
| | IntelliServ®






Other Business Data




| |                         
| | ------------------------
| | Research and Engineering





| |        
| | -------
| | Patents





| |        
| | -------
| | Backlog





| |          
| | ---------
| | Insurance





8



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| |                                             
| | --------------------------------------------
| | Federal Regulation and Environmental Matters







i.e.




| |          
| | ---------
| | Employees





| |                      
| | ---------------------
| | Available Information

1-800-SEC-0330. (http://www.sec.gov)


9



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(http://www.grantprideco.com) 10-K, 10-Q, 8-K,







|         |             
|-------- | ------------
|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.



10



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| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Increases in the prices of our raw materials could affect
    our results of operations.









| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | 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.

ramp-up




| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | 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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|        |           
|------- | ----------
|Item 2. | Properties



|                                    |  |        |  |          |         |             |  |                                                                  
|----------------------------------- |  | ------ |  | -------- | ------- | ----------- |  | -----------------------------------------------------------------
|                                    |  |        |  | Facility |         |            
|                                    |  |        |  | Size     |         |            
|Location                            |  | Tenure |  | (Sq.Ft.) |         | Utilization
|                                    |  |        |  |          |         |            
|Drilling Products and Services      |  |        |  |          |         |             |  |                                                                  
|Navasota, Texas                     |  | Owned  |  |          | 347,000 |             |  | Manufacture of drill stem products                               
|Veracruz, Mexico                    |  | Leased |  |          | 303,400 |             |  | Manufacture of tool joints and processing of drill pipe          
|Baimi Town, Jiangyan, Jiangsu China |  | Leased |  |          | 49,428  |             |  | Manufacture of drill pipe                                        
|Tianjin, China                      |  | Owned  |  |          | 100,912 |             |  | Manufacture of unfinished upset to grade drill pipe              
|Turin, Italy                        |  | Owned  |  |          | 60,400  |             |  | Manufacture of tool joints                                       
|Jurong, Singapore                   |  | Leased |  |          | 33,600  |             |  | Manufacture of drill collars, accessories and threading services 
|Batam Island, Indonesia             |  | Owned  |  |          | 25,984  |             |  | Manufacture of drill pipe                                        
|                                   
|Drill Bits                          |  |        |  |          |         |             |  |                                                                  
|Houston, Texas                      |  | Owned  |  |          | 403,000 |             |  | Manufacture of roller-cone bits                                  
|                                    |  | Owned  |  |          | 50,256  |             |  | Manufacture of fixed-cutter bits                                 
|                                    |  | Leased |  |          | 58,920  |             |  | Manufacture of bi-center bits                                    
|Stonehouse, U.K.                    |  | Owned  |  |          | 71,000  |             |  | Manufacture of fixed-cutter bits                                 
|Jurong, Singapore                   |  | Leased |  |          | 169,663 |             |  | Manufacture of roller-cone bits                                  
|Provo, Utah                         |  | Leased |  |          | 39,038  |             |  | Manufacture of PDC cutters                                       
|                                   
|Tubular Technology and Services     |  |        |  |          |         |             |  |                                                                  
|Muskogee, Oklahoma                  |  | Leased |  |          | 195,900 |             |  | Manufacture of TCA premium casing and premium threading          
|Houston, Texas                      |  | Leased |  |          | 249,893 |             |  | Manufacture of Atlas Bradford connectors                         
|                                    |  | Owned  |  |          | 54,500  |             |  | Premium threading services and manufacture of tubular accessories
|Houma, Louisiana                    |  | Owned  |  |          | 101,150 |             |  | Manufacture and threading of downhole accessories                
|Broussard, Louisiana                |  | Owned  |  |          | 55,920  |             |  | Premium threading of downhole and specialty equipment            
|Casper, Wyoming                     |  | Owned  |  |          | 28,181  |             |  | Premium threading of casing and tubing                           
|Beaumont, Texas                     |  | Owned  |  |          | 17,838  |             |  | Premium threading services and manufacture of conductors         
|Vlissingen, The Netherlands         |  | Leased |  |          | 65,800  |             |  | Premium threading services and manufacture of conductors         
|Batam Island, Indonesia             |  | Owned  |  |          | 14,400  |             |  | Premium threading services and manufacture of conductors         
|Corporate and Other                 |  |        |  |          |         |             |  |                                                                  
|Provo, Utah                         |  | Leased |  |          | 27,467  |             |  | IntelliServ drill pipe                                           
|Houston, Texas                      |  | Leased |  |          | 39,350  |             |  | Corporate headquarters                                           
|The Woodlands, Texas                |  | Leased |  |          | 61,831  |             |  | Sales and administrative offices                                 

15



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|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 |   | Low  
|     |                |      |   |      
|2005 |                |      |   |       |  |  |   |      
|     | First quarter  |      | $ | 25.50 |  |  | $ | 17.83 | 
|     | Second quarter |      |   | 27.47 |  |  |   | 21.41 | 
|     | Third quarter  |      |   | 41.49 |  |  |   | 26.58 | 
|     | Fourth quarter |      |   | 47.82 |  |  |   | 32.38 | 
|2004 |                |      |   |       |  |  |   |      
|     | First quarter  |      | $ | 15.99 |  |  | $ | 12.87 | 
|     | Second quarter |      |   | 18.56 |  |  |   | 13.90 | 
|     | Third quarter  |      |   | 20.91 |  |  |   | 16.82 | 
|     | Fourth quarter |      |   | 22.31 |  |  |   | 18.80 | 

1 8









|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



16



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10-K.


|                                       |                                                      |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |         |      | 
|-------------------------------------- | ---------------------------------------------------- | ------------------------------------- | - | --------- | ---- | ------- | - | --------- | ---- | ---- | - | --------- | ---- |  | - | --------- | ------ |  | - | ------- | ---- | 
|                                       |                                                      | Year Ended December 31,              
|                                       |                                                      |                                      
|                                       |                                                      | 2005                                  |   | 2004(a)   |      | 2003(a) |   | 2002      |      | 2001
|                                       |                                                      |                                       |   |           |      |         |   |           |      |     
|                                       |                                                      | (In thousands, except per share data)
|Operating Data:                        |                                                      |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |        
|                                       | Revenues                                             |                                       | $ | 1,349,997 |      |         | $ | 945,643   |      |      | $ | 803,818   |      |  | $ | 609,390   |        |  | $ | 688,056 |     
|                                       | Operating Income                                     |                                       |   | 310,953   |      |         |   | 141,672   |      |      |   | 45,297    |      |  |   | 46,995    |        |  |   | 59,976  |     
|                                       | Income from Continuing Operations                    |                                       |   | 189,004   | (b)  |         |   | 64,793    |      |      |   | 4,657     |      |  |   | 13,690    | (c)    |  |   | 24,809  | (e) 
|                                       | Income Before Cumulative Effect of Accounting Change |                                       |   | 189,004   | (b)  |         |   | 55,266    |      |      |   | 5,190     |      |  |   | 13,046    | (c)(d) |  |   | 28,090  | (e) 
|                                       | Net Income                                           |                                       |   | 189,004   | (b)  |         |   | 55,266    |      |      |   | 5,190     |      |  |   | 6,634     | (c)    |  |   | 28,090  | (e) 
|Income Per Share:                      |                                                      |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |        
|                                       | Income from Continuing Operations:                   |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |         |     
|                                       |                                                      | Basic                                 |   |           | 1.49 |         |   |           | 0.53 |      |   |           | 0.04 |  |   |           | 0.12   |  |   |         | 0.23 | 
|                                       |                                                      | Diluted                               |   |           | 1.45 |         |   |           | 0.51 |      |   |           | 0.04 |  |   |           | 0.12   |  |   |         | 0.22 | 
|                                       | Net Income:                                          |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |         |     
|                                       |                                                      | Basic                                 |   |           | 1.49 |         |   |           | 0.45 |      |   |           | 0.04 |  |   |           | 0.06   |  |   |         | 0.26 | 
|                                       |                                                      | Diluted                               |   |           | 1.45 |         |   |           | 0.44 |      |   |           | 0.04 |  |   |           | 0.06   |  |   |         | 0.25 | 
|Balance Sheet Data (At End of Period): |                                                      |                                       |   |           |      |         |   |           |      |      |   |           |      |  |   |           |        |  |   |        
|                                       | Total Assets                                         |                                       | $ | 1,540,284 |      |         | $ | 1,344,466 |      |      | $ | 1,262,061 |      |  | $ | 1,315,349 |        |  | $ | 915,598 |     
|                                       | Long-Term Debt                                       |                                       |   | 217,484   |      |         |   | 377,773   |      |      |   | 426,853   |      |  |   | 478,846   |        |  |   | 205,024 |     
|                                       | Stockholders Equity                                 |                                       |   | 996,155   |      |         |   | 705,541   |      |      |   | 606,114   |      |  |   | 588,872   |        |  |   | 468,967 |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | See discussion of other charges related to 2004 and 2003 in
    Note 3 in the accompanying consolidated financial
    statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(b) | Includes total refinancing charges of $57.1 million, 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. The
    $35.4 million is comprised of $25.4 million for the
    make-whole premium on the
    95/8% Senior
    Notes, $4.8 million related to the write-off of debt issue
    costs associated with the previous credit facility and the
    95/8% Senior
    Notes, including the
    95/8% Senior
    Notes discount, and $5.2 million related to the
    settlement of Treasury rate locks. The $21.7 million,
    related to the repurchase of the 9% Senior Notes, is
    comprised of $18.1 million for the tender offer
    consideration and consent payment, $3.2 million related to
    the write-off of debt issue costs and $0.4 million in other
    related fees.
|   
|(c) | We incurred $7.0 million of other charges during the year
    ended December 31, 2002. This includes a charge of
    $2.6 million related to fixed asset write-downs and a
    charge of $4.4 million for executive severance costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(d) | Includes a cumulative effect of accounting change related to
    Financial Accounting Standards Board (SFAS) No. 142,
    Goodwill and Other Intangible Assets of
    $6.4 million, net of tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(e) | We incurred $44.8 million of other charges during the year
    ended December 31, 2001. This includes a charge of
    $11.1 million related to inventory write-offs and
    capitalized manufacturing variance write-offs which were
    classified as cost of sales and $33.7 million related to
    the write-off of assets related to our manufacturing arrangement
    with OCTL in India of $17.7 million, fixed asset
    impairments of $1.5 million and severance and related
    expenses of $14.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

17



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

10-K.







General




Refinancing Charges


5 8 5 8 5 8 5 8


Acquisitions


5-year




18



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Market Trends






|                            |         |                         |   |       |      |  |   |       |  |  |   |       | 
|--------------------------- | ------- | ----------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                            |         | Year Ended December 31, |  
|                            |         |                         |  
|                            |         | 2005                    |   |       | 2004 |  |   | 2003  | 
|                            |         |                         |   |       |      |  |   |       | 
|WTI Oil(a)                  |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         | $ | 56.59 |      |  | $ | 41.51 |  |  | $ | 31.06 | 
|                            | Ending  |                         |   | 61.04 |      |  |   | 43.45 |  |  |   | 32.52 | 
|Henry Hub Gas(b)            |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         | $ | 8.89  |      |  | $ | 5.90  |  |  | $ | 5.49  | 
|                            | Ending  |                         |   | 9.52  |      |  |   | 6.01  |  |  |   | 5.80  | 
|North American Rig Count(c) |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         |   | 1,838 |      |  |   | 1,559 |  |  |   | 1,404 | 
|                            | Ending  |                         |   | 2,045 |      |  |   | 1,686 |  |  |   | 1,531 | 
|International Rig Count(c)  |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         |   | 908   |      |  |   | 836   |  |  |   | 771   | 
|                            | Ending  |                         |   | 948   |      |  |   | 869   |  |  |   | 803   | 






|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(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).

19



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##### Table of Contents






Future Market Trends and Expectations







Results of Operations




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2005 Compared to the Year
    Ended December 31, 2004



|                         |                                 |                         |   |         |           |  |   |          |         |  |  |      |     |  
|------------------------ | ------------------------------- | ----------------------- | - | ------- | --------- |  | - | -------- | ------- |  |  | ---- | --- | -
|                         |                                 | Year Ended December 31, |  
|                         |                                 |                         |  
|                         |                                 | 2005                    |   |         | 2004      |  |   | % Change |        
|                         |                                 |                         |   |         |           |  |   |          |        
|                         |                                 | (In thousands)          |  
|Revenues:                |                                 |                         |   |         |           |  |   |          |         |  |  |     
|                         | Drilling Products and Services  |                         | $ | 598,900 |           |  | $ | 390,617  |         |  |  | 53   | %  
|                         | Drill Bits                      |                         |   | 398,227 |           |  |   | 326,918  |         |  |  | 22   | %  
|                         | Tubular Technology and Services |                         |   | 352,870 |           |  |   | 226,233  |         |  |  | 56   | %  
|                         | Corporate and Other             |                         |   |        |           |  |   | 1,875    |         |  |  | (100 | )% 
|                         |                                 |                         |   |         |           |  |   |          |        
|                         |                                 | Total Revenues          |   |         | 1,349,997 |  |   |          | 945,643 |  |  |      | 43  | %
|Operating Income (Loss): |                                 |                         |   |         |           |  |   |          |         |  |  |     
|                         | Drilling Products and Services  |                         | $ | 176,181 |           |  | $ | 90,637   | (a)     |  |  | 94   | %  
|                         | Drill Bits                      |                         |   | 98,616  |           |  |   | 70,542   |         |  |  | 40   | %  
|                         | Tubular Technology and Services |                         |   | 88,286  |           |  |   | 20,884   | (b)     |  |  | 323  | %  
|                         | Corporate and Other             |                         |   | (52,130 | )         |  |   | (40,391  | )(c)    |  |  | 29   | %  
|                         |                                 |                         |   |         |           |  |   |          |        
|                         |                                 | Total Operating Income  |   |         | 310,953   |  |   |          | 141,672 |  |  |      | 119 | %






|    |  |                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes other charges of $2.0 million in 2004 related to
    our manufacturing rationalization program, which includes lease
    termination, severance and other exit costs in connection with
    the downsizing of our Drilling Products Canadian operations.
|   
|(b) |  | Includes other charges of $3.2 million for severance costs
    related to the Tubular Technology and Services organizational
    restructuring.                                                                                                                  
|   
|(c) |  | Includes other charges of $3.8 million for the write-off of
    leasehold improvements and furniture and fixtures related to the
    relocation of our corporate offices in September 2004.                                                                      



20



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Segment Results




| |                               
| | ------------------------------
| | Drilling Products and Services





| |           
| | ----------
| | Drill Bits





| |                                
| | -------------------------------
| | Tubular Technology and Services





| |                    
| | -------------------
| | Corporate and Other

start-up


21



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##### Table of Contents





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2004 Compared to the Year
    Ended December 31, 2003



|                         |                                 |                         |   |         |         |  |   |          |            |  |  |     |     |  
|------------------------ | ------------------------------- | ----------------------- | - | ------- | ------- |  | - | -------- | ---------- |  |  | --- | --- | -
|                         |                                 | Year Ended December 31, |  
|                         |                                 |                         |  
|                         |                                 | 2004                    |   |         | 2003    |  |   | % Change |           
|                         |                                 |                         |   |         |         |  |   |          |           
|                         |                                 | (In thousands)          |  
|Revenues:                |                                 |                         |   |         |         |  |   |          |            |  |  |    
|                         | Drilling Products and Services  |                         | $ | 390,617 |         |  | $ | 308,297  |            |  |  | 27  | %  
|                         | Drill Bits                      |                         |   | 326,918 |         |  |   | 258,975  |            |  |  | 26  | %  
|                         | Tubular Technology and Services |                         |   | 226,233 |         |  |   | 226,607  |            |  |  | (0  | )% 
|                         | Corporate and Other             |                         |   | 1,875   |         |  |   | 9,939    |            |  |  | (81 | )% 
|                         |                                 |                         |   |         |         |  |   |          |           
|                         |                                 | Total Revenues          |   |         | 945,643 |  |   |          | 803,818    |  |  |     | 18  | %
|Operating Income (Loss): |                                 |                         |   |         |         |  |   |          |            |  |  |    
|                         | Drilling Products and Services  |                         | $ | 90,637  | (a)     |  |   | 18,776   | (a)        |  |  | 383 | %  
|                         | Drill Bits                      |                         |   | 70,542  |         |  |   | 58,443   | (d)        |  |  | 21  | %  
|                         | Tubular Technology and Services |                         |   | 20,884  | (b)     |  |   | 7,634    | (e)        |  |  | 174 | %  
|                         | Corporate and Other             |                         |   | (40,391 | )(c)    |  |   | (39,556  | )(e)(f)(g) |  |  | (2  | )% 
|                         |                                 |                         |   |         |         |  |   |          |           
|                         |                                 | Total Operating Income  |   |         | 141,672 |  |   |          | 45,297     |  |  |     | 213 | %






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes other charges of $2.0 million in 2004 related to
    our manufacturing rationalization program, which includes lease
    termination, severance and other exit costs in connection with
    the downsizing of our Drilling Products Canadian operations.
    Includes other charges of $24.9 million in 2003 for fixed
    asset write-downs related to our manufacturing rationalization
    program designed to take out of service redundant or idle assets
    before their estimated useful lives pursuant to our initiative
    to streamline manufacturing capacity and improve operating
    efficiencies. The fixed asset write-downs were determined by use
    of internal appraisals and evaluations to assess the net
    realizable value upon disposal based on expected future cash
    flows.
|   
|(b) |  | Includes other charges of $3.2 million for severance costs
    related to the Tubular Technology and Services organizational
    restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(c) |  | Includes other charges of $3.8 million for the write-off of
    leasehold improvements and furniture and fixtures related to the
    relocation of our corporate offices in September 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(d) |  | Includes transition costs of $3.9 million related to the
    ReedHycalog acquisition in December 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(e) |  | Includes other charges of $6.4 million, $0.4 million
    in Tubular, Technology, and Services and $6.0 million in
    Corporate and Other, classified as Cost of Sales related to the
    write-down of industrial inventory products to their estimated
    net realizable values. The amount was determined by use of
    internal appraisals and evaluations to assess the estimated net
    realizable value upon disposition.                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(f) |  | Includes other charges of $6.4 million related to the
    write-down of two technology joint ventures. Included in this
    amount is a goodwill impairment of $2.5 million, an
    intangible asset write-off of $1.3 million and an
    equity-method investment impairment of $2.6 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(g) |  | Includes other charges of $1.5 million for stock
    compensation expense. In May 2003, two members of the Board of
    Directors volunteered to step down to reduce the number of
    common directors between us and our former parent Weatherford,
    and vesting of their stock-based compensation was accelerated.
    Also included is a $1.4 million credit reflecting the
    actual 2003 settlement of a liability accrued as a charge in
    2000.                                                                                                                                                                                                                                                                                                                                                          



22



---



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Segment Results




| |                               
| | ------------------------------
| | Drilling Products and Services





| |           
| | ----------
| | Drill Bits

tm tm tm tm


23



---



##### Table of Contents





| |                                
| | -------------------------------
| | Tubular Technology and Services





| |                    
| | -------------------
| | Corporate and Other



POS-GRIP POS-GRIP jack-up POS-GRIP





Liquidity and Capital Resources


5 8 1 8








|                                          |  |                         |          |   |      |   |         |      |  |   |         |  
|----------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                          |  | Year Ended December 31, |         
|                                          |  |                         |         
|                                          |  | 2005                    |          |   | 2004 |   |         | 2003 | 
|                                          |  |                         |          |   |      |   |         |      | 
|                                          |  | (In thousands)          |         
|Net Cash Provided by Operating Activities |  | $                       | 194,676  |   |      | $ | 113,170 |      |  | $ | 82,938  |  
|Net Cash Used in Investing Activities     |  |                         | (69,672  | ) |      |   | (45,381 | )    |  |   | (23,804 | )
|Net Cash Used in Financing Activities     |  |                         | (144,180 | ) |      |   | (39,890 | )    |  |   | (62,412 | )

24



---



##### Table of Contents





| |                     
| | --------------------
| | Operating Activities







| |                     
| | --------------------
| | Investing Activities









| |                     
| | --------------------
| | Financing Activities

5 8




25



---



##### Table of Contents



Debt Restructuring




| |                    
| | -------------------
| | New Credit Facility















| |                                                  
| | -------------------------------------------------
| | Redemption of
    95/8% Senior
    Notes Due 2007

5 8 5 8 5 8 5 8


26



---



##### Table of Contents



5 8




| |                                                
| | -----------------------------------------------
| | Issuance of
    61/8%
    Senior Notes Due 2015

1 8 1 8 1 8 1 8


|                    |  |            |          | 
|------------------- |  | ---------- | -------- | 
|Year                |  | Percentage
|                    |  |           
|2010                |  |            | 103.063% | 
|2011                |  |            | 102.042% | 
|2012                |  |            | 101.021% | 
|2013 and thereafter |  |            | 100.000% | 

1 8 1 8 1 8




| |                                       
| | --------------------------------------
| | Repurchase of 9% Senior Notes Due 2009





| |                    
| | -------------------
| | Treasury Rate Locks





| |                  
| | -----------------
| | Liquidity Outlook



27



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##### Table of Contents







|                             |                               |                |         |         |        |   |         |           |  |       |           |        |  |         |        |        |  |   |         |         | 
|---------------------------- | ----------------------------- | -------------- | ------- | ------- | ------ | - | ------- | --------- |  | ----- | --------- | ------ |  | ------- | ------ | ------ |  | - | ------- | ------- | 
|                             |                               |                |         |         |        |   |         |           |  | After |          
|                             |                               | Total          |         |         | 1 Year |   |         | 2-4 Years |  |       | 5-6 Years |        |  | 6 Years |       
|                             |                               |                |         |         |        |   |         |           |  |       |           |        |  |         |       
|                             |                               | (In thousands) |        
|Contractual Obligations:     |                               |                |         |         |        |   |         |           |  |       |           |        |  |         |        |        |  |   |         |        
|Long-Term Debt(a)            |                               | $              | 302,715 |         |        | $ | 18,678  |           |  | $     | 40,752    |        |  | $       | 36,100 |        |  | $ | 207,185 |        
|Operating Leases             |                               |                | 46,049  |         |        |   | 9,527   |           |  |       | 17,342    |        |  |         | 7,856  |        |  |   | 11,324  |        
|Purchase Obligation(b)       |                               |                | 196,655 |         |        |   | 196,367 |           |  |       | 288       |        |  |         |       |        |  |   |        |        
|Pension Funding              |                               |                | 2,000   |         |        |   | 2,000   |           |  |       |          |        |  |         |       |        |  |   |        |        
|Capital Lease Obligations(a) |                               |                | 2,617   |         |        |   | 1,151   |           |  |       | 1,312     |        |  |         | 154    |        |  |   |        |        
|                             |                               |                |         |         |        |   |         |           |  |       |           |        |  |         |       
|                             | Total Contractual Obligations |                | $       | 550,036 |        |   | $       | 227,723   |  |       | $         | 59,694 |  |         | $      | 44,110 |  |   | $       | 218,509 | 
|                             |                               |                |         |         |        |   |         |           |  |       |           |        |  |         |       

|                       |  |       |        |  |        |   |        |           |  |       |           |  |         |   |   |  |  |   |   | 
|---------------------- |  | ----- | ------ |  | ------ | - | ------ | --------- |  | ----- | --------- |  | ------- | - | - |  |  | - | - | 
|                       |  |       |        |  |        |   |        |           |  | After
|                       |  | Total |        |  | 1 Year |   |        | 2-4 Years |  |       | 5-6 Years |  | 6 Years
|                       |  |       |        |  |        |   |        |           |  |       |           |  |        
|Commercial Commitments |  |       |        |  |        |   |        |           |  |       |           |  |         |   |   |  |  |   |   | 
|Letters of Credit      |  | $     | 13,880 |  |        | $ | 10,906 |           |  | $     | 2,974     |  |         | $ |  |  |  | $ |  | 






|    |  |                                                                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Long-term debt and capital lease obligations above includes
    estimated interest payments based on principal balances and
    interest rates as of December 31, 2005.                                                                                                                                                   
|   
|(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.




Related-Party Transactions






28



---



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Off-Balance Sheet Financing







Recent Accounting Pronouncements








29



---



##### Table of Contents










Critical Accounting Policies and Estimates


10-K.




| |                    
| | -------------------
| | Revenue Recognition





| |                              
| | -----------------------------
| | Deferred Revenues and Charges





| |                                     
| | ------------------------------------
| | Allowance for Uncollectible Accounts



30



---



##### Table of Contents





| |            
| | -----------
| | Inventories

first-in,




| |                      
| | ---------------------
| | Business Combinations





| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets





| |                               
| | ------------------------------
| | Goodwill and Intangible Assets





| |                                            
| | -------------------------------------------
| | Valuation Allowance for Deferred Tax Assets



31



---



##### Table of Contents







| |                       
| | ----------------------
| | Contingent Liabilities







| |              
| | -------------
| | Pension Plans








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk

Financial Instruments




10-K


Foreign Currency Risk




32



---



##### Table of Contents





Interest Rates




|                |                       |                |   |       |   |      |   |       |   |      |   |            |   |  |   |      |   |  |   |      |   |  |   |         |  
|--------------- | --------------------- | -------------- | - | ----- | - | ---- | - | ----- | - | ---- | - | ---------- | - |  | - | ---- | - |  | - | ---- | - |  | - | ------- | -
|2005            |                       | 2006           |   | 2007  |   | 2008 |   | 2009  |   | 2010 |   | Thereafter
|                |                       |                |   |       |   |      |   |       |   |      |   |           
|                |                       | (In thousands)
|Long-term debt: |                       |                |   |       |   |      |   |       |   |      |   |            |   |  |   |      |   |  |   |      |   |  |   |        
|                | Fixed rate            |                | $ | 7,045 |   |      | $ | 3,635 |   |      | $ | 550        |   |  | $ | 634  |   |  | $ | 287  |   |  | $ | 201,178 |  
|                | Average interest rate |                |   | 6.11  | % |      |   | 6.12  | % |      |   | 6.12       | % |  |   | 6.12 | % |  |   | 6.12 | % |  |   | 6.12    | %

|                |                       |      |   |       |   |      |   |       |   |      |   |            |   |  |   |      |   |  |   |         |   |  |   |       |  
|--------------- | --------------------- | ---- | - | ----- | - | ---- | - | ----- | - | ---- | - | ---------- | - |  | - | ---- | - |  | - | ------- | - |  | - | ----- | -
|2004            |                       | 2005 |   | 2006  |   | 2007 |   | 2008  |   | 2009 |   | Thereafter
|                |                       |      |   |       |   |      |   |       |   |      |   |           
|Long-term debt: |                       |      |   |       |   |      |   |       |   |      |   |            |   |  |   |      |   |  |   |         |   |  |   |      
|                | Fixed rate            |      | $ | 4,181 |   |      | $ | 1,273 |   |      | $ | 199,705    |   |  | $ | 234  |   |  | $ | 175,245 |   |  | $ | 1,316 |  
|                | Average interest rate |      |   | 9.28  | % |      |   | 9.32  | % |      |   | 9.22       | % |  |   | 8.96 | % |  |   | 8.94    | % |  |   | 5.04  | %





|                                |  |               |       |       |  |          |       |       |  |   |       |  |  |   |       | 
|------------------------------- |  | ------------- | ----- | ----- |  | -------- | ----- | ----- |  | - | ----- |  |  | - | ----- | 
|                                |  | December 31, 
|                                |  |              
|                                |  | 2005          |       | 2004 
|                                |  |               |       |      
|                                |  | Carrying      |       | Fair  |  | Carrying |       | Fair 
|                                |  | Value         |       | Value |  | Value    |       | Value
|                                |  |               |       |       |  |          |       |      
|                                |  | (In millions)
|61/8% Senior
    Notes due 2015 |  | $             | 200.0 |       |  | $        | 200.6 |       |  | $ |      |  |  | $ |      | 
|9% Senior Notes due 2009        |  |               | 0.1   |       |  |          | 0.1   |       |  |   | 175.0 |  |  |   | 196.7 | 
|95/8% Senior
    Notes due 2007 |  |               |      |       |  |          |      |       |  |   | 199.5 |  |  |   | 225.1 | 

33



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##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



|                                                                                                                          |  | 
|------------------------------------------------------------------------------------------------------------------------- |  | 
|Report of Independent Registered Public
    Accounting Firm  Deloitte & Touche LLP                                       |  | 
|                                                                                                                         
|Report of Independent Registered Public
    Accounting Firm  Ernst & Young LLP                                           |  | 
|                                                                                                                         
|Consolidated Statements of Operations for
    each of the three years in the period ended December 31,
    2005           |  | 
|                                                                                                                         
|Consolidated Balance Sheets at
    December 31, 2005 and 2004                                                             |  | 
|                                                                                                                         
|Consolidated Statements of Cash Flows for
    each of the three years in the period ended December 31,
    2005           |  | 
|                                                                                                                         
|Consolidated Statements of
    Stockholders Equity for each of the three years in the
    period ended December 31, 2005 |  | 
|                                                                                                                         
|Notes to Consolidated Financial
    Statements                                                                            |  | 

34



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm
















Deloitte &
Touche LLP






35



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





36



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GRANT PRIDECO, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                 |                                             |                                       |           |         |      |   |         |         |   |   |         |         | 
|-------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------- | --------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | 
|                                                                                 |                                             | Year Ended December 31,               |          
|                                                                                 |                                             |                                       |          
|                                                                                 |                                             | 2005                                  |           |         | 2004 |   |         | 2003    |  
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 |                                             | (In thousands, except per share data) |          
|Revenues                                                                         |                                             | $                                     | 1,349,997 |         |      | $ | 945,643 |         |   | $ | 803,818 |        
|Operating Expenses:                                                              |                                             |                                       |           |         |      |   |         |         |   |   |         |        
|                                                                                 | Cost of sales                               |                                       |           | 776,486 |      |   |         | 560,807 |   |   |         | 533,572 | 
|                                                                                 | Sales and marketing                         |                                       |           | 137,133 |      |   |         | 128,585 |   |   |         | 106,589 | 
|                                                                                 | General and administrative                  |                                       |           | 99,732  |      |   |         | 85,071  |   |   |         | 69,251  | 
|                                                                                 | Research and engineering                    |                                       |           | 25,693  |      |   |         | 20,473  |   |   |         | 17,711  | 
|                                                                                 | Other charges                               |                                       |           |        |      |   |         | 9,035   |   |   |         | 31,398  | 
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 |                                             |                                       | 1,039,044 |         |      |   | 803,971 |         |   |   | 758,521 |        
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Operating Income                                                                 |                                             |                                       | 310,953   |         |      |   | 141,672 |         |   |   | 45,297  |        
|Interest Expense                                                                 |                                             |                                       | (29,148   | )       |      |   | (41,889 | )       |   |   | (43,871 | )      
|Other Income, Net                                                                |                                             |                                       | 5,655     |         |      |   | 398     |         |   |   | 11,164  |        
|Equity Income in Unconsolidated Affiliates                                       |                                             |                                       | 58,259    |         |      |   | 4,600   |         |   |   | 1,975   |        
|Refinancing Charges                                                              |                                             |                                       | (57,086   | )       |      |   |        |         |   |   |        |        
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Income From Continuing Operations Before Income Taxes and
    Minority Interests |                                             |                                       | 288,633   |         |      |   | 104,781 |         |   |   | 14,565  |        
|Income Tax Provision                                                             |                                             |                                       | (89,680   | )       |      |   | (34,745 | )       |   |   | (6,692  | )      
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Income from Continuing Operations Before Minority Interests                      |                                             |                                       | 198,953   |         |      |   | 70,036  |         |   |   | 7,873   |        
|Minority Interests                                                               |                                             |                                       | (9,949    | )       |      |   | (5,243  | )       |   |   | (3,216  | )      
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Income from Continuing Operations                                                |                                             |                                       | 189,004   |         |      |   | 64,793  |         |   |   | 4,657   |        
|Income (Loss) from Discontinued Operations, Net of Tax                           |                                             |                                       |          |         |      |   | (9,527  | )       |   |   | 533     |        
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Net Income                                                                       |                                             | $                                     | 189,004   |         |      | $ | 55,266  |         |   | $ | 5,190   |        
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|Basic Net Income Per Share:                                                      |                                             |                                       |           |         |      |   |         |         |   |   |         |        
|                                                                                 | Income from continuing operations           |                                       | $         | 1.49    |      |   | $       | 0.53    |   |   | $       | 0.04    | 
|                                                                                 | Loss from discontinued operations           |                                       |           |        |      |   |         | (0.08   | ) |   |         |        | 
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 | Net income                                  |                                       | $         | 1.49    |      |   | $       | 0.45    |   |   | $       | 0.04    | 
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 | Basic weighted average shares outstanding   |                                       |           | 127,236 |      |   |         | 123,325 |   |   |         | 121,646 | 
|Diluted Net Income Per Share:                                                    |                                             |                                       |           |         |      |   |         |         |   |   |         |        
|                                                                                 | Income from continuing operations           |                                       | $         | 1.45    |      |   | $       | 0.51    |   |   | $       | 0.04    | 
|                                                                                 | Loss from discontinued operations           |                                       |           |        |      |   |         | (0.07   | ) |   |         |        | 
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 | Net income                                  |                                       | $         | 1.45    |      |   | $       | 0.44    |   |   | $       | 0.04    | 
|                                                                                 |                                             |                                       |           |         |      |   |         |         |  
|                                                                                 | Diluted weighted average shares outstanding |                                       |           | 130,467 |      |   |         | 126,091 |   |   |         | 123,401 | 



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GRANT PRIDECO, INC.





CONSOLIDATED BALANCE SHEETS


(In thousands, except par value amounts)


|                                                         |                                                                                                                             |              |           |         |      |   |           |         |  
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------ | --------- | ------- | ---- | - | --------- | ------- | -
|                                                         |                                                                                                                             | December 31, |          
|                                                         |                                                                                                                             |              |          
|                                                         |                                                                                                                             | 2005         |           |         | 2004 |  
|                                                         |                                                                                                                             |              |           |         |      |  
|ASSETS                                                  
|Current Assets:                                          |                                                                                                                             |              |           |         |      |   |           |        
|                                                         | Cash                                                                                                                        |              | $         | 28,164  |      |   | $         | 47,552  |  
|                                                         | Restricted cash                                                                                                             |              |           |        |      |   |           | 231     |  
|                                                         | Accounts receivable, net of allowance for doubtful accounts of
    $5,856 and $8,024 for 2005 and 2004, respectively        |              |           | 268,450 |      |   |           | 202,084 |  
|                                                         | Inventories                                                                                                                 |              |           | 360,630 |      |   |           | 288,820 |  
|                                                         | Deferred charges                                                                                                            |              |           | 14,629  |      |   |           | 17,204  |  
|                                                         | Current deferred tax assets                                                                                                 |              |           | 39,957  |      |   |           | 26,473  |  
|                                                         | Prepaid expenses                                                                                                            |              |           | 13,197  |      |   |           | 12,033  |  
|                                                         | Other current assets                                                                                                        |              |           | 1,228   |      |   |           | 2,370   |  
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                         |                                                                                                                             |              | 726,255   |         |      |   | 596,767   |        
|Property, Plant and Equipment, Net                       |                                                                                                                             |              | 238,770   |         |      |   | 244,305   |        
|Goodwill                                                 |                                                                                                                             |              | 421,627   |         |      |   | 393,993   |        
|Intangible Assets, Net                                   |                                                                                                                             |              | 58,181    |         |      |   | 43,807    |        
|Investments In and Advances to Unconsolidated Affiliates |                                                                                                                             |              | 84,547    |         |      |   | 49,159    |        
|Other Assets                                             |                                                                                                                             |              | 10,904    |         |      |   | 16,435    |        
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                         |                                                                                                                             | $            | 1,540,284 |         |      | $ | 1,344,466 |        
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                        
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|Current Liabilities:                                     |                                                                                                                             |              |           |         |      |   |           |        
|                                                         | Short-term borrowings and current portion of long-term debt                                                                 |              | $         | 7,045   |      |   | $         | 4,181   |  
|                                                         | Accounts payable                                                                                                            |              |           | 92,290  |      |   |           | 71,741  |  
|                                                         | Accrued labor and benefits                                                                                                  |              |           | 61,863  |      |   |           | 53,060  |  
|                                                         | Deferred revenues                                                                                                           |              |           | 21,424  |      |   |           | 21,413  |  
|                                                         | Federal income taxes payable                                                                                                |              |           | 24,708  |      |   |           | 8,144   |  
|                                                         | Current deferred tax liabilities                                                                                            |              |           | 3,818   |      |   |           | 3,108   |  
|                                                         | Other current liabilities                                                                                                   |              |           | 35,498  |      |   |           | 33,854  |  
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                         |                                                                                                                             |              | 246,646   |         |      |   | 195,501   |        
|Long-Term Debt                                           |                                                                                                                             |              | 217,484   |         |      |   | 377,773   |        
|Deferred Tax Liabilities                                 |                                                                                                                             |              | 38,171    |         |      |   | 25,183    |        
|Other Long-Term Liabilities                              |                                                                                                                             |              | 29,365    |         |      |   | 24,474    |        
|Commitments and Contingencies (See Notes 14 and 15)      |                                                                                                                             |              |           |         |      |   |           |        
|Minority Interests                                       |                                                                                                                             |              | 12,463    |         |      |   | 15,994    |        
|Stockholders Equity:                                    |                                                                                                                             |              |           |         |      |   |           |        
|                                                         | Preferred stock, $0.01 par value; authorized
    10,000 shares; no shares issued in 2005 or 2004                            |              |           |        |      |   |           |        |  
|                                                         | Common stock, $0.01 par value; authorized
    300,000 shares; issued 130,927 and 124,516 in 2005 and
    2004, respectively |              |           | 1,309   |      |   |           | 1,245   |  
|                                                         | Capital in excess of par value                                                                                              |              |           | 647,211 |      |   |           | 528,188 |  
|                                                         | Unearned compensation                                                                                                       |              |           | (6,573  | )    |   |           | (5,801  | )
|                                                         | Retained earnings                                                                                                           |              |           | 381,293 |      |   |           | 192,289 |  
|                                                         | Accumulated other comprehensive loss                                                                                        |              |           | (19,496 | )    |   |           | (12,291 | )
|                                                         | Treasury stock, at cost, 924 and 617 shares in 2005 and
    2004, respectively                                              |              |           | (17,862 | )    |   |           | (8,483  | )
|                                                         | Deferred compensation obligation                                                                                            |              |           | 10,273  |      |   |           | 10,394  |  
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                         |                                                                                                                             |              | 996,155   |         |      |   | 705,541   |        
|                                                         |                                                                                                                             |              |           |         |      |  
|                                                         |                                                                                                                             | $            | 1,540,284 |         |      | $ | 1,344,466 |        
|                                                         |                                                                                                                             |              |           |         |      |  



38



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##### Table of Contents



GRANT PRIDECO, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |         |         |        |         |         |         |  
|--------------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------- | -------- | ------- | -------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | -
|                                        |                                                                                        | Year Ended December 31,                                           |                                          
|                                        |                                                                                        |                                                                   |                                          
|                                        |                                                                                        | 2005                                                              |                                           |          | 2004    |          |        | 2003    |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|                                        |                                                                                        | (In thousands)                                                    |                                          
|Cash Flows From Operating Activities:   |                                                                                        |                                                                   |                                           |          |         |          |        |         |         |         |        |        
|                                        | Net income                                                                             |                                                                   | $                                         | 189,004  |         |          | $      | 55,266  |         |         | $      | 5,190   |        
|                                        | Adjustments to reconcile net income to net cash provided by
    operating activities:  |                                                                   |                                           |          |         |          |        |         |         |         |        |         |        
|                                        |                                                                                        | Loss on discontinued operations                                   |                                           |          |        |          |        |         | 11,746  |         |        |         |        |        
|                                        |                                                                                        | Gain on sale of businesses, net                                   |                                           |          | (1,577  | )        |        |         | (774    | )       |        |         | (3,393  | )      
|                                        |                                                                                        | Depreciation and amortization                                     |                                           |          | 46,632  |          |        |         | 43,220  |         |        |         | 44,688  |        
|                                        |                                                                                        | Non-cash portion of other charges                                 |                                           |          |        |          |        |         | 6,010   |         |        |         | 31,247  |        
|                                        |                                                                                        | Debt refinancing charges                                          |                                           |          | 51,834  |          |        |         |        |         |        |         |        |        
|                                        |                                                                                        | Deferred income tax                                               |                                           |          | (12,769 | )        |        |         | 20,096  |         |        |         | (16,133 | )      
|                                        |                                                                                        | Equity income in unconsolidated affiliates, net of dividends      |                                           |          | (46,218 | )        |        |         | 3,490   |         |        |         | 11,675  |        
|                                        |                                                                                        | Stock-based compensation expense                                  |                                           |          | 10,073  |          |        |         | 4,660   |         |        |         | 2,866   |        
|                                        |                                                                                        | Deferred compensation expense                                     |                                           |          | 2,263   |          |        |         | 1,682   |         |        |         | 1,595   |        
|                                        |                                                                                        | Minority interests in consolidated subsidiaries, net of dividends |                                           |          | 3,688   |          |        |         | 2,103   |         |        |         | 1,326   |        
|                                        |                                                                                        | (Gain) loss on sale of assets, net                                |                                           |          | 1,338   |          |        |         | (4,466  | )       |        |         | 645     |        
|                                        | Change in operating assets and liabilities, net of effects of
    businesses acquired: |                                                                   |                                           |          |         |          |        |         |         |         |        |         |        
|                                        |                                                                                        | Accounts receivable                                               |                                           |          | (68,638 | )        |        |         | 2,278   |         |        |         | (29,747 | )      
|                                        |                                                                                        | Inventories                                                       |                                           |          | (68,192 | )        |        |         | (60,039 | )       |        |         | (4,413  | )      
|                                        |                                                                                        | Deferred charges                                                  |                                           |          | 2,575   |          |        |         | (17,204 | )       |        |         |        |        
|                                        |                                                                                        | Other current assets                                              |                                           |          | 4,397   |          |        |         | 6,768   |         |        |         | 29,500  |        
|                                        |                                                                                        | Other assets                                                      |                                           |          | 708     |          |        |         | 3,087   |         |        |         | (281    | )      
|                                        |                                                                                        | Accounts payable                                                  |                                           |          | 18,320  |          |        |         | 64      |         |        |         | 13,075  |        
|                                        |                                                                                        | Deferred revenues                                                 |                                           |          | 11      |          |        |         | 21,413  |         |        |         |        |        
|                                        |                                                                                        | Federal income tax payable                                        |                                           |          | 61,558  |          |        |         | (7,392  | )       |        |         | 3,985   |        
|                                        |                                                                                        | Other current liabilities                                         |                                           |          | (4,636  | )        |        |         | 17,197  |         |        |         | (5,652  | )      
|                                        |                                                                                        | Other, net                                                        |                                           |          | 4,305   |          |        |         | 3,965   |         |        |         | (3,235  | )      
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|                                        |                                                                                        |                                                                   | Net cash provided by operating activities |          |         | 194,676  |        |         |         | 113,170 |        |         |         | 82,938  |  
|Cash Flows From Investing Activities:   |                                                                                        |                                                                   |                                           |          |         |          |        |         |         |         |        |        
|                                        | Acquisition of businesses, net of cash acquired                                        |                                                                   |                                           | (39,232  | )       |          |        | (33,833 | )       |         |        | (8,272  | )      
|                                        | Proceeds from sales of businesses, net of cash disposed                                |                                                                   |                                           | 2,521    |         |          |        | 2,180   |         |         |        | 30,364  |        
|                                        | Proceeds from sale of discontinued operations, net of cash
    disposed                |                                                                   |                                           |         |         |          |        | 19,859  |         |         |        |        |        
|                                        | Investments in and advances to unconsolidated affiliates                               |                                                                   |                                           | (5,273   | )       |          |        | (4,167  | )       |         |        | (5,459  | )      
|                                        | Capital expenditures for property, plant and equipment                                 |                                                                   |                                           | (29,501  | )       |          |        | (37,879 | )       |         |        | (41,418 | )      
|                                        | Proceeds from sales of fixed assets                                                    |                                                                   |                                           | 1,813    |         |          |        | 8,459   |         |         |        | 981     |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|                                        |                                                                                        |                                                                   | Net cash used in investing activities     |          |         | (69,672  | )      |         |         | (45,381 | )      |         |         | (23,804 | )
|Cash Flows From Financing Activities:   |                                                                                        |                                                                   |                                           |          |         |          |        |         |         |         |        |        
|                                        | Borrowings (repayments) on credit facility, net                                        |                                                                   |                                           | 11,200   |         |          |        | (14,320 | )       |         |        | (42,982 | )      
|                                        | Repayments on debt                                                                     |                                                                   |                                           | (379,315 | )       |          |        | (49,781 | )       |         |        | (17,608 | )      
|                                        | Debt refinancing costs                                                                 |                                                                   |                                           | (43,778  | )       |          |        |        |         |         |        |        |        
|                                        | Issuance of debt                                                                       |                                                                   |                                           | 200,000  |         |          |        |        |         |         |        |        |        
|                                        | Debt issuance costs                                                                    |                                                                   |                                           | (6,041   | )       |          |        |        |         |         |        |        |        
|                                        | Purchases of treasury stock                                                            |                                                                   |                                           | (3,385   | )       |          |        | (2,508  | )       |         |        | (2,388  | )      
|                                        | Proceeds from stock option exercises                                                   |                                                                   |                                           | 75,243   |         |          |        | 25,791  |         |         |        | 566     |        
|                                        | Employee stock purchase plan purchases                                                 |                                                                   |                                           | 1,896    |         |          |        | 928     |         |         |        |        |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|                                        |                                                                                        |                                                                   | Net cash used in financing activities     |          |         | (144,180 | )      |         |         | (39,890 | )      |         |         | (62,412 | )
|Effect of Exchange Rate Changes on Cash |                                                                                        |                                                                   | (212                                      | )        |         |          | 423    |         |         |         | 630    |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|Net Increase (Decrease) in Cash         |                                                                                        |                                                                   | (19,388                                   | )        |         |          | 28,322 |         |         |         | (2,648 | )      
|Cash at Beginning of Year               |                                                                                        |                                                                   | 47,552                                    |          |         |          | 19,230 |         |         |         | 21,878 |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        
|Cash at End of Year                     |                                                                                        | $                                                                 | 28,164                                    |          |         | $        | 47,552 |         |         | $       | 19,230 |        
|                                        |                                                                                        |                                                                   |                                           |          |         |          |        |         |        



39



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##### Table of Contents



GRANT PRIDECO, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         |         |  
|----------------------------------------------------------------------- | ----------------------------------------------- | -------------- | ------- | - | --------- | - | ----- | -------- |  | - | ------------ | ----------- |  | ------------- | -------------- | - | ---- | -------- | ------- | ------------ |  | - | ------- | ------ | - | ---------- | ---- | - | ----- | - | ------- | - |  | - | ------ | - |  | - | ------- | ------- | -
|                                                                        |                                                 | Common Stock   |         |   | Capital   |   |       |          |  |   |              |             |  |               |                |   |      |         
|                                                                        |                                                 | $0.01 Par      |         |   | in Excess |   |       |          |  |   |              | Accum Other |  |               | Treasury Stock |   |      | Deferred |         |              | 
|                                                                        |                                                 |                |         |   | of Par    |   |       | Unearned |  |   | Retained     |             |  | Comprehensive |                |   |      |          |         | Compensation |  |   |        
|                                                                        |                                                 | Shares         |         |   | Amount    |   |       | Value    |  |   | Compensation |             |  | Earnings      |                |   | Loss |          |         | Shares       |  |   | Amount  |        |   | Obligation |      |   | Total |  
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|                                                                        |                                                 | (In thousands) |        
|Balance at December 31, 2002                                            |                                                 |                | 120,815 |   |           | $ | 1,208 |          |  | $ | 484,819      |             |  | $             | (7,743         | ) |      | $        | 131,833 |              |  | $ | (24,073 | )      |   |            | (342 | ) |       | $ | (4,409  | ) |  | $ | 7,237  |   |  | $ | 588,872 |        
|Components of Comprehensive Loss:                                       |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         |        
|                                                                        | Net Income                                      |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         | 5,190        |  |   |         |       |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 5,190   |  
|                                                                        | Currency Translation Adjustment                 |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | 7,818  |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 7,818   |  
|                                                                        | Minimum Pension Liability, net of tax of $356   |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | (662   | ) |            |      |  |       |   |         |  |  |   |        |  |  |   |         | (662    | )
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|                                                                        | Total Comprehensive Loss                        |                |         |   |           |   |       |          |  |   |              |             |  |               |                |  |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         | 12,346  |  
|Stock Grant and Options Exercised                                       |                                                 |                | 85      |   |           |   | 1     |          |  |   | 565          |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 566     |        
|Tax Benefit of Options Exercised                                        |                                                 |                |        |   |           |   |      |          |  |   | 120          |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 120     |        
|Compensation Expense for Accelerated Vesting                            |                                                 |                |        |   |           |   |      |          |  |   | 340          |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 340     |        
|Issuance of Restricted Stock                                            |                                                 |                | 350     |   |           |   | 3     |          |  |   | (3           | )           |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   |        |        
|Amortization of Restricted Stock, Net                                   |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               | 4,014          |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 4,014   |        
|Deferred Compensation Obligation                                        |                                                 |                |        |   |           |   |      |          |  |   | 10           |             |  |               |               |   |      |          |        |              |  |   |         |        |   |            | 11   |   |       |   | 105     |   |  |   | (259   | ) |  |   | (144    | )      
|Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            | (204 | ) |       |   | (2,388  | ) |  |   | 2,388  |   |  |   |        |        
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|Balance at December 31, 2003                                            |                                                 |                | 121,250 |   |           | $ | 1,212 |          |  | $ | 485,851      |             |  | $             | (3,729         | ) |      | $        | 137,023 |              |  | $ | (16,917 | )      |   |            | (535 | ) |       | $ | (6,692  | ) |  | $ | 9,366  |   |  | $ | 606,114 |        
|Components of Comprehensive Loss:                                       |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         |        
|                                                                        | Net Income                                      |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         | 55,266       |  |   |         |       |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 55,266  |  
|                                                                        | Currency Translation Adjustment                 |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | 3,966  |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 3,966   |  
|                                                                        | Minimum Pension Liability, net of tax of ($354) |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | 660    |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 660     |  
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|                                                                        | Total Comprehensive Loss                        |                |         |   |           |   |       |          |  |   |              |             |  |               |                |  |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         | 59,892  |  
|Stock Grant and Options Exercised                                       |                                                 |                | 2,998   |   |           |   | 30    |          |  |   | 25,761       |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 25,791  |        
|Tax Benefit of Options Exercised                                        |                                                 |                |        |   |           |   |      |          |  |   | 6,717        |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 6,717   |        
|Compensation Expense for Accelerated Vesting                            |                                                 |                |        |   |           |   |      |          |  |   | 3,304        |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 3,304   |        
|Issuance of Restricted Stock                                            |                                                 |                |        |   |           |   |      |          |  |   | 5,582        |             |  |               | (5,582         | ) |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   |        |        
|Amortization of Restricted Stock                                        |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               | 3,510          |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 3,510   |        
|Employee Stock Purchase Plan Issuance                                   |                                                 |                | 91      |   |           |   | 1     |          |  |   | 927          |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 928     |        
|Deferred Compensation Obligation                                        |                                                 |                | 177     |   |           |   | 2     |          |  |   | 46           |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            | 68   |   |       |   | 717     |   |  |   | (1,480 | ) |  |   | (715    | )      
|Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            | (150 | ) |       |   | (2,508  | ) |  |   | 2,508  |   |  |   |        |        
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|Balance at December 31, 2004                                            |                                                 |                | 124,516 |   |           | $ | 1,245 |          |  | $ | 528,188      |             |  | $             | (5,801         | ) |      | $        | 192,289 |              |  | $ | (12,291 | )      |   |            | (617 | ) |       | $ | (8,483  | ) |  | $ | 10,394 |   |  | $ | 705,541 |        
|Components of Comprehensive Income:                                     |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         |        
|                                                                        | Net Income                                      |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         | 189,004      |  |   |         |       |   |            |      |  |       |   |         |  |  |   |        |  |  |   |         | 189,004 |  
|                                                                        | Currency Translation Adjustment                 |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | (6,080 | ) |            |      |  |       |   |         |  |  |   |        |  |  |   |         | (6,080  | )
|                                                                        | Minimum Pension Liability, net of tax of $606   |                |         |  |           |   |       |         |  |   |              |            |  |               |                |  |      |          |         |             |  |   |         | (1,125 | ) |            |      |  |       |   |         |  |  |   |        |  |  |   |         | (1,125  | )
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|                                                                        | Total Comprehensive Loss                        |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |   |         |   |  |   |        |   |  |   |         | 181,799 |  
|Stock Grant and Options Exercised                                       |                                                 |                | 5,660   |   |           |   | 56    |          |  |   | 75,187       |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 75,243  |        
|Tax Benefit of Options Exercised                                        |                                                 |                |         |   |           |   |       |          |  |   | 35,517       |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 35,517  |        
|Compensation Expense for Accelerated Vesting                            |                                                 |                |        |   |           |   |      |          |  |   | 1,129        |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |      |   |       |   |         |   |  |   |       |   |  |   | 1,129   |        
|Issuance of Restricted Stock                                            |                                                 |                | 500     |   |           |   | 5     |          |  |   | 5,202        |             |  |               | (5,207         | ) |      |          |        |              |  |   |        |        |   |            | (205 | ) |       |   | (5,365  | ) |  |   |       |   |  |   | (5,365  | )      
|Amortization of Restricted Stock, Net                                   |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               | 4,435          |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 4,435   |        
|Employee Stock Purchase Plan Issuance                                   |                                                 |                | 171     |   |           |   | 2     |          |  |   | 1,894        |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            |     |   |       |   |        |   |  |   |       |   |  |   | 1,896   |        
|Deferred Compensation Obligation                                        |                                                 |                | 80      |   |           |   | 1     |          |  |   | 94           |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            | 26   |   |       |   | (629    | ) |  |   | (3,506 | ) |  |   | (4,040  | )      
|Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |                                                 |                |        |   |           |   |      |          |  |   |             |             |  |               |               |   |      |          |        |              |  |   |        |        |   |            | (128 | ) |       |   | (3,385  | ) |  |   | 3,385  |   |  |   |        |        
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  
|Balance at December 31, 2005                                            |                                                 |                | 130,927 |   |           | $ | 1,309 |          |  | $ | 647,211      |             |  | $             | (6,573         | ) |      | $        | 381,293 |              |  | $ | (19,496 | )      |   |            | (924 | ) |       | $ | (17,862 | ) |  | $ | 10,273 |   |  | $ | 996,155 |        
|                                                                        |                                                 |                |         |   |           |   |       |          |  |   |              |             |  |               |                |   |      |          |         |              |  |   |         |        |   |            |      |   |       |  



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GRANT PRIDECO, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                                
|-- | ---------------------------------------------------------------
|1. | Organization and Summary of Significant Accounting
    Policies



| |                     
| | --------------------
| | Nature of Operations



® tm tm




| |                            
| | ---------------------------
| | Principles of Consolidation



|                            |  |             |     | 
|--------------------------- |  | ----------- | --- | 
|                            |  | % Ownership
|                            |  |            
|Tianjin Grant Prideco (TGP) |  |             | 60% | 
|H-Tech                      |  |             | 54% | 





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                 
| | ----------------
| | Use of Estimates





| |                    
| | -------------------
| | Revenue Recognition





| |                              
| | -----------------------------
| | Deferred Revenues and Charges





| |     
| | ----
| | Cash



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                     
| | ------------------------------------
| | Allowance for Uncollectible Accounts





| |            
| | -----------
| | Inventories

first-in,




|                                       |  |                |         |  |      |   |         | 
|-------------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                       |  | December 31,   |        
|                                       |  |                |        
|                                       |  | 2005           |         |  | 2004 |  
|                                       |  |                |         |  |      |  
|                                       |  | (In thousands) |        
|Raw Materials, Components and Supplies |  | $              | 169,966 |  |      | $ | 104,543 | 
|Work in Process                        |  |                | 84,783  |  |      |   | 59,308  | 
|Finished Goods                         |  |                | 105,881 |  |      |   | 124,969 | 
|                                       |  |                |         |  |      |  
|                                       |  | $              | 360,630 |  |      | $ | 288,820 | 
|                                       |  |                |         |  |      |  







| |                              
| | -----------------------------
| | Property, Plant and Equipment



|                           |  |      |             | 
|-------------------------- |  | ---- | ----------- | 
|                           |  | Life
|                           |  |     
|Buildings and Improvements |  |      | 15-30 years | 
|Machinery and Equipment    |  |      | 2-15 years  | 
|Furniture and Fixtures     |  |      | 2-10 years  | 

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                |          |   |      |   |          |  
|------------------------------ |  | -------------- | -------- | - | ---- | - | -------- | -
|                               |  | December 31,   |         
|                               |  |                |         
|                               |  | 2005           |          |   | 2004 |  
|                               |  |                |          |   |      |  
|                               |  | (In thousands) |         
|Land                           |  | $              | 21,534   |   |      | $ | 21,521   |  
|Buildings and Improvements     |  |                | 86,371   |   |      |   | 78,557   |  
|Machinery and Equipment        |  |                | 287,008  |   |      |   | 269,517  |  
|Furniture and Fixtures         |  |                | 35,362   |   |      |   | 29,058   |  
|Construction in Progress       |  |                | 13,084   |   |      |   | 19,655   |  
|                               |  |                |          |   |      |  
|                               |  |                | 443,359  |   |      |   | 418,308  |  
|Less: Accumulated Depreciation |  |                | (204,589 | ) |      |   | (174,003 | )
|                               |  |                |          |   |      |  
|                               |  | $              | 238,770  |   |      | $ | 244,305  |  
|                               |  |                |          |   |      |  





| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets





| |                                            
| | -------------------------------------------
| | Goodwill and Identifiable Intangible Assets



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Stock-Based Compensation





|                       |                              |                         |  |       |      |  |  |       |   |  |  |       |  
|---------------------- | ---------------------------- | ----------------------- |  | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                       |                              | Year Ended December 31, | 
|                       |                              |                         | 
|                       |                              | 2005                    |  |       | 2004 |  |  | 2003  |  
|                       |                              |                         |  |       |      |  |  |       |  
|Valuation Assumptions: |                              |                         |  |       |      |  |  |       |   |  |  |      
|                       | Expected Option Term (Years) |                         |  | 5.0   |      |  |  | 7.4   |   |  |  | 7.4   |  
|                       | Expected Volatility          |                         |  | 41.00 | %    |  |  | 42.50 | % |  |  | 41.14 | %
|                       | Expected Dividend Rate       |                         |  |      |      |  |  |      |   |  |  |      |  
|                       | Risk Free Interest Rate      |                         |  | 3.87  | %    |  |  | 3.66  | % |  |  | 3.64  | %





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |                             |                                                                                                                                             |   |         |         |   |   |        |        |   |   |        |         |  
|---------------------------- | --------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | ------- | - | - | ------ | ------ | - | - | ------ | ------- | -
|                             |                             | Year Ended December 31,                                                                                                                     |  
|                             |                             |                                                                                                                                             |  
|                             |                             | 2005                                                                                                                                        |   |         | 2004    |   |   | 2003   |       
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|                             |                             | (In thousands, except per share                                                                                                             |  
|                             |                             | amounts)                                                                                                                                    |  
|Net Income                   |                             |                                                                                                                                             |   |         |         |   |   |        |        |   |   |       
|                             | As Reported                 |                                                                                                                                             | $ | 189,004 |         |   | $ | 55,266 |        |   | $ | 5,190  |        
|                             |                             | Add: Stock-Based Employee Compensation Expense Included in
    Reported Net Income, Net of Related Tax Effects(a)                           |   |         | 6,806   |   |   |        | 4,506  |   |   |        | 2,831   |  
|                             |                             | Deduct: Stock-Based Employee Compensation Expense Determined
    Under the Fair Value Method for All Awards, Net of Related Tax
    Effects |   |         | (11,370 | ) |   |        | (9,276 | ) |   |        | (12,208 | )
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|                             | Pro Forma Net Income (Loss) |                                                                                                                                             | $ | 184,440 |         |   | $ | 50,496 |        |   | $ | (4,187 | )      
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|Net Income (Loss) Per Share: |                             |                                                                                                                                             |   |         |         |   |   |        |        |   |   |       
|                             | Basic as Reported           |                                                                                                                                             | $ | 1.49    |         |   | $ | 0.45   |        |   | $ | 0.04   |        
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|                             | Basic Pro Forma             |                                                                                                                                             | $ | 1.45    |         |   | $ | 0.41   |        |   | $ | (0.03  | )      
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|                             | Diluted as Reported         |                                                                                                                                             | $ | 1.45    |         |   | $ | 0.44   |        |   | $ | 0.04   |        
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       
|                             | Diluted Pro Forma           |                                                                                                                                             | $ | 1.42    |         |   | $ | 0.40   |        |   | $ | (0.03  | )      
|                             |                             |                                                                                                                                             |   |         |         |   |   |        |       






|    |  |                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes stock based compensation, included in the
    Non-Cash Portion of Other Charges as well as
    Stock Based Compensation in the Consolidated
    Statements of Cash Flows.



| |              
| | -------------
| | Pension Plans







| |                       
| | ----------------------
| | Contingent Liabilities



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                                                               
| | --------------------------------------------------------------
| | Fair Value of Financial Instruments Other Than
    Derivatives





| |                            
| | ---------------------------
| | Off-Balance Sheet Financing





| |                            
| | ---------------------------
| | Accounting for Income Taxes





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Net Income Per Share





|                                                                                                        |  |                |         |  |      |  |         |      |  |  |         | 
|------------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- | 
|                                                                                                        |  | December 31,   |        
|                                                                                                        |  |                |        
|                                                                                                        |  | 2005           |         |  | 2004 |  |         | 2003 | 
|                                                                                                        |  |                |         |  |      |  |         |      | 
|                                                                                                        |  | (In thousands) |        
|Basic Weighted Average Number of Shares Outstanding                                                     |  |                | 127,236 |  |      |  | 123,325 |      |  |  | 121,646 | 
|Dilutive Effect of Stock Options and Restricted Stock, Net of
    Assumed Repurchase of Treasury Shares |  |                | 3,231   |  |      |  | 2,766   |      |  |  | 1,755   | 
|                                                                                                        |  |                |         |  |      |  |         |      | 
|Diluted Weighted Average Number of Shares Outstanding                                                   |  |                | 130,467 |  |      |  | 126,091 |      |  |  | 123,401 | 
|                                                                                                        |  |                |         |  |      |  |         |      | 



| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                   
|-- | ------------------
|2. | Comprehensive Loss





|                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                           |  | Year Ended December 31, |        
|                                           |  |                         |        
|                                           |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                           |  |                         |         |   |      |   |         |      | 
|                                           |  | (In thousands)          |        
|Foreign Currency Translation Adjustments   |  | $                       | (18,369 | ) |      | $ | (12,289 | )    |  | $ | (16,255 | )
|Minimum Pension Liability, Net of Tax      |  |                         | (1,127  | ) |      |   | (2      | )    |  |   | (662    | )
|                                           |  |                         |         |   |      |   |         |      | 
|Total Accumulated Other Comprehensive Loss |  | $                       | (19,496 | ) |      | $ | (12,291 | )    |  | $ | (16,917 | )
|                                           |  |                         |         |   |      |   |         |      | 

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Other Charges




| |             
| | ------------
| | 2004 Charges



|                                           |                           |                |       |       |              |   |       |               |  |   |       |   |  |   |       |       | 
|------------------------------------------ | ------------------------- | -------------- | ----- | ----- | ------------ | - | ----- | ------------- |  | - | ----- | - |  | - | ----- | ----- | 
|                                           |                           | Drilling       |       |       | Tubular      |   |       |               |  |  
|                                           |                           | Products and   |       |       | Technology   |   |       | Corporate and |  |   |      
|                                           |                           | Services       |       |       | and Services |   |       | Other         |  |   | Total |  
|                                           |                           |                |       |       |              |   |       |               |  |   |       |  
|                                           |                           | (In thousands) |      
|Drilling Products Rationalization Program: |                           |                |       |       |              |   |       |               |  |   |       |   |  |   |       |      
|                                           | Lease termination cost(a) |                | $     | 1,430 |              |   | $     |              |  |   | $     |  |  |   | $     | 1,430 | 
|                                           | Severance costs(b)        |                |       | 272   |              |   |       |              |  |   |       |  |  |   |       | 272   | 
|                                           | Other exit costs(c)       |                |       | 349   |              |   |       |              |  |   |       |  |  |   |       | 349   | 
|                                           |                           |                |       |       |              |   |       |               |  |   |       |  
|                                           |                           |                | 2,051 |       |              |   |      |               |  |   |      |   |  |   | 2,051 |      
|Severance Costs(d)                         |                           |                |      |       |              |   | 3,207 |               |  |   |      |   |  |   | 3,207 |      
|Corporate Relocation Charge(e)             |                           |                |      |       |              |   |      |               |  |   | 3,777 |   |  |   | 3,777 |      
|                                           |                           |                |       |       |              |   |       |               |  |   |       |  
|                                           |                           | $              | 2,051 |       |              | $ | 3,207 |               |  | $ | 3,777 |   |  | $ | 9,035 |      
|                                           |                           |                |       |       |              |   |       |               |  |   |       |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The lease termination cost of $1.4 million, primarily
    recorded in the first quarter of 2004, is for a long-term lease
    which is expected to be repaid over the next year for equipment
    located at the Companys Canadian facility. Due to the
    downsizing of the Companys Canadian operations, this
    equipment will no longer be utilized. This amount was included
    in Other Current Liabilities in the Consolidated
    Balance Sheets.         
|   
|(b) |  | Severance costs of $0.3 million, primarily recorded in the
    first quarter of 2004, relate to employees that were terminated
    in connection with the downsizing of the Companys Canadian
    operations. These costs relate to 79 employees and were paid in
    July 2004.                                                                                                                                                                                        
|   
|(c) |  | Other exit costs of $0.3 million, primarily recorded in the
    first quarter of 2004, are associated with the downsizing of the
    Canadian operations.                                                                                                                                                                                                                                                                                                                
|   
|(d) |  | Severance costs of $3.2 million, of which $0.9 million
    was recorded in the first quarter of 2004 and $2.3 million
    was recorded in the second quarter of 2004, relate to the
    organizational restructuring of the Companys Tubular
    Technology and Services segment. These costs relate to 4
    employees and of the $3.2 million, $2.5 million
    related to accelerated vesting of stock options with the
    remaining $0.7 million paid by June 2004.
|   
|(e) |  | Corporate relocation charge of $3.8 million, recorded in
    the third quarter of 2004, primarily relates to the non-cash
    write-off of leasehold improvements and furniture and fixtures
    resulting from the relocation of the Companys Corporate
    offices in September 2004.                                                                                                                                                                                 

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |             
| | ------------
| | 2003 Charges



|                                               |  |                |        |  |              |   |     |               |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | -------------- | ------ |  | ------------ | - | --- | ------------- |  | - | ------ | - |  | - | ------ | -
|                                               |  | Drilling       |        |  | Tubular      |   |     |               |  |  
|                                               |  | Products and   |        |  | Technology   |   |     | Corporate and |  |   |       
|                                               |  | Services       |        |  | and Services |   |     | Other         |  |   | Total  |  
|                                               |  |                |        |  |              |   |     |               |  |   |        |  
|                                               |  | (In thousands) |       
|Fixed Asset Write-Downs(a)                     |  | $              | 24,924 |  |              | $ |    |               |  | $ |       |   |  | $ | 24,924 |  
|Other Impairments(b)                           |  |                |       |  |              |   |    |               |  |   | 6,396  |   |  |   | 6,396  |  
|Stock Compensation Expense(c)                  |  |                |       |  |              |   |    |               |  |   | 1,478  |   |  |   | 1,478  |  
|Contingent Liability Credit(d)                 |  |                |       |  |              |   |    |               |  |   | (1,400 | ) |  |   | (1,400 | )
|                                               |  |                |        |  |              |   |     |               |  |   |        |  
|                                               |  |                | 24,924 |  |              |   |    |               |  |   | 6,474  |   |  |   | 31,398 |  
|Inventory Reserves for Exited Product Lines(e) |  |                |       |  |              |   | 425 |               |  |   | 6,000  |   |  |   | 6,425  |  
|                                               |  |                |        |  |              |   |     |               |  |   |        |  
|                                               |  | $              | 24,924 |  |              | $ | 425 |               |  | $ | 12,474 |   |  | $ | 37,823 |  
|                                               |  |                |        |  |              |   |     |               |  |   |        |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The write-down of fixed assets was reported as other charges and
    related to assets taken out of service as part of the Drilling
    Products and Services manufacturing rationalization
    program. The amount was determined by use of internal appraisals
    and evaluations to assess the net realizable value upon disposal
    based on expected future cash flows.
|   
|(b) |  | The other impairments relate to two technology joint ventures.
    The amount was determined by use of internal appraisals and
    evaluations to assess the net realizable value upon disposal
    based on expected future cash flows.                                                                                                                                       
|   
|(c) |  | In May 2003, two members of the Board of Directors volunteered
    to step down to reduce the number of common directors between
    Grant Prideco and its former parent, Weatherford, and vesting of
    their stock-based compensation was accelerated (see
    Note 11).                                                                                                    
|   
|(d) |  | In July 2003, the dispute underlying the 2000 $4.7 million
    contingent liability accrual was settled for $3.3 million,
    therefore a $1.4 million credit was recorded to reflect the
    actual 2003 settlement of the liability accrued as a charge in
    2000.                                                                                                         
|   
|(e) |  | The inventory reserves for the exited product lines were
    reported as cost of sales and relate to the write-down of
    industrial inventory drilling products to their net estimated
    realizable values. The amount was determined by use of internal
    appraisals and evaluations to assess the estimated net
    realizable value upon disposition.                 



|   |             
|-- | ------------
|4. | Acquisitions

5-year


51



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












52



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |             
|-- | ------------
|5. | Dispositions













|   |                        
|-- | -----------------------
|6. | Discontinued Operations



53



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                           |  |                |         |   |      |   |        |  
|------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------ | -
|                                           |  | Year Ended     |        
|                                           |  | December 31,   |        
|                                           |  |                |        
|                                           |  | 2004           |         |   | 2003 |  
|                                           |  |                |         |   |      |  
|                                           |  | (In thousands) |        
|Revenues                                   |  | $              | 12,833  |   |      | $ | 34,683 |  
|Income Before Income Taxes                 |  |                | 1,369   |   |      |   | 820    |  
|Income Tax Provision                       |  |                | (479    | ) |      |   | (287   | )
|                                           |  |                |         |   |      |  
|Income from Operations, Net of Tax         |  |                | 890     |   |      |   | 533    |  
|Loss on Disposal, Net of Tax               |  |                | (10,417 | ) |      |   |       |  
|                                           |  |                |         |   |      |  
|Income (Loss) from Discontinued Operations |  | $              | (9,527  | ) |      | $ | 533    |  
|                                           |  |                |         |   |      |  





|   |                                         
|-- | ----------------------------------------
|7. | Investments in Unconsolidated Affiliates



|            |  |                |        |  |      |   |        | 
|----------- |  | -------------- | ------ |  | ---- | - | ------ | 
|            |  | December 31,   |       
|            |  |                |       
|            |  | 2005           |        |  | 2004 |  
|            |  |                |        |  |      |  
|            |  | (In thousands) |       
|VAT         |  | $              | 84,547 |  |      | $ | 38,308 | 
|IntelliServ |  |                |       |  |      |   | 10,851 | 





|                     |  |                |         |  |      |   |         | 
|-------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                     |  | December 31,   |        
|                     |  |                |        
|                     |  | 2005           |         |  | 2004 |  
|                     |  |                |         |  |      |  
|                     |  | (In thousands) |        
|Current Assets       |  | $              | 205,456 |  |      | $ | 103,561 | 
|Other Assets         |  |                | 48,934  |  |      |   | 59,351  | 
|                     |  |                |         |  |      |  
|                     |  | $              | 254,390 |  |      | $ | 162,912 | 
|                     |  |                |         |  |      |  
|Current Liabilities  |  | $              | 66,544  |  |      | $ | 58,259  | 
|Other Liabilities    |  |                | 21,679  |  |      |   | 21,610  | 
|Stockholders Equity |  |                | 166,167 |  |      |   | 83,043  | 
|                     |  |                |         |  |      |  
|                     |  | $              | 254,390 |  |      | $ | 162,912 | 
|                     |  |                |         |  |      |  

54



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                        |  |                         |         |  |      |   |         |      |  |   |         | 
|----------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                        |  | Year Ended December 31, |        
|                        |  |                         |        
|                        |  | 2005                    |         |  | 2004 |   |         | 2003 | 
|                        |  |                         |         |  |      |   |         |      | 
|                        |  | (In thousands)          |        
|Net Sales               |  | $                       | 537,865 |  |      | $ | 320,141 |      |  | $ | 224,960 | 
|Gross Profit            |  |                         | 141,803 |  |      |   | 31,862  |      |  |   | 22,008  | 
|Net Income              |  |                         | 127,101 |  |      |   | 20,162  |      |  |   | 11,181  | 
|Companys Equity Income |  |                         | 63,978  |  |      |   | 9,448   |      |  |   | 6,481   | 
|Dividends Received      |  |                         | 12,041  |  |      |   | 8,090   |      |  |   | 13,649  | 

S-X 10-K








55



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |               
|-- | --------------
|8. | Long-Term Debt



| |                          
| | -------------------------
| | Summary of Long-Term Debt



|                                                                             |  |                |         |  |      |   |         | 
|---------------------------------------------------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                                                             |  | December 31,   |        
|                                                                             |  |                |        
|                                                                             |  | 2005           |         |  | 2004 |  
|                                                                             |  |                |         |  |      |  
|                                                                             |  | (In thousands) |        
|New Credit Facility (7.5% at December 31, 2005)                              |  | $              | 11,200  |  |      | $ |        | 
|61/8% Senior
    Notes due 2015                                              |  |                | 200,000 |  |      |   |        | 
|9% Senior Notes due 2009                                                     |  |                | 95      |  |      |   | 175,000 | 
|95/8% Senior
    Notes due 2007, Net of Unamortized Discount of $518 in 2004 |  |                |        |  |      |   | 199,482 | 
|Capital Lease Obligations                                                    |  |                | 2,318   |  |      |   |        | 
|Other                                                                        |  |                | 10,916  |  |      |   | 7,472   | 
|                                                                             |  |                |         |  |      |  
|                                                                             |  |                | 224,529 |  |      |   | 381,954 | 
|Less: Current Portion of Long-Term Debt                                      |  |                | 7,045   |  |      |   | 4,181   | 
|                                                                             |  |                |         |  |      |  
|                                                                             |  | $              | 217,484 |  |      | $ | 377,773 | 
|                                                                             |  |                |         |  |      |  



|           |  |   |         | 
|---------- |  | - | ------- | 
|2006       |  | $ | 7,045   | 
|2007       |  |   | 3,635   | 
|2008       |  |   | 550     | 
|2009       |  |   | 634     | 
|2010       |  |   | 11,487  | 
|Thereafter |  |   | 201,178 | 
|           |  |   |        
|           |  | $ | 224,529 | 
|           |  |   |        



| |               
| | --------------
| | Capital Leases



|                                                         |  |   |       | 
|-------------------------------------------------------- |  | - | ----- | 
|2006                                                     |  | $ | 1,151 | 
|2007                                                     |  |   | 630   | 
|2008                                                     |  |   | 364   | 
|2009                                                     |  |   | 318   | 
|2010                                                     |  |   | 154   | 
|Thereafter                                               |  |   |      | 
|                                                         |  |   |      
|Total Minimum Lease Payments                             |  | $ | 2,617 | 
|Less: Amounts Representing Interest                      |  |   | 299   | 
|                                                         |  |   |      
|Present Value of Minimum Lease Payments                  |  |   | 2,318 | 
|Less: Current Portion of Obligations Under Capital Lease |  |   | 1,007 | 
|                                                         |  |   |      
|Long-Term Portion of Obligations Under Capital Lease     |  | $ | 1,311 | 
|                                                         |  |   |      

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Debt Restructuring




| |                    
| | -------------------
| | New Credit Facility















| |                                                  
| | -------------------------------------------------
| | Redemption of
    95/8% Senior
    Notes Due 2007

5 8 5 8 5 8 5 8


57



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


5 8




| |                                                
| | -----------------------------------------------
| | Issuance of
    61/8% Senior
    Notes Due 2015

1 8 1 8 1 8 1 8


|                    |  |            |          | 
|------------------- |  | ---------- | -------- | 
|Year                |  | Percentage |         
|                    |  |            |         
|2010                |  |            | 103.063% | 
|2011                |  |            | 102.042% | 
|2012                |  |            | 101.021% | 
|2013 and thereafter |  |            | 100.000% | 

1 8 1 8 1 8




| |                                       
| | --------------------------------------
| | Repurchase of 9% Senior Notes Due 2009





| |                    
| | -------------------
| | Treasury Rate Locks



58



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                     
|-- | ------------------------------------
|9. | Goodwill and Other Intangible Assets





|                                  |  |                |         |   |            |   |            |              |  |   |         |   |  |       |        |  |  |   |         |  
|--------------------------------- |  | -------------- | ------- | - | ---------- | - | ---------- | ------------ |  | - | ------- | - |  | ----- | ------ |  |  | - | ------- | -
|                                  |  | Drilling       |         |   |            |   | Tubular    |              |  |   |         |  
|                                  |  | Products and   |         |   |            |   | Technology |              |  |   |         |  
|                                  |  | Services       |         |   | Drill Bits |   |            | and Services |  |   | Other   |   |  | Total |       
|                                  |  |                |         |   |            |   |            |              |  |   |         |   |  |       |       
|                                  |  | (In thousands) |        
|Balance, December 31, 2003        |  | $              | 129,458 |   |            | $ | 162,315    |              |  | $ | 105,171 |   |  | $     |       |  |  | $ | 396,944 |  
|Acquisitions                      |  |                |        |   |            |   | 5,089      |              |  |   |        |   |  |       |       |  |  |   | 5,089   |  
|Dispositions                      |  |                |        |   |            |   |           |              |  |   | (8,038  | ) |  |       |       |  |  |   | (8,038  | )
|Translation and Other Adjustments |  |                | 669     |   |            |   | (671       | )            |  |   |        |   |  |       |       |  |  |   | (2      | )
|                                  |  |                |         |   |            |   |            |              |  |   |         |   |  |       |       
|Balance, December 31, 2004        |  |                | 130,127 |   |            |   | 166,733    |              |  |   | 97,133  |   |  |       |       |  |  |   | 393,993 |  
|Acquisitions                      |  |                | 2,114   |   |            |   | 5,777      |              |  |   |        |   |  |       | 18,840 |  |  |   | 26,731  |  
|Translation and Other Adjustments |  |                | (1,356  | ) |            |   | 2,259      |              |  |   |        |   |  |       |       |  |  |   | 903     |  
|                                  |  |                |         |   |            |   |            |              |  |   |         |   |  |       |       
|Balance, December 31, 2005        |  | $              | 130,885 |   |            | $ | 174,769    |              |  | $ | 97,133  |   |  | $     | 18,840 |  |  | $ | 421,627 |  
|                                  |  |                |         |   |            |   |            |              |  |   |         |   |  |       |       





59



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |  |              |     |                |                   |   |        |                   |  |   |             |   |  |             |        |  |              |   |        |             |  |   |         |   |  |   |        | 
|------------------------ |  | ------------ | --- | -------------- | ----------------- | - | ------ | ----------------- |  | - | ----------- | - |  | ----------- | ------ |  | ------------ | - | ------ | ----------- |  | - | ------- | - |  | - | ------ | 
|                         |  | Weighted     |     |                | December 31, 2005 |   |        | December 31, 2004 | 
|                         |  | Average      |     |                |                   |   |        |                   | 
|                         |  | Amortization |     |                | Gross             |   |        | Accumulated       |  |   | Net         |   |  | Gross       |        |  | Accumulated  |   |        | Net         | 
|                         |  | Period       |     |                | Intangibles       |   |        | Amortization      |  |   | Intangibles |   |  | Intangibles |        |  | Amortization |   |        | Intangibles | 
|                         |  |              |     |                |                   |   |        |                   |  |   |             |   |  |             |        |  |              |   |        |             | 
|                         |  | (Years)      |     |                |                  
|                         |  |              |     | (In thousands) |                  
|Patents                  |  |              | 15  |                |                   | $ | 58,367 |                   |  | $ | (8,174      | ) |  | $           | 50,193 |  |              | $ | 43,380 |             |  | $ | (5,908  | ) |  | $ | 37,472 | 
|Technology Licenses      |  |              | 12  |                |                   |   | 1,438  |                   |  |   | (583        | ) |  |             | 855    |  |              |   | 1,438  |             |  |   | (498    | ) |  |   | 940    | 
|Customer Relationships   |  |              | 20  |                |                   |   | 6,410  |                   |  |   | (612        | ) |  |             | 5,798  |  |              |   | 4,600  |             |  |   | (335    | ) |  |   | 4,265  | 
|Trademarks               |  |              | 4   |                |                   |   | 1,610  |                   |  |   | (1,044      | ) |  |             | 566    |  |              |   | 1,610  |             |  |   | (815    | ) |  |   | 795    | 
|Covenants Not To Compete |  |              | 3   |                |                   |   | 3,625  |                   |  |   | (3,078      | ) |  |             | 547    |  |              |   | 3,125  |             |  |   | (2,790  | ) |  |   | 335    | 
|Pension Asset(a)         |  |              | N/A |                |                   |   | 222    |                   |  |   |            |   |  |             | 222    |  |              |   |       |             |  |   |        |   |  |   |       | 
|                         |  |              |     |                |                   |   |        |                   |  |   |             |   |  |             |        |  |              |   |        |             | 
|                         |  |              | 11  |                |                   | $ | 71,672 |                   |  | $ | (13,491     | ) |  | $           | 58,181 |  |              | $ | 54,153 |             |  | $ | (10,346 | ) |  | $ | 43,807 | 
|                         |  |              |     |                |                   |   |        |                   |  |   |             |   |  |             |        |  |              |   |        |             | 






|    |                                                                          
|--- | -------------------------------------------------------------------------
|(a) | The pension asset is a non-amortizing intangible asset (see
    Note 12).





|    |                                   
|--- | ----------------------------------
|10. | Supplemental Cash Flow Information



|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                  |  | Year Ended December 31, |       
|                                  |  |                         |       
|                                  |  | 2005                    |        |  | 2004 |   |        | 2003 | 
|                                  |  |                         |        |  |      |   |        |      | 
|                                  |  | (In thousands)          |       
|Interest Paid                     |  | $                       | 24,417 |  |      | $ | 38,241 |      |  | $ | 41,168 | 
|Income Taxes Paid, Net of Refunds |  |                         | 40,515 |  |      |   | 22,369 |      |  |   | 13,530 | 



|                                           |  |                         |         |   |      |   |        |      |  |   |        |  
|------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                           |  | Year Ended December 31, |        
|                                           |  |                         |        
|                                           |  | 2005                    |         |   | 2004 |   |        | 2003 | 
|                                           |  |                         |         |   |      |   |        |      | 
|                                           |  | (In thousands)          |        
|Fair Value of Assets, Net of Cash Acquired |  | $                       | 20,569  |   |      | $ | 38,248 |      |  | $ | (2,826 | )
|Goodwill                                   |  |                         | 26,731  |   |      |   | 5,089  |      |  |   | 8,870  |  
|Fair Value of Liabilities Assumed          |  |                         | (16,263 | ) |      |   | (9,504 | )    |  |   | 2,228  |  
|Minority Interests Acquired                |  |                         | 8,195   |   |      |   |       |      |  |   |       |  
|                                           |  |                         |         |   |      |   |        |      | 
|Cash Consideration, Net of Cash Acquired   |  | $                       | 39,232  |   |      | $ | 33,833 |      |  | $ | 8,272  |  
|                                           |  |                         |         |   |      |   |        |      | 

60



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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                          
|--- | -----------------------------------------
|11. | Common Stock and Stock-Based Compensation

Stock Option and Restricted
Stock Plans








gross-up


61



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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                         |  |                                      |         |  |      |   |         |      |  |   |       | 
|-------------------------------------------------------- |  | ------------------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ----- | 
|                                                         |  | Year Ended December 31,              |        
|                                                         |  |                                      |        
|                                                         |  | 2005                                 |         |  | 2004 |   |         | 2003 | 
|                                                         |  |                                      |         |  |      |   |         |      | 
|                                                         |  | (In thousands, except share amounts) |        
|Shares Awarded                                           |  |                                      | 195,000 |  |      |   | 390,550 |      |  |   |      | 
|Weighted Average Fair Value of Restricted Stock Granted  |  | $                                    | 22.51   |  |      | $ | 13.59   |      |  | $ |      | 
|Compensation Expense Recognized, Including Tax Component |  | $                                    | 8,972   |  |      | $ | 4,246   |      |  | $ | 4,014 | 









|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          |  |            |   |  |   |       | 
|---------------------------------------- |  | --------- | ---------- | -------- | -------- | - | ----- | --------- | -------- |  | ---------- | - |  | --------- | ----- |  | -------- |  | ---------- | - |  | - | ----- | 
|                                         |  | 2005      |            |          | 2004     |   |       | 2003      |         
|                                         |  |           |            |          |          |   |       |           |         
|                                         |  |           |            | Weighted |          |   |       |           | Weighted |  |            |   |  | Weighted  |      
|                                         |  |           |            | Average  |          |   |       |           | Average  |  |            |   |  | Average   |      
|                                         |  | Number of |            |          | Exercise |   |       | Number of |          |  | Exercise   |   |  | Number of |       |  | Exercise | 
|                                         |  | Shares    |            |          | Price    |   |       | Shares    |          |  | Price      |   |  | Shares    |       |  | Price    | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 
|Outstanding at the Beginning of the Year |  |           | 10,094,804 |          |          | $ | 12.74 |           |          |  | 12,510,605 |   |  | $         | 11.69 |  |          |  | 12,330,533 |   |  | $ | 11.81 | 
|Options Granted During the Year          |  |           | 482,000    |          |          |   | 20.52 |           |          |  | 713,500    |   |  |           | 13.61 |  |          |  | 993,500    |   |  |   | 10.72 | 
|Options Exercised                        |  |           | (5,657,391 | )        |          |   | 13.29 |           |          |  | (2,998,289 | ) |  |           | 8.69  |  |          |  | (96,428    | ) |  |   | 8.29  | 
|Options Canceled                         |  |           | (172,025   | )        |          |   | 11.63 |           |          |  | (131,012   | ) |  |           | 10.22 |  |          |  | (717,000   | ) |  |   | 12.87 | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 
|Outstanding at the End of the Year       |  |           | 4,747,388  |          |          | $ | 12.91 |           |          |  | 10,094,804 |   |  | $         | 12.74 |  |          |  | 12,510,605 |   |  | $ | 11.69 | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 
|Exercisable at the End of the Year       |  |           | 3,244,385  |          |          | $ | 11.17 |           |          |  | 5,648,654  |   |  | $         | 15.54 |  |          |  | 6,437,883  |   |  | $ | 13.66 | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 



|                         |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | -------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |          | Options Exercisable | 
|                         |  |                     |           |          |                     | 
|                         |  |                     |           | Weighted |                     |  | Weighted |          |  |   |             | Weighted | 
|                         |  |                     |           | Average  |                     |  | Average  |          |  |   |             | Average  | 
|                         |  | Number              |           |          | Remaining           |  |          | Exercise |  |   | Number      |          |  | Exercise |          
|Range of Exercise Prices |  | Outstanding         |           |          | Life (Years)        |  |          | Price    |  |   | Exercisable |          |  | Price    |          
|                         |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          
|$4.69 - $7.14            |  |                     | 1,328,411 |          |                     |  | 9.41     |          |  | $ | 7.06        |          |  |          | 1,328,411 |  |  | $ | 7.06  | 
|$8.35 - $14.19           |  |                     | 1,920,852 |          |                     |  | 9.33     |          |  |   | 11.76       |          |  |          | 827,014   |  |  |   | 7.77  | 
|$14.55 - $21.91          |  |                     | 1,498,125 |          |                     |  | 7.77     |          |  |   | 19.56       |          |  |          | 1,088,960 |  |  |   | 18.78 | 
|                         |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          
|                         |  |                     | 4,747,388 |          |                     |  | 8.86     |          |  | $ | 12.91       |          |  |          | 3,244,385 |  |  | $ | 11.17 | 
|                         |  |                     |           |          |                     |  |          |          |  |   |             |          |  |          |          

62



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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                      
| | -------------------------------------
| | Executive Deferred Compensation Plans







| |                             
| | ----------------------------
| | Employee Stock Purchase Plan





| |               
| | --------------
| | Treasury Stock





|    |                                      
|--- | -------------------------------------
|12. | Retirement and Employee Benefit Plans



| |                          
| | -------------------------
| | Defined Contribution Plan



63



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |              
| | -------------
| | Pension Plans





| |                  
| | -----------------
| | U.S. Pension Plan





| |                              
| | -----------------------------
| | Obligations and Funded Status



|                                                       |                                                |                                          |        |        |        |   |        |        |        |  
|------------------------------------------------------ | ---------------------------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                       |                                                | 2005                                     |        |        | 2004   |  
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | (In thousands)                           |       
|Change in Benefit Obligation:                          |                                                |                                          |        |        |        |   |        |       
|                                                       | Benefit obligation at beginning of year        |                                          | $      | 13,377 |        |   | $      | 13,675 |       
|                                                       | Service cost                                   |                                          |        | 382    |        |   |        | 367    |       
|                                                       | Interest cost                                  |                                          |        | 841    |        |   |        | 734    |       
|                                                       | Plan amendments                                |                                          |        | 222    |        |   |        |       |       
|                                                       | Benefits paid                                  |                                          |        | (615   | )      |   |        | (486   | )     
|                                                       | Plan curtailments                              |                                          |        | (67    | )      |   |        |       |       
|                                                       | Actuarial loss (gain)                          |                                          |        | 1,578  |        |   |        | (913   | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Benefit obligation at end of year        |        | $      | 15,718 |   |        | $      | 13,377 |  
|                                                       |                                                |                                          |        |        |        |  
|Change in Plan Assets:                                 |                                                |                                          |        |        |        |   |        |       
|                                                       | Fair value of plan assets at beginning of year |                                          | $      | 9,165  |        |   | $      | 8,796  |       
|                                                       | Actual return on plan assets                   |                                          |        | 316    |        |   |        | 787    |       
|                                                       | Employer contributions                         |                                          |        | 1,658  |        |   |        | 244    |       
|                                                       | Benefits paid                                  |                                          |        | (615   | )      |   |        | (486   | )     
|                                                       | Administrative expenses                        |                                          |        | (60    | )      |   |        | (176   | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Fair value of plan assets at end of year |        | $      | 10,464 |   |        | $      | 9,165  |  
|                                                       |                                                |                                          |        |        |        |  
|Funded Status at End of Year                           |                                                |                                          | (5,254 | )      |        |   | (4,212 | )     
|Unrecognized Net Actuarial Loss                        |                                                |                                          | 1,734  |        |        |   | 4      |       
|Unrecognized Prior Service Cost                        |                                                |                                          | 222    |        |        |   |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (3,298 | ) |        | $      | (4,208 | )
|                                                       |                                                |                                          |        |        |        |  
|Amounts Recognized on the Consolidated Balance Sheets: |                                                |                                          |        |        |        |   |        |       
|                                                       | Accrued benefit liability                      |                                          | $      | (5,254 | )      |   | $      | (4,212 | )     
|                                                       | Accumulated other comprehensive income         |                                          |        | 1,734  |        |   |        | 4      |       
|                                                       | Intangible asset                               |                                          |        | 222    |        |   |        |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (3,298 | ) |        | $      | (4,208 | )
|                                                       |                                                |                                          |        |        |        |  

64



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                |        |  |      |   |        | 
|------------------------------ |  | -------------- | ------ |  | ---- | - | ------ | 
|                               |  | 2005           |        |  | 2004 |  
|                               |  |                |        |  |      |  
|                               |  | (In thousands) |       
|Projected Benefit Obligation   |  | $              | 15,718 |  |      | $ | 13,377 | 
|Accumulated Benefit Obligation |  |                | 15,718 |  |      |   | 13,377 | 
|Fair Value of Plan Assets      |  |                | 10,464 |  |      |   | 9,165  | 



|                               |                   |                |      |     |      |   |      |     | 
|------------------------------ | ----------------- | -------------- | ---- | --- | ---- | - | ---- | --- | 
|                               |                   | 2005           |      |     | 2004 |  
|                               |                   |                |      |     |      |  
|                               |                   | (In thousands) |     
|Service Cost                   |                   | $              | 382  |     |      | $ | 367  |    
|Interest Cost                  |                   |                | 841  |     |      |   | 734  |    
|Expected Return on Plan Assets |                   |                | (595 | )   |      |   | (560 | )  
|Amortization of Net Loss       |                   |                | 11   |     |      |   |     |    
|Administration Expenses        |                   |                | 108  |     |      |   | 51   |    
|                               |                   |                |      |     |      |  
|                               | Net Periodic Cost |                | $    | 747 |      |   | $    | 592 | 
|                               |                   |                |      |     |      |  



| |                       
| | ----------------------
| | Additional Information



|                                                                                  |  |                |       |  |      |   |        |  
|--------------------------------------------------------------------------------- |  | -------------- | ----- |  | ---- | - | ------ | -
|                                                                                  |  | 2005           |       |  | 2004 |  
|                                                                                  |  |                |       |  |      |  
|                                                                                  |  | (In thousands) |      
|Increase (Decrease) in Minimum Liability Included in Other
    Comprehensive Loss |  | $              | 1,730 |  |      | $ | (1,014 | )



| |            
| | -----------
| | Assumptions



|                              |  |      |      |   |      |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                              |  | 2005 |      |   | 2004 | 
|                              |  |      |      |   |      | 
|Discount rate                 |  |      | 5.50 | % |      |  | 5.78 | %
|Rate of compensation increase |  |      | N/A  |   |      |  | N/A  |  



|                               |  |      |      |   |      |  |      |  
|------------------------------ |  | ---- | ---- | - | ---- |  | ---- | -
|                               |  | 2005 |      |   | 2004 | 
|                               |  |      |      |   |      | 
|Discount rate                  |  |      | 5.78 | % |      |  | 6.15 | %
|Expected return on plan assets |  |      | 6.58 | % |      |  | 6.58 | %
|Rate of compensation increase  |  |      | N/A  |   |      |  | N/A  |  



65



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                 
| | ----------------
| | Asset Categories



|                  |  |        |     |              |      |  |     |      |  |  |     |  
|----------------- |  | ------ | --- | ------------ | ---- |  | --- | ---- |  |  | --- | -
|                  |  |        |     | Actual       |     
|                  |  |        |     | December 31, |     
|                  |  |        |     |              |     
|Asset Category    |  | Target |     |              | 2005 |  |     | 2004 | 
|                  |  |        |     |              |      |  |     |      | 
|Equity Securities |  |        | 50  | %            |      |  | 59  | %    |  |  | 68  | %
|Fixed Income      |  |        | 40  | %            |      |  | 41  | %    |  |  | 31  | %
|Other             |  |        | 10  | %            |      |  | 0   | %    |  |  | 1   | %
|                  |  |        |     |              |      |  |     |      | 
|                  |  |        | 100 | %            |      |  | 100 | %    |  |  | 100 | %
|                  |  |        |     |              |      |  |     |      | 





| |          
| | ---------
| | Cash Flow





|                   |  |                |        | 
|------------------ |  | -------------- | ------ | 
|Fiscal Year Ending |  | Payments       |       
|                   |  |                |       
|                   |  | (In thousands) |       
|2006               |  | $              | 904    | 
|2007               |  |                | 980    | 
|2008               |  |                | 1,039  | 
|2009               |  |                | 1,083  | 
|2010               |  |                | 1,128  | 
|Next 5 years       |  |                | 6,347  | 
|                   |  |                |       
|Total              |  | $              | 11,481 | 
|                   |  |                |       



| |                         
| | ------------------------
| | Non-U.S.Pension
    Plan



66



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                              
| | -----------------------------
| | Obligations and Funded Status



|                                                       |                                                |                                          |        |        |        |   |        |        |        |  
|------------------------------------------------------ | ---------------------------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                       |                                                | 2005                                     |        |        | 2004   |  
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | (In thousands)                           |       
|Change in Benefit Obligation:                          |                                                |                                          |        |        |        |   |        |       
|                                                       | Benefit obligation at beginning of year        |                                          | $      | 20,648 |        |   | $      | 21,480 |       
|                                                       | Interest cost                                  |                                          |        | 917    |        |   |        | 863    |       
|                                                       | Employee contributions                         |                                          |        |       |        |   |        |       |       
|                                                       | Benefits paid                                  |                                          |        | (234   | )      |   |        | (256   | )     
|                                                       | Acquisitions                                   |                                          |        |       |        |   |        |       |       
|                                                       | Actuarial (gain) loss                          |                                          |        | 2,480  |        |   |        | (1,439 | )     
|                                                       | Exchange rate changes                          |                                          |        | (2,125 | )      |   |        |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Benefit obligation at end of year        |        | $      | 21,686 |   |        | $      | 20,648 |  
|                                                       |                                                |                                          |        |        |        |  
|Change in Plan Assets:                                 |                                                |                                          |        |        |        |   |        |       
|                                                       | Fair value of plan assets at beginning of year |                                          | $      | 21,129 |        |   | $      | 17,956 |       
|                                                       | Actual return on plan assets                   |                                          |        | 2,633  |        |   |        | 3,429  |       
|                                                       | Employer contributions                         |                                          |        |       |        |   |        |       |       
|                                                       | Employee contributions                         |                                          |        |       |        |   |        |       |       
|                                                       | Benefits paid                                  |                                          |        | (234   | )      |   |        | (256   | )     
|                                                       | Exchange rate changes                          |                                          |        | (2,140 | )      |   |        |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Fair value of plan assets at end of year |        | $      | 21,388 |   |        | $      | 21,129 |  
|                                                       |                                                |                                          |        |        |        |  
|Funded Status at End of Year                           |                                                |                                          | (298   | )      |        |   | 481    |       
|Unrecognized Net Actuarial Gain                        |                                                |                                          | (4,191 | )      |        |   | (5,120 | )     
|Unrecognized Prior Service Cost                        |                                                |                                          | 400    |        |        |   |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,089 | ) |        | $      | (4,639 | )
|                                                       |                                                |                                          |        |        |        |  
|Amounts Recognized on the Consolidated Balance Sheets: |                                                |                                          |        |        |        |   |        |       
|                                                       | Accrued benefit liability                      |                                          | $      | (4,089 | )      |   | $      | (4,639 | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,089 | ) |        | $      | (4,639 | )
|                                                       |                                                |                                          |        |        |        |  



|                               |  |      |        | 
|------------------------------ |  | ---- | ------ | 
|                               |  | 2005 |       
|                               |  |      |       
|Projected Benefit Obligation   |  | $    | 21,686 | 
|Accumulated Benefit Obligation |  |      | 21,686 | 
|Fair Value of Plan Assets      |  |      | 21,388 | 



67



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |                      |                |      |   |      |   |      |      |  
|---------------------------------- | -------------------- | -------------- | ---- | - | ---- | - | ---- | ---- | -
|                                   |                      | 2005           |      |   | 2004 |  
|                                   |                      |                |      |   |      |  
|                                   |                      | (In thousands) |     
|Interest Cost                      |                      | $              | 917  |   |      | $ | 863  |     
|Expected Return on Plan Assets     |                      |                | (939 | ) |      |   | (927 | )   
|Amortization of Prior Service Cost |                      |                | 235  |   |      |   |     |     
|Amortization of Net Actuarial Gain |                      |                | (213 | ) |      |   | (293 | )   
|                                   |                      |                |      |   |      |  
|                                   | Net Periodic Benefit |                | $    |  |      |   | $    | (357 | )
|                                   |                      |                |      |   |      |  



| |                       
| | ----------------------
| | Additional Information





| |            
| | -----------
| | Assumptions



|                              |  |      |      |   |      |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                              |  | 2005 |      |   | 2004 | 
|                              |  |      |      |   |      | 
|Discount rate                 |  |      | 4.25 | % |      |  | 4.75 | %
|Rate of compensation increase |  |      | N/A  |   |      |  | N/A  |  



|                               |  |      |      |   |      |  |      |  
|------------------------------ |  | ---- | ---- | - | ---- |  | ---- | -
|                               |  | 2005 |      |   | 2004 | 
|                               |  |      |      |   |      | 
|Discount rate                  |  |      | 4.75 | % |      |  | 5.00 | %
|Expected return on plan assets |  |      | 4.75 | % |      |  | 5.00 | %
|Rate of compensation increase  |  |      | N/A  |   |      |  | N/A  |  





| |                 
| | ----------------
| | Asset Categories



|                  |  |        |     |              |      |  |     |      |  |  |     |  
|----------------- |  | ------ | --- | ------------ | ---- |  | --- | ---- |  |  | --- | -
|                  |  |        |     | Actual       |     
|                  |  |        |     | December 31, |     
|                  |  |        |     |              |     
|Asset Category    |  | Target |     |              | 2005 |  |     | 2004 | 
|                  |  |        |     |              |      |  |     |      | 
|Equity Securities |  |        | 0   | %            |      |  | 0   | %    |  |  | 0   | %
|Fixed Income      |  |        | 100 | %            |      |  | 100 | %    |  |  | 100 | %
|Other             |  |        | 0   | %            |      |  | 0   | %    |  |  | 0   | %
|                  |  |        |     |              |      |  |     |      | 
|                  |  |        | 100 | %            |      |  | 100 | %    |  |  | 100 | %
|                  |  |        |     |              |      |  |     |      | 

68



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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |          
| | ---------
| | Cash Flow





|                   |  |                |       | 
|------------------ |  | -------------- | ----- | 
|Fiscal Year Ending |  | Payments       |      
|                   |  |                |      
|                   |  | (In thousands) |      
|2006               |  | $              | 237   | 
|2007               |  |                | 251   | 
|2008               |  |                | 256   | 
|2009               |  |                | 277   | 
|2010               |  |                | 293   | 
|Next 5 years       |  |                | 2,250 | 
|                   |  |                |      
|Total              |  | $              | 3,564 | 
|                   |  |                |      



|    |             
|--- | ------------
|13. | Income Taxes



|         |                                  |                         |         |         |      |   |        |         |  |   |         |        | 
|-------- | -------------------------------- | ----------------------- | ------- | ------- | ---- | - | ------ | ------- |  | - | ------- | ------ | 
|         |                                  | Year Ended December 31, |        
|         |                                  |                         |        
|         |                                  | 2005                    |         |         | 2004 |   |        | 2003    | 
|         |                                  |                         |         |         |      |   |        |         | 
|         |                                  | (In thousands)          |        
|Domestic |                                  | $                       | 82,877  |         |      | $ | 39,339 |         |  | $ | (47,324 | )     
|Foreign  |                                  |                         | 205,756 |         |      |   | 65,442 |         |  |   | 61,889  |       
|         |                                  |                         |         |         |      |   |        |         | 
|         | Total Income Before Income Taxes |                         | $       | 288,633 |      |   | $      | 104,781 |  |   | $       | 14,565 | 
|         |                                  |                         |         |         |      |   |        |         | 



|          |                                         |                         |          |         |      |  |         |         |   |  |         |         |  
|--------- | --------------------------------------- | ----------------------- | -------- | ------- | ---- |  | ------- | ------- | - |  | ------- | ------- | -
|          |                                         | Year Ended December 31, |         
|          |                                         |                         |         
|          |                                         | 2005                    |          |         | 2004 |  |         | 2003    |  
|          |                                         |                         |          |         |      |  |         |         |  
|          |                                         | (In thousands)          |         
|Current:  |                                         |                         |          |         |      |  |         |         |   |  |         |        
|          | U.S. federal and state income taxes     |                         | $        | (55,401 | )    |  | $       | (460    | ) |  | $       | (500    | )
|          | Foreign                                 |                         |          | (47,048 | )    |  |         | (14,189 | ) |  |         | (22,325 | )
|          |                                         |                         |          |         |      |  |         |         |  
|          |                                         |                         | (102,449 | )       |      |  | (14,649 | )       |   |  | (22,825 | )      
|          |                                         |                         |          |         |      |  |         |         |  
|Deferred: |                                         |                         |          |         |      |  |         |         |   |  |         |        
|          | U.S. federal and state income taxes     |                         |          | 16,640  |      |  |         | (14,879 | ) |  |         | 16,136  |  
|          | Foreign                                 |                         |          | (3,871  | )    |  |         | (5,217  | ) |  |         | (3      | )
|          |                                         |                         |          |         |      |  |         |         |  
|          |                                         |                         | 12,769   |         |      |  | (20,096 | )       |   |  | 16,133  |        
|          |                                         |                         |          |         |      |  |         |         |  
|          | Total Income Tax (Provision) Benefit(a) |                         | $        | (89,680 | )    |  | $       | (34,745 | ) |  | $       | (6,692  | )
|          |                                         |                         |          |         |      |  |         |         |  






|    |  |                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes $0.9 million and ($0.3) million of deferred
    taxes from the income (loss) from discontinued operations for
    the years ended 2004 and 2003, respectively (see Note 6).

69



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                         |                                      |                         |          |         |      |   |         |         |   |   |        |        |  
|------------------------------------------------------------------------ | ------------------------------------ | ----------------------- | -------- | ------- | ---- | - | ------- | ------- | - | - | ------ | ------ | -
|                                                                         |                                      | Year Ended December 31, |         
|                                                                         |                                      |                         |         
|                                                                         |                                      | 2005                    |          |         | 2004 |   |         | 2003    |  
|                                                                         |                                      |                         |          |         |      |   |         |         |  
|                                                                         |                                      | (In thousands)          |         
|(Provision) Benefit for Income Taxes at Statutory Rates                  |                                      | $                       | (101,022 | )       |      | $ | (35,610 | )       |   | $ | (4,239 | )     
|Effect of Foreign Income Tax, Net                                        |                                      |                         | 8,249    |         |      |   | 4,233   |         |   |   | (1,044 | )     
|Change in Valuation Allowance                                            |                                      |                         | 1,726    |         |      |   | (4,523  | )       |   |   | (4,300 | )     
|Preferred Supplier Credit                                                |                                      |                         | 1,421    |         |      |   | 1,339   |         |   |   | 3,080  |       
|Extraterritorial Income and Manufacturing Deduction Benefit              |                                      |                         | 1,223    |         |      |   | 1,145   |         |   |   | 700    |       
|State and Local Income Taxes, Net of U.S. Federal Income
    Tax Benefit |                                      |                         | (100     | )       |      |   | 900     |         |   |   | (500   | )     
|Amortization of Restricted Stock Award                                   |                                      |                         | (423     | )       |      |   | (2,220  | )       |   |   |       |       
|Other Permanent Items                                                    |                                      |                         | (754     | )       |      |   | (9      | )       |   |   | (389   | )     
|                                                                         |                                      |                         |          |         |      |   |         |         |  
|                                                                         | (Provision) Benefit for Income Taxes |                         | $        | (89,680 | )    |   | $       | (34,745 | ) |   | $      | (6,692 | )
|                                                                         |                                      |                         |          |         |      |   |         |         |  







|                     |                                       |                           |   |        |        |  |   |        |        | 
|-------------------- | ------------------------------------- | ------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                     |                                       | Year Ended December 31,   |  
|                     |                                       |                           |  
|                     |                                       | 2005                      |   |        | 2004   | 
|                     |                                       |                           |   |        |        | 
|                     |                                       | (In thousands)            |  
|Deferred Tax Assets: |                                       |                           |   |        |        |  |   |       
|                     | Foreign tax credits                   |                           | $ | 41,258 |        |  | $ | 23,393 |       
|                     | Domestic and foreign operating losses |                           |   | 1,416  |        |  |   | 1,367  |       
|                     | Accrued liabilities and reserves      |                           |   | 24,372 |        |  |   | 17,951 |       
|                     | Inventory basis differences           |                           |   | 7,422  |        |  |   | 4,778  |       
|                     | Investments in unconsolidated subs    |                           |   | 2,018  |        |  |   | 3,164  |       
|                     |                                       |                           |   |        |        | 
|                     |                                       | Total deferred tax assets |   |        | 76,486 |  |   |        | 50,653 | 
|                     |                                       |                           |   |        |        | 

70



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                          |                                       |                                       |  |         |         |   |  |         |         |  
|------------------------- | ------------------------------------- | ------------------------------------- |  | ------- | ------- | - |  | ------- | ------- | -
|                          |                                       | Year Ended December 31,               | 
|                          |                                       |                                       | 
|                          |                                       | 2005                                  |  |         | 2004    |  
|                          |                                       |                                       |  |         |         |  
|                          |                                       | (In thousands)                        | 
|Deferred Tax Liabilities: |                                       |                                       |  |         |         |   |  |        
|                          | Goodwill and other intangibles        |                                       |  | (16,562 | )       |   |  | (6,176  | )      
|                          | Property and equipment and other      |                                       |  | (24,044 | )       |   |  | (24,792 | )      
|                          | Foreign taxes                         |                                       |  | (6,828  | )       |   |  |        |        
|                          | Tax on non-repatriated foreign income |                                       |  | (14,846 | )       |   |  | (5,510  | )      
|                          |                                       |                                       |  |         |         |  
|                          |                                       | Total deferred tax liabilities        |  |         | (62,280 | ) |  |         | (36,478 | )
|                          |                                       |                                       |  |         |         |  
|Valuation Allowance:      |                                       |                                       |  |         |         |   |  |        
|                          | Foreign tax credits                   |                                       |  | (14,749 | )       |   |  | (13,924 | )      
|                          |                                       |                                       |  |         |         |  
|                          | Total valuation allowance             |                                       |  | (14,749 | )       |   |  | (13,924 | )      
|                          |                                       |                                       |  |         |         |  
|                          |                                       | Net deferred tax assets (liabilities) |  | $       | (543    | ) |  | $       | 251     |  
|                          |                                       |                                       |  |         |         |  







71



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                                       
|--- | --------------------------------------
|14. | Disputes, Litigation and Contingencies



| |                              
| | -----------------------------
| | Litigation and Other Disputes





| |          
| | ---------
| | Insurance





|    |            
|--- | -----------
|15. | Commitments



| |                 
| | ----------------
| | Operating Leases





|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 9,527  | 
|2007       |  |   | 7,153  | 
|2008       |  |   | 5,858  | 
|2009       |  |   | 4,331  | 
|2010       |  |   | 4,129  | 
|Thereafter |  |   | 15,051 | 
|           |  |   |       
|           |  | $ | 46,049 | 
|           |  |   |       

72



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                  
| | -----------------
| | Other Commitments

30-year




|    |                
|--- | ---------------
|16. | Related Parties









|    |                    
|--- | -------------------
|17. | Segment Information



| |                  
| | -----------------
| | Business Segments





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






74



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|     |                                                        |                |   |            |   |              |   |           |   |       |   |         |   |  |   |         |      |  |   |           |  
|---- | ------------------------------------------------------ | -------------- | - | ---------- | - | ------------ | - | --------- | - | ----- | - | ------- | - |  | - | ------- | ---- |  | - | --------- | -
|     |                                                        | Drilling       |   |            |   | Tubular      |   | Corporate |   |      
|     |                                                        | Products       |   |            |   | Technology   |   | and       |   |      
|     |                                                        | and Services   |   | Drill Bits |   | and Services |   | Other     |   | Total
|     |                                                        |                |   |            |   |              |   |           |   |      
|     |                                                        | (In thousands)
|2005 |                                                        |                |   |            |   |              |   |           |   |       |   |         |   |  |   |         |      |  |   |          
|     | Revenues from Unaffiliated Customers                   |                | $ | 598,900    |   |              | $ | 398,227   |   |       | $ | 352,870 |   |  | $ |        |      |  | $ | 1,349,997 |  
|     | Intersegment Revenues                                  |                |   | 178        |   |              |   | 99        |   |       |   | 8,116   |   |  |   |        |      |  |   | 8,393     |  
|     | Depreciation and Amortization                          |                |   | 13,884     |   |              |   | 15,939    |   |       |   | 11,667  |   |  |   | 5,142   |      |  |   | 46,632    |  
|     | Operating Income (Loss)                                |                |   | 176,181    |   |              |   | 98,616    |   |       |   | 88,286  |   |  |   | (52,130 | )    |  |   | 310,953   |  
|     | Interest Expense                                       |                |   | 483        |   |              |   | 240       |   |       |   | 132     |   |  |   | 28,293  |      |  |   | 29,148    |  
|     | Equity Income (Loss) in Unconsolidated Affiliates      |                |   | 63,977     |   |              |   |          |   |       |   |        |   |  |   | (5,718  | )    |  |   | 58,259    |  
|     | (Provision) Benefit for Income Taxes                   |                |   | (74,355    | ) |              |   | (28,080   | ) |       |   | (27,947 | ) |  |   | 40,702  |      |  |   | (89,680   | )
|     | Income (Loss) from Continuing Operations               |                |   | 158,838    |   |              |   | 60,258    |   |       |   | 52,793  |   |  |   | (82,885 | )(a) |  |   | 189,004   |  
|     | Capital Expenditures for Property, Plant and Equipment |                |   | 10,456     |   |              |   | 6,224     |   |       |   | 7,775   |   |  |   | 5,046   |      |  |   | 29,501    |  
|     | Total Assets                                           |                |   | 592,054    |   |              |   | 538,734   |   |       |   | 315,144 |   |  |   | 94,352  |      |  |   | 1,540,284 |  
|2004 |                                                        |                |   |            |   |              |   |           |   |       |   |         |   |  |   |         |      |  |   |          
|     | Revenues from Unaffiliated Customers                   |                | $ | 390,617    |   |              | $ | 326,918   |   |       | $ | 226,233 |   |  | $ | 1,875   |      |  | $ | 945,643   |  
|     | Intersegment Revenues                                  |                |   |           |   |              |   |          |   |       |   | 348     |   |  |   |        |      |  |   | 348       |  
|     | Depreciation and Amortization                          |                |   | 15,109     |   |              |   | 12,121    |   |       |   | 12,751  |   |  |   | 3,239   |      |  |   | 43,220    |  
|     | Other Charges                                          |                |   | 2,051      |   |              |   |          |   |       |   | 3,207   |   |  |   | 3,777   |      |  |   | 9,035     |  
|     | Operating Income (Loss)                                |                |   | 90,637     |   |              |   | 70,542    |   |       |   | 20,884  |   |  |   | (40,391 | )    |  |   | 141,672   |  
|     | Interest Expense                                       |                |   | 614        |   |              |   | 110       |   |       |   | 213     |   |  |   | 40,952  |      |  |   | 41,889    |  
|     | Equity Income (Loss) in Unconsolidated Affiliates      |                |   | 9,448      |   |              |   |          |   |       |   |        |   |  |   | (4,848  | )    |  |   | 4,600     |  
|     | (Provision) Benefit for Income Taxes                   |                |   | (30,658    | ) |              |   | (20,242   | ) |       |   | (5,266  | ) |  |   | 21,421  |      |  |   | (34,745   | )
|     | Income (Loss) from Continuing Operations               |                |   | 63,772     |   |              |   | 39,453    |   |       |   | 9,573   |   |  |   | (48,005 | )    |  |   | 64,793    |  
|     | Capital Expenditures for Property, Plant and Equipment |                |   | 8,808      |   |              |   | 18,794    |   |       |   | 4,986   |   |  |   | 5,291   |      |  |   | 37,879    |  
|     | Total Assets                                           |                |   | 489,684    |   |              |   | 519,258   |   |       |   | 258,517 |   |  |   | 77,007  |      |  |   | 1,344,466 |  
|2003 |                                                        |                |   |            |   |              |   |           |   |       |   |         |   |  |   |         |      |  |   |          
|     | Revenues from Unaffiliated Customers                   |                | $ | 308,297    |   |              | $ | 258,975   |   |       | $ | 226,607 |   |  | $ | 9,939   |      |  | $ | 803,818   |  
|     | Depreciation and Amortization                          |                |   | 14,912     |   |              |   | 11,191    |   |       |   | 13,424  |   |  |   | 5,161   |      |  |   | 44,688    |  
|     | Other Charges                                          |                |   | 24,924     |   |              |   |          |   |       |   | 425     |   |  |   | 12,474  |      |  |   | 37,823    |  
|     | Operating Income (Loss)                                |                |   | 18,776     |   |              |   | 58,443    |   |       |   | 7,634   |   |  |   | (39,556 | )    |  |   | 45,297    |  
|     | Interest Expense                                       |                |   | 514        |   |              |   | 7         |   |       |   | 507     |   |  |   | 42,843  |      |  |   | 43,871    |  
|     | Equity Income (Loss) in Unconsolidated Affiliates      |                |   | 6,481      |   |              |   |          |   |       |   |        |   |  |   | (4,506  | )    |  |   | 1,975     |  
|     | (Provision) Benefit for Income Taxes                   |                |   | (10,819    | ) |              |   | (15,062   | ) |       |   | 1,082   |   |  |   | 18,107  |      |  |   | (6,692    | )
|     | Income (Loss) from Continuing Operations               |                |   | 14,368     |   |              |   | 31,258    |   |       |   | (2,442  | ) |  |   | (38,527 | )    |  |   | 4,657     |  
|     | Capital Expenditures for Property, Plant and Equipment |                |   | 16,260     |   |              |   | 10,175    |   |       |   | 9,664   |   |  |   | 5,319   |      |  |   | 41,418    |  
|     | Total Assets                                           |                |   | 478,714    |   |              |   | 450,653   |   |       |   | 273,587 |   |  |   | 59,107  |      |  |   | 1,262,061 |  






|    |  |                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes non-cash items in Corporate and Other of
    $57.1 million related refinancing charges and
    $10.1 million related to stock-based compensation.



| |                                    
| | -----------------------------------
| | Foreign Operations and Export Sales



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|     |                   |                |   |         |  |         |   |        |  |      |   |        |  |       |   |        |  |  |   |         |  |  |   |         |  |  |   |           | 
|---- | ----------------- | -------------- | - | ------- |  | ------- | - | ------ |  | ---- | - | ------ |  | ----- | - | ------ |  |  | - | ------- |  |  | - | ------- |  |  | - | --------- | 
|     |                   | United         |   |         |  | Latin   |   |        |  |      |   |        |  |      
|     |                   | States         |   | Canada  |  | America |   | Italy  |  | Asia |   | Other  |  | Total
|     |                   |                |   |         |  |         |   |        |  |      |   |        |  |      
|     |                   | (In thousands)
|2005 |                   |                |   |         |  |         |   |        |  |      |   |        |  |       |   |        |  |  |   |         |  |  |   |         |  |  |   |          
|     | Revenues          |                | $ | 864,470 |  |         | $ | 66,487 |  |      | $ | 49,949 |  |       | $ | 39,561 |  |  | $ | 192,053 |  |  | $ | 137,477 |  |  | $ | 1,349,997 | 
|     | Long-Lived Assets |                |   | 492,835 |  |         |   | 22,809 |  |      |   | 73,109 |  |       |   | 40,618 |  |  |   | 80,490  |  |  |   | 102,679 |  |  |   | 812,540   | 
|2004 |                   |                |   |         |  |         |   |        |  |      |   |        |  |       |   |        |  |  |   |         |  |  |   |         |  |  |   |          
|     | Revenues          |                | $ | 577,479 |  |         | $ | 72,950 |  |      | $ | 43,986 |  |       | $ | 20,938 |  |  | $ | 123,100 |  |  | $ | 107,190 |  |  | $ | 945,643   | 
|     | Long-Lived Assets |                |   | 413,431 |  |         |   | 18,405 |  |      |   | 73,336 |  |       |   | 42,752 |  |  |   | 78,741  |  |  |   | 118,965 |  |  |   | 745,630   | 
|2003 |                   |                |   |         |  |         |   |        |  |      |   |        |  |       |   |        |  |  |   |         |  |  |   |         |  |  |   |          
|     | Revenues          |                | $ | 458,421 |  |         | $ | 84,213 |  |      | $ | 51,567 |  |       | $ | 11,818 |  |  | $ | 100,793 |  |  | $ | 97,006  |  |  | $ | 803,818   | 
|     | Long-Lived Assets |                |   | 458,791 |  |         |   | 18,358 |  |      |   | 75,237 |  |       |   | 43,426 |  |  |   | 58,900  |  |  |   | 93,971  |  |  |   | 748,683   | 



| |                                
| | -------------------------------
| | Major Customers and Credit Risk







|    |                                              
|--- | ---------------------------------------------
|18. | Selected Quarterly Financial Data (Unaudited)



|                                            |  |                                       |         |  |         |   |         |         |  |   |         |     |  |   |         | 
|------------------------------------------- |  | ------------------------------------- | ------- |  | ------- | - | ------- | ------- |  | - | ------- | --- |  | - | ------- | 
|                                            |  | 2005                                  |        
|                                            |  |                                       |        
|                                            |  | First                                 |         |  | Second  |   |         | Third   |  |   | Fourth  |    
|                                            |  | Quarter                               |         |  | Quarter |   |         | Quarter |  |   | Quarter |    
|                                            |  |                                       |         |  |         |   |         |         |  |   |         |    
|                                            |  | (In thousands, except per share data) |        
|Revenues                                    |  | $                                     | 292,096 |  |         | $ | 316,947 |         |  | $ | 352,228 |     |  | $ | 388,726 | 
|Gross Profit                                |  |                                       | 124,180 |  |         |   | 136,670 |         |  |   | 150,790 |     |  |   | 161,871 | 
|Selling, General and Administrative         |  |                                       | 61,989  |  |         |   | 65,397  |         |  |   | 65,939  |     |  |   | 69,233  | 
|Operating Income                            |  |                                       | 62,191  |  |         |   | 71,273  |         |  |   | 84,851  |     |  |   | 92,638  | 
|Net Income                                  |  |                                       | 36,666  |  |         |   | 25,828  | (a)     |  |   | 48,114  | (b) |  |   | 78,396  | 
|Basic Net Income Per Share(c)               |  | $                                     | 0.29    |  |         | $ | 0.21    |         |  | $ | 0.37    |     |  | $ | 0.60    | 
|                                            |  |                                       |         |  |         |   |         |         |  |   |         |    
|Basic Weighted Average Shares Outstanding   |  |                                       | 125,234 |  |         |   | 125,858 |         |  |   | 128,373 |     |  |   | 129,881 | 
|Diluted Net Income Per Share(c)             |  | $                                     | 0.29    |  |         | $ | 0.20    |         |  | $ | 0.37    |     |  | $ | 0.59    | 
|                                            |  |                                       |         |  |         |   |         |         |  |   |         |    
|Diluted Weighted Average Shares Outstanding |  |                                       | 128,352 |  |         |   | 129,310 |         |  |   | 131,657 |     |  |   | 132,724 | 

76



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |      | 
|------------------------------------------------------ | ------------------------------------------ | ------------------------------------- | ------- | ---- | ------- | - | ------- | ------- | - | - | ------- | ---- |  | - | ------- | ---- | 
|                                                       |                                            | 2004                                  |        
|                                                       |                                            |                                       |        
|                                                       |                                            | First                                 |         |      | Second  |   |         | Third   |   |   | Fourth  |     
|                                                       |                                            | Quarter                               |         |      | Quarter |   |         | Quarter |   |   | Quarter |     
|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |     
|                                                       |                                            | (In thousands, except per share data) |        
|Revenues                                               |                                            | $                                     | 191,481 |      |         | $ | 224,666 |         |   | $ | 246,366 |      |  | $ | 283,130 |     
|Gross Profit                                           |                                            |                                       | 77,589  |      |         |   | 88,437  |         |   |   | 97,573  |      |  |   | 121,237 |     
|Other Charges                                          |                                            |                                       | 2,734   | (d)  |         |   | 2,498   | (e)     |   |   | 3,803   | (f)  |  |   |        |     
|Selling, General, and Administrative                   |                                            |                                       | 53,944  |      |         |   | 55,672  |         |   |   | 59,312  |      |  |   | 65,201  |     
|Operating Income                                       |                                            |                                       | 20,911  |      |         |   | 30,267  |         |   |   | 34,458  |      |  |   | 56,036  |     
|Income from Continuing Operations                      |                                            |                                       | 6,564   |      |         |   | 12,045  |         |   |   | 17,234  |      |  |   | 28,950  |     
|Income (Loss) from Discontinued Operations, Net of Tax |                                            |                                       | 642     |      |         |   | (9,885  | )       |   |   | 21      |      |  |   | (305    | )   
|Net Income                                             |                                            |                                       | 7,206   |      |         |   | 2,160   |         |   |   | 17,255  |      |  |   | 28,645  |     
|Basic Net Income Per Share(c):                         |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |     
|                                                       | Income from continuing operations          |                                       | $       | 0.05 |         |   | $       | 0.10    |   |   | $       | 0.14 |  |   | $       | 0.23 | 
|                                                       | Income (loss) from discontinued operations |                                       |         | 0.01 |         |   |         | (0.08   | ) |   |         |     |  |   |         |     | 
|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |     
|                                                       | Net income                                 |                                       | $       | 0.06 |         |   | $       | 0.02    |   |   | $       | 0.14 |  |   | $       | 0.23 | 
|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |     
|Basic Weighted Average Shares Outstanding              |                                            |                                       | 122,044 |      |         |   | 122,767 |         |   |   | 123,805 |      |  |   | 124,669 |     
|Diluted Net Income Per Share(c):                       |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |     
|                                                       | Income from continuing operations          |                                       | $       | 0.05 |         |   | $       | 0.10    |   |   | $       | 0.14 |  |   | $       | 0.23 | 
|                                                       | Income (loss) from discontinued operations |                                       |         | 0.01 |         |   |         | (0.08   | ) |   |         |     |  |   |         |     | 
|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |     
|                                                       | Net income                                 |                                       | $       | 0.06 |         |   | $       | 0.02    |   |   | $       | 0.14 |  |   | $       | 0.23 | 
|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |     
|Diluted Weighted Average Shares Outstanding            |                                            |                                       | 124,262 |      |         |   | 125,383 |         |   |   | 126,603 |      |  |   | 127,614 |     






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The second quarter of 2005 includes $35.4 million of
    refinancing charges 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. This amount comprised $25.4 million for the
    make-whole premium on the
    95/8% Senior
    Notes, $4.8 million related to the write-off of debt issue
    costs associated with the previous credit facility and the
    95/8% Senior
    Notes, including the
    95/8% Senior
    Notes discount, and $5.2 million related to the
    settlement of Treasury rate locks.
|   
|(b) |  | The third quarter of 2005 includes $21.7 million of
    refinancing charges related to the repurchase of substantially
    all of our 9% Senior Notes in the third quarter of 2005.
    This amount comprised $18.1 million for the tender offer
    consideration and consent payment, $3.2 million related to
    the write-off of debt issue costs and $0.4 million in other
    related fees.                                                                                                                                                                                                                                                                
|   
|(c) |  | Earnings per share (EPS) in each quarter is computed using
    the weighted average number of shares outstanding during that
    quarter while EPS for the full year is computed by taking the
    average of the weighted average number of shares outstanding
    each quarter. Thus, the sum of the four quarters EPS may
    not equal the full-year EPS.                                                                                                                                                                                                                                                                                                   
|   
|(d) |  | Includes other charges of $1.8 million related to the
    Drilling Products rationalization program and $0.9 million
    of severance costs associated with the organizational
    restructuring of the Companys Tubular Technology Services
    segment in the first quarter of 2004.                                                                                                                                                                                                                                                                                                                                                                          
|   
|(e) |  | Includes other charges of $2.3 million for severance costs
    associated with the organizational restructuring of the
    Companys Tubular Technology Services segment and
    $0.2 million related to the Drilling products
    rationalization program in the second quarter of 2004.                                                                                                                                                                                                                                                                                                                                                                        
|   
|(f) |  | Includes other charges of $3.8 million in the third quarter
    of 2004 related to the relocation of the Companys
    corporate offices in September 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                           
|--- | ------------------------------------------
|19. | Subsidiary Guarantor Financial Information

1 8


CONDENSED STATEMENT OF OPERATIONS


Year Ended December 31, 2005


|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |          |          |   |   |           |         | 
|------------------------------------------------ | ----------------------------------- | -------------- | ------- | - | ---------- | ---- | --------- | ---------- |  | - | ------------ | ------- |  | ----- | -------- | -------- | - | - | --------- | ------- | 
|                                                 |                                     |                |         |   |            | Non- |           |            |  |   |             
|                                                 |                                     | Parent         |         |   | Guarantors |      |           | Guarantors |  |   | Eliminations |         |  | Total |         
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|                                                 |                                     | (In thousands) |        
|Revenues                                         |                                     | $              |        |   |            | $    | 1,067,952 |            |  | $ | 552,591      |         |  | $     | (270,546 | )        |   | $ | 1,349,997 |        
|Operating Expenses:                              |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |          |          |   |   |           |        
|                                                 | Cost of sales                       |                |         |  |            |      |           | 710,905    |  |   |              | 285,575 |  |       |          | (219,994 | ) |   |           | 776,486 | 
|                                                 | Selling, general and administrative |                |         |  |            |      |           | 185,143    |  |   |              | 77,415  |  |       |          |         |   |   |           | 262,558 | 
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|                                                 |                                     |                |        |   |            |      | 896,048   |            |  |   | 362,990      |         |  |       | (219,994 | )        |   |   | 1,039,044 |        
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|Operating Income                                 |                                     |                |        |   |            |      | 171,904   |            |  |   | 189,601      |         |  |       | (50,552  | )        |   |   | 310,953   |        
|Interest Expense                                 |                                     |                | (27,284 | ) |            |      | (1,301    | )          |  |   | (563         | )       |  |       |         |          |   |   | (29,148   | )      
|Other Income (Expense), Net                      |                                     |                | 2,269   |   |            |      | 61,243    |            |  |   | (57,857      | )       |  |       |         |          |   |   | 5,655     |        
|Equity Income in Unconsolidated Affiliates       |                                     |                |        |   |            |      | 58,259    |            |  |   |             |         |  |       |         |          |   |   | 58,259    |        
|Refinance Charges                                |                                     |                | (49,541 | ) |            |      | (7,545    | )          |  |   |             |         |  |       |         |          |   |   | (57,086   | )      
|Equity in Subsidiaries, Net of Taxes             |                                     |                | 281,213 |   |            |      | 21,405    |            |  |   |             |         |  |       | (302,618 | )        |   |   |          |        
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|Income Before Income Taxes and Minority Interest |                                     |                | 206,657 |   |            |      | 303,965   |            |  |   | 131,181      |         |  |       | (353,170 | )        |   |   | 288,633   |        
|Income Tax Provision                             |                                     |                | (17,653 | ) |            |      | (35,804   | )          |  |   | (36,223      | )       |  |       |         |          |   |   | (89,680   | )      
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|Income Before Minority Interests                 |                                     |                | 189,004 |   |            |      | 268,161   |            |  |   | 94,958       |         |  |       | (353,170 | )        |   |   | 198,953   |        
|Minority Interests                               |                                     |                |        |   |            |      |          |            |  |   | (9,949       | )       |  |       |         |          |   |   | (9,949    | )      
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         
|Net Income                                       |                                     | $              | 189,004 |   |            | $    | 268,161   |            |  | $ | 85,009       |         |  | $     | (353,170 | )        |   | $ | 189,004   |        
|                                                 |                                     |                |         |   |            |      |           |            |  |   |              |         |  |       |         

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED BALANCE SHEET


As of December 31, 2005


|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |            |         |   |   |           |         | 
|------------------------------------------------------- | ----------------------------------------------------------- | -------------- | --------- | -------- | ---------- | ---- | --------- | ---------- | - | - | ------------ | ------- |  | ----- | ---------- | ------- | - | - | --------- | ------- | 
|                                                        |                                                             |                |           |          |            | Non- |           |            |   |   |             
|                                                        |                                                             | Parent         |           |          | Guarantors |      |           | Guarantors |   |   | Eliminations |         |  | Total |           
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                        |                                                             | (In thousands) |          
|ASSETS                                                 
|Current Assets:                                         |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |            |         |   |   |           |        
|                                                        | Cash                                                        |                | $         |         |            |      | $         | 13,093     |   |   | $            | 15,071  |  |       | $          |        |   |   | $         | 28,164  | 
|                                                        | Accounts receivable, net                                    |                |           |         |            |      |           | 164,439    |   |   |              | 104,011 |  |       |            |        |   |   |           | 268,450 | 
|                                                        | Inventories                                                 |                |           |         |            |      |           | 272,914    |   |   |              | 140,256 |  |       |            | (52,540 | ) |   |           | 360,630 | 
|                                                        | Deferred charges                                            |                |           |         |            |      |           | 14,397     |   |   |              | 232     |  |       |            |        |   |   |           | 14,629  | 
|                                                        | Current deferred tax assets                                 |                |           | (2,671   | )          |      |           | 30,721     |   |   |              | 11,907  |  |       |            |        |   |   |           | 39,957  | 
|                                                        | Other current assets                                        |                |           |         |            |      |           | 4,971      |   |   |              | 9,454   |  |       |            |        |   |   |           | 14,425  | 
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                        |                                                             |                | (2,671    | )        |            |      | 500,535   |            |   |   | 280,931      |         |  |       | (52,540    | )       |   |   | 726,255   |        
|Property, Plant and Equipment, Net                      |                                                             |                |          |          |            |      | 133,677   |            |   |   | 105,093      |         |  |       |           |         |   |   | 238,770   |        
|Goodwill                                                |                                                             |                |          |          |            |      | 229,837   |            |   |   | 191,790      |         |  |       |           |         |   |   | 421,627   |        
|Investment In and Advances to Subsidiaries              |                                                             |                | 1,063,749 |          |            |      | 101,751   |            |   |   |             |         |  |       | (1,165,500 | )       |   |   |          |        
|Investment In and Advances to Unconsolidated Affiliates |                                                             |                |          |          |            |      | 84,547    |            |   |   |             |         |  |       |           |         |   |   | 84,547    |        
|Other Assets                                            |                                                             |                | 6,630     |          |            |      | 48,192    |            |   |   | 14,263       |         |  |       |           |         |   |   | 69,085    |        
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                        |                                                             | $              | 1,067,708 |          |            | $    | 1,098,539 |            |   | $ | 592,077      |         |  | $     | (1,218,040 | )       |   | $ | 1,540,284 |        
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Current Liabilities:                                    |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |            |         |   |   |           |        
|                                                        | Short-term borrowings and current portion of long-term debt |                | $         |         |            |      | $         | 7,045      |   |   | $            |        |  |       | $          |        |   |   | $         | 7,045   | 
|                                                        | Accounts payable                                            |                |           |         |            |      |           | 64,343     |   |   |              | 27,947  |  |       |            |        |   |   |           | 92,290  | 
|                                                        | Deferred revenues                                           |                |           |         |            |      |           | 21,060     |   |   |              | 364     |  |       |            |        |   |   |           | 21,424  | 
|                                                        | Federal income taxes payable                                |                |           | 9,573    |            |      |           | (7,704     | ) |   |              | 22,839  |  |       |            |        |   |   |           | 24,708  | 
|                                                        | Current deferred tax liabilities                            |                |           |         |            |      |           | (11        | ) |   |              | 3,829   |  |       |            |        |   |   |           | 3,818   | 
|                                                        | Intercompany liabilities (assets)                           |                |           | (147,863 | )          |      |           | 47,631     |   |   |              | 93,455  |  |       |            | 6,777   |   |   |           |        | 
|                                                        | Other accrued liabilities                                   |                |           | 5,512    |            |      |           | 62,525     |   |   |              | 29,324  |  |       |            |        |   |   |           | 97,361  | 
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                        |                                                             |                | (132,778  | )        |            |      | 194,889   |            |   |   | 177,758      |         |  |       | 6,777      |         |   |   | 246,646   |        
|Long-Term Debt                                          |                                                             |                | 200,095   |          |            |      | 6,189     |            |   |   | 11,200       |         |  |       |           |         |   |   | 217,484   |        
|Deferred Tax Liabilities                                |                                                             |                | 4,236     |          |            |      | 9,031     |            |   |   | 24,904       |         |  |       |           |         |   |   | 38,171    |        
|Other Long-Term Liabilities                             |                                                             |                |          |          |            |      | 28,071    |            |   |   | 1,294        |         |  |       |           |         |   |   | 29,365    |        
|Commitments and Contingencies Minority Interests        |                                                             |                |          |          |            |      |          |            |   |   | 12,463       |         |  |       |           |         |   |   | 12,463    |        
|Stockholders Equity                                    |                                                             |                | 996,155   |          |            |      | 860,359   |            |   |   | 364,458      |         |  |       | (1,224,817 | )       |   |   | 996,155   |        
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           
|                                                        |                                                             | $              | 1,067,708 |          |            | $    | 1,098,539 |            |   | $ | 592,077      |         |  | $     | (1,218,040 | )       |   | $ | 1,540,284 |        
|                                                        |                                                             |                |           |          |            |      |           |            |   |   |              |         |  |       |           

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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    |      |         | $          | 302     |   |              | $       | 37,089  |       |   | $      | (15,000 | ) |         | $        | 194,676  |  
|Cash 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      |         |   |              |        |         |       |   |       |         |   |         | 2,521    |         
|                                        | Investment 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     |         |       |   |       |         |   |         | 1,813    |         
|                                        |                                                        |                                                     |   |          |            |      |         |            |         |   |              |         |         |       |  
|                                        |                                                        | Net 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  |         |       |   |       |         |   |         | 11,200   |         
|                                        | Repayments 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   | )       
|                                        | Proceeds from stock option exercises                   |                                                     |   | 75,243   |            |      |         |           |         |   |              |        |         |       |   |       |         |   |         | 75,243   |         
|                                        | Dividends paid                                         |                                                     |   |         |            |      |         |           |         |   |              | (15,000 | )       |       |   | 15,000 |         |   |         |         |         
|                                        | Other, net                                             |                                                     |   | (1,489   | )          |      |         |           |         |   |              |        |         |       |   |       |         |   |         | (1,489   | )       
|                                        |                                                        |                                                     |   |          |            |      |         |            |         |   |              |         |         |       |  
|                                        |                                                        | 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                    |                                                        |                                                     |  |          |            |      | (17,628 | )          |         |   | (1,760       | )       |         |       |  |        |         |   | (19,388 | )       
|Cash at Beginning of Period             |                                                        |                                                     |  |          |            |      | 30,721  |            |         |   | 16,831       |         |         |       |  |        |         |   | 47,552  |         
|                                        |                                                        |                                                     |   |          |            |      |         |            |         |   |              |         |         |       |  
|Cash at End of Period                   |                                                        | $                                                   |  |          |            | $    | 13,093  |            |         | $ | 15,071       |         |         | $     |  |        |         | $ | 28,164  |         
|                                        |                                                        |                                                     |   |          |            |      |         |            |         |   |              |         |         |       |  

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED STATEMENT OF OPERATIONS


Year Ended December 31, 2004


|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |         | 
|------------------------------------------------------------------------------- | ----------------------------------- | -------------- | ------- | - | ---------- | ---- | ------- | ---------- |  | - | ------------ | ------- |  | ----- | ------- | - |  | - | ------- | ------- | 
|                                                                                |                                     |                |         |   |            | Non- |         |            |  |   |             
|                                                                                |                                     | Parent         |         |   | Guarantors |      |         | Guarantors |  |   | Eliminations |         |  | Total |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                |                                     | (In thousands) |        
|Revenues                                                                        |                                     | $              |        |   |            | $    | 649,202 |            |  | $ | 296,441      |         |  | $     |        |   |  | $ | 945,643 |        
|Operating Expenses:                                                             |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |        
|                                                                                | Cost of sales                       |                |         |  |            |      |         | 397,176    |  |   |              | 163,631 |  |       |         |  |  |   |         | 560,807 | 
|                                                                                | Selling, general and administrative |                |         |  |            |      |         | 160,536    |  |   |              | 73,593  |  |       |         |  |  |   |         | 234,129 | 
|                                                                                | Other charges                       |                |         |  |            |      |         | 6,984      |  |   |              | 2,051   |  |       |         |  |  |   |         | 9,035   | 
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                |                                     |                |        |   |            |      | 564,696 |            |  |   | 239,275      |         |  |       |        |   |  |   | 803,971 |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Operating Income                                                                |                                     |                |        |   |            |      | 84,506  |            |  |   | 57,166       |         |  |       |        |   |  |   | 141,672 |        
|Interest Expense                                                                |                                     |                | (36,758 | ) |            |      | (4,486  | )          |  |   | (645         | )       |  |       |        |   |  |   | (41,889 | )      
|Other Income (Expense), Net                                                     |                                     |                |        |   |            |      | 2,425   |            |  |   | (2,027       | )       |  |       |        |   |  |   | 398     |        
|Equity Income in Unconsolidated Affiliates                                      |                                     |                |        |   |            |      | 4,600   |            |  |   |             |         |  |       |        |   |  |   | 4,600   |        
|Equity in Subsidiaries, Net of Taxes                                            |                                     |                | 80,383  |   |            |      |        |            |  |   |             |         |  |       | (80,383 | ) |  |   |        |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                |                                     |                | 43,625  |   |            |      | 2,539   |            |  |   | (2,672       | )       |  |       | (80,383 | ) |  |   | (36,891 | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations Before Income Taxes and
    Minority Interest |                                     |                | 43,625  |   |            |      | 87,045  |            |  |   | 54,494       |         |  |       | (80,383 | ) |  |   | 104,781 |        
|Income Tax (Provision) Benefit                                                  |                                     |                | 11,641  |   |            |      | (33,135 | )          |  |   | (13,251      | )       |  |       |        |   |  |   | (34,745 | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations Before Minority Interests                     |                                     |                | 55,266  |   |            |      | 53,910  |            |  |   | 41,243       |         |  |       | (80,383 | ) |  |   | 70,036  |        
|Minority Interests                                                              |                                     |                |        |   |            |      |        |            |  |   | (5,243       | )       |  |       |        |   |  |   | (5,243  | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations                                               |                                     |                | 55,266  |   |            |      | 53,910  |            |  |   | 36,000       |         |  |       | (80,383 | ) |  |   | 64,793  |        
|Loss From Discontinued Operations, Net of Tax                                   |                                     |                |        |   |            |      | (9,527  | )          |  |   |             |         |  |       |        |   |  |   | (9,527  | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Net Income                                                                      |                                     | $              | 55,266  |   |            | $    | 44,383  |            |  | $ | 36,000       |         |  | $     | (80,383 | ) |  | $ | 55,266  |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        

81



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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED BALANCE SHEET


As of December 31, 2004


|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |            |   |  |   |           |         | 
|------------------------------------------------------- | ----------------------------------------------------------- | -------------- | --------- | ----- | ---------- | ---- | ------- | ---------- | - | - | ------------ | ------ |  | ----- | ---------- | - |  | - | --------- | ------- | 
|                                                        |                                                             |                |           |       |            | Non- |         |            |   |   |             
|                                                        |                                                             | Parent         |           |       | Guarantors |      |         | Guarantors |   |   | Eliminations |        |  | Total |           
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                        |                                                             | (In thousands) |          
|ASSETS                                                 
|Current Assets:                                         |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |            |   |  |   |           |        
|                                                        | Cash                                                        |                | $         |      |            |      | $       | 30,721     |   |   | $            | 16,831 |  |       | $          |  |  |   | $         | 47,552  | 
|                                                        | Restricted cash                                             |                |           |      |            |      |         |           |   |   |              | 231    |  |       |            |  |  |   |           | 231     | 
|                                                        | Accounts receivable, net                                    |                |           |      |            |      |         | 133,589    |   |   |              | 68,495 |  |       |            |  |  |   |           | 202,084 | 
|                                                        | Inventories                                                 |                |           |      |            |      |         | 193,738    |   |   |              | 95,082 |  |       |            |  |  |   |           | 288,820 | 
|                                                        | Deferred charges                                            |                |           |      |            |      |         | 17,204     |   |   |              |       |  |       |            |  |  |   |           | 17,204  | 
|                                                        | Current deferred tax assets                                 |                |           |      |            |      |         | 24,236     |   |   |              | 2,237  |  |       |            |  |  |   |           | 26,473  | 
|                                                        | Other current assets                                        |                |           |      |            |      |         | 5,920      |   |   |              | 8,483  |  |       |            |  |  |   |           | 14,403  | 
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                        |                                                             |                |          |       |            |      | 405,408 |            |   |   | 191,359      |        |  |       |           |   |  |   | 596,767   |        
|Property, Plant and Equipment, Net                      |                                                             |                |          |       |            |      | 141,793 |            |   |   | 102,512      |        |  |       |           |   |  |   | 244,305   |        
|Goodwill                                                |                                                             |                |          |       |            |      | 206,004 |            |   |   | 187,989      |        |  |       |           |   |  |   | 393,993   |        
|Investment In and Advances to Subsidiaries              |                                                             |                | 1,080,596 |       |            |      |        |            |   |   |             |        |  |       | (1,080,596 | ) |  |   |          |        
|Investment In and Advances to Unconsolidated Affiliates |                                                             |                |          |       |            |      | 49,159  |            |   |   |             |        |  |       |           |   |  |   | 49,159    |        
|Other Assets                                            |                                                             |                | 6,101     |       |            |      | 38,357  |            |   |   | 15,784       |        |  |       |           |   |  |   | 60,242    |        
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                        |                                                             | $              | 1,086,697 |       |            | $    | 840,721 |            |   | $ | 497,644      |        |  | $     | (1,080,596 | ) |  | $ | 1,344,466 |        
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Current Liabilities:                                    |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |            |   |  |   |           |        
|                                                        | Short-term borrowings and current portion of long-term debt |                | $         |      |            |      | $       | 4,181      |   |   | $            |       |  |       | $          |  |  |   | $         | 4,181   | 
|                                                        | Accounts payable                                            |                |           |      |            |      |         | 40,912     |   |   |              | 30,829 |  |       |            |  |  |   |           | 71,741  | 
|                                                        | Deferred revenues                                           |                |           |      |            |      |         | 21,413     |   |   |              |       |  |       |            |  |  |   |           | 21,413  | 
|                                                        | Current deferred tax liabilities                            |                |           |      |            |      |         | (47        | ) |   |              | 3,155  |  |       |            |  |  |   |           | 3,108   | 
|                                                        | Other accrued liabilities                                   |                |           | 6,673 |            |      |         | 56,821     |   |   |              | 31,564 |  |       |            |  |  |   |           | 95,058  | 
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                        |                                                             |                | 6,673     |       |            |      | 123,280 |            |   |   | 65,548       |        |  |       |           |   |  |   | 195,501   |        
|Long-Term Debt                                          |                                                             |                | 374,483   |       |            |      | 3,290   |            |   |   |             |        |  |       |           |   |  |   | 377,773   |        
|Deferred Tax Liabilities                                |                                                             |                |          |       |            |      | (714    | )          |   |   | 25,897       |        |  |       |           |   |  |   | 25,183    |        
|Other Long-Term Liabilities                             |                                                             |                |          |       |            |      | 23,204  |            |   |   | 1,270        |        |  |       |           |   |  |   | 24,474    |        
|Commitments and Contingencies                           |                                                             |                |          |       |            |      |        |            |   |   |             |        |  |       |           |   |  |   |          |        
|Minority Interests                                      |                                                             |                |          |       |            |      |        |            |   |   | 15,994       |        |  |       |           |   |  |   | 15,994    |        
|Stockholders Equity                                    |                                                             |                | 705,541   |       |            |      | 691,661 |            |   |   | 388,935      |        |  |       | (1,080,596 | ) |  |   | 705,541   |        
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           
|                                                        |                                                             | $              | 1,086,697 |       |            | $    | 840,721 |            |   | $ | 497,644      |        |  | $     | (1,080,596 | ) |  | $ | 1,344,466 |        
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED STATEMENT OF CASH FLOWS


Year Ended December 31, 2004


|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |   |   |   |   |        |         |         |  
|--------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------------------- | - | ------ | ---------- | ---- | ------ | ---------- | ------- | - | ------------ | ------- | ------- | - | - | - | - | - | ------ | ------- | ------- | -
|                                        |                                                                         |                                                     |   |        |            | Non- |        |            |         |   |             
|                                        |                                                                         | Parent                                              |   |        | Guarantors |      |        | Guarantors |         |   | Eliminations |         | Total   |  
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |  
|                                        |                                                                         | (In thousands)                                      |  
|Cash Flows From Operating Activities:   |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        |                                                                         | Net cash (used in) provided by operating activities |   | $      | (24,211    | )    |        | $          | 116,546 |   |              | $       | 20,835  |   |   | $ |  |   |        | $       | 113,170 |  
|Cash Flows From Investing Activities:   |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        | Acquisition of businesses, net of cash acquired                         |                                                     |   |       |            |      |        | (33,833    | )       |   |              |        |         |   |   |  |   |   |        | (33,833 | )      
|                                        | Proceeds from sales of businesses, net of cash disposed                 |                                                     |   |       |            |      |        | 1,349      |         |   |              | 831     |         |   |   |  |   |   |        | 2,180   |        
|                                        | Proceeds from sale of discontinued operations, net of cash
    disposed |                                                     |   |       |            |      |        | 19,859     |         |   |              |        |         |   |   |  |   |   |        | 19,859  |        
|                                        | Investments in and advances to unconsolidated affiliates                |                                                     |   |       |            |      |        | (4,167     | )       |   |              |        |         |   |   |  |   |   |        | (4,167  | )      
|                                        | Capital expenditures for property, plant and equipment                  |                                                     |   |       |            |      |        | (18,592    | )       |   |              | (19,287 | )       |   |   |  |   |   |        | (37,879 | )      
|                                        | Proceeds from sale of fixed assets                                      |                                                     |   |       |            |      |        | 6,911      |         |   |              | 1,548   |         |   |   |  |   |   |        | 8,459   |        
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |  
|                                        |                                                                         | Net cash used in investing activities               |   |        |           |      |        |            | (28,473 | ) |              |         | (16,908 | ) |   |   |  |   |        |         | (45,381 | )
|Cash Flows From Financing Activities:   |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        | Repayments on debt, net                                                 |                                                     |   |       |            |      |        | (59,972    | )       |   |              | (4,129  | )       |   |   |  |   |   |        | (64,101 | )      
|                                        | Purchases of treasury stock                                             |                                                     |   | (2,508 | )          |      |        |           |         |   |              |        |         |   |   |  |   |   |        | (2,508  | )      
|                                        | Proceeds from stock option exercises                                    |                                                     |   | 25,791 |            |      |        |           |         |   |              |        |         |   |   |  |   |   |        | 25,791  |        
|                                        | ESPP Purchases                                                          |                                                     |   | 928    |            |      |        |            |         |   |              |         |         |   |   |   |   |   |        | 928     |        
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |  
|                                        |                                                                         | Net cash provided by (used in) financing activities |   |        | 24,211     |      |        |            | (59,972 | ) |              |         | (4,129  | ) |   |   |  |   |        |         | (39,890 | )
|Effect of Exchange Rate Changes on Cash |                                                                         |                                                     |  |        |            |      |       |            |         |   | 423          |         |         |   |  |   |   |   | 423    |        
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |  
|Net Increase in Cash                    |                                                                         |                                                     |  |        |            |      | 28,101 |            |         |   | 221          |         |         |   |  |   |   |   | 28,322 |        
|Cash at Beginning of Year               |                                                                         |                                                     |  |        |            |      | 2,620  |            |         |   | 16,610       |         |         |   |  |   |   |   | 19,230 |        
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |  
|Cash at End of Year                     |                                                                         | $                                                   |  |        |            | $    | 30,721 |            |         | $ | 16,831       |         |         | $ |  |   |   | $ | 47,552 |        
|                                        |                                                                         |                                                     |   |        |            |      |        |            |         |   |              |         |         |   |  

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED STATEMENT OF OPERATIONS


Year Ended December 31, 2003


|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |         | 
|-------------------------------------------------------------------------------------- | ----------------------------------- | -------------- | ------- | - | ---------- | ---- | ------- | ---------- |  | - | ------------ | ------- |  | ----- | ------- | - |  | - | ------- | ------- | 
|                                                                                       |                                     |                |         |   |            | Non- |         |            |  |   |             
|                                                                                       |                                     | Parent         |         |   | Guarantors |      |         | Guarantors |  |   | Eliminations |         |  | Total |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     | (In thousands) |        
|Revenues                                                                               |                                     | $              |        |   |            | $    | 529,661 |            |  | $ | 274,157      |         |  | $     |        |   |  | $ | 803,818 |        
|Operating Expenses:                                                                    |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |        
|                                                                                       | Cost of sales                       |                |         |  |            |      |         | 407,411    |  |   |              | 126,161 |  |       |         |  |  |   |         | 533,572 | 
|                                                                                       | Selling, general and administrative |                |         |  |            |      |         | 119,805    |  |   |              | 73,746  |  |       |         |  |  |   |         | 193,551 | 
|                                                                                       | Other charges                       |                |         |  |            |      |         | 23,475     |  |   |              | 7,923   |  |       |         |  |  |   |         | 31,398  | 
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     |                |        |   |            |      | 550,691 |            |  |   | 207,830      |         |  |       |        |   |  |   | 758,521 |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Operating Income (Loss)                                                                |                                     |                |        |   |            |      | (21,030 | )          |  |   | 66,327       |         |  |       |        |   |  |   | 45,297  |        
|Interest Expense                                                                       |                                     |                | (36,644 | ) |            |      | (6,564  | )          |  |   | (663         | )       |  |       |        |   |  |   | (43,871 | )      
|Other Income (Expense), Net                                                            |                                     |                | 3,489   |   |            |      | 17,245  |            |  |   | (9,570       | )       |  |       |        |   |  |   | 11,164  |        
|Equity Loss in Unconsolidated Affiliates                                               |                                     |                |        |   |            |      | 1,975   |            |  |   |             |         |  |       |        |   |  |   | 1,975   |        
|Equity in Subsidiaries, Net of Taxes                                                   |                                     |                | 26,741  |   |            |      |        |            |  |   |             |         |  |       | (26,741 | ) |  |   |        |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     |                | (6,414  | ) |            |      | 12,656  |            |  |   | (10,233      | )       |  |       | (26,741 | ) |  |   | (30,732 | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income (Loss) From Continuing Operations Before Income Taxes and
    Minority Interest |                                     |                | (6,414  | ) |            |      | (8,374  | )          |  |   | 56,094       |         |  |       | (26,741 | ) |  |   | 14,565  |        
|Income Tax (Provision) Benefit                                                         |                                     |                | 11,604  |   |            |      | 1,579   |            |  |   | (19,875      | )       |  |       |        |   |  |   | (6,692  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations Before Minority Interests                            |                                     |                | 5,190   |   |            |      | (6,795  | )          |  |   | 36,219       |         |  |       | (26,741 | ) |  |   | 7,873   |        
|Minority Interests                                                                     |                                     |                |        |   |            |      |        |            |  |   | (3,216       | )       |  |       |        |   |  |   | (3,216  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income (Loss) From Continuing Operations                                               |                                     |                | 5,190   |   |            |      | (6,795  | )          |  |   | 33,003       |         |  |       | (26,741 | ) |  |   | 4,657   |        
|Income From Discontinued Operations, Net of Tax                                        |                                     |                |        |   |            |      | 533     |            |  |   |             |         |  |       |        |   |  |   | 533     |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Net Income (Loss)                                                                      |                                     | $              | 5,190   |   |            | $    | (6,262  | )          |  | $ | 33,003       |         |  | $     | (26,741 | ) |  | $ | 5,190   |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED STATEMENT OF CASH FLOWS


Year Ended December 31, 2003


|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |   |   |   |   |        |         |         |  
|--------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | - | ------ | ---------- | ---- | ----- | ---------- | ------- | - | ------------ | ------- | ------- | - | - | - | - | - | ------ | ------- | ------- | -
|                                        |                                                          |                                                     |   |        |            | Non- |       |            |         |   |             
|                                        |                                                          | Parent                                              |   |        | Guarantors |      |       | Guarantors |         |   | Eliminations |         | Total   |  
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |  
|                                        |                                                          | (In thousands)                                      |  
|Cash Flows From Operating Activities:   |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        |                                                          | Net cash (used in) provided by operating activities |   | $      | (20,381    | )    |       | $          | 78,908  |   |              | $       | 24,411  |   |   | $ |  |   |        | $       | 82,938  |  
|Cash Flows From Investing Activities:   |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        | Acquisition of businesses, net of cash acquired          |                                                     |   | (1,861 | )          |      |       | (1,250     | )       |   |              | (5,161  | )       |   |   |  |   |   |        | (8,272  | )      
|                                        | Proceeds from sales of businesses, net of cash disposed  |                                                     |   | 24,064 |            |      |       | 6,300      |         |   |              |        |         |   |   |  |   |   |        | 30,364  |        
|                                        | Investments in and advances to unconsolidated affiliates |                                                     |   |       |            |      |       | (5,459     | )       |   |              |        |         |   |   |  |   |   |        | (5,459  | )      
|                                        | Capital expenditures for property, plant and equipment   |                                                     |   |       |            |      |       | (23,461    | )       |   |              | (17,957 | )       |   |   |  |   |   |        | (41,418 | )      
|                                        | Proceeds from sale of fixed assets                       |                                                     |   |       |            |      |       | 796        |         |   |              | 185     |         |   |   |  |   |   |        | 981     |        
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |  
|                                        |                                                          | Net cash provided by (used in) investing activities |   |        | 22,203     |      |       |            | (23,074 | ) |              |         | (22,933 | ) |   |   |  |   |        |         | (23,804 | )
|Cash Flows From Financing Activities:   |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |   |   |   |   |        |        
|                                        | Repayments on debt, net                                  |                                                     |   |       |            |      |       | (55,904    | )       |   |              | (4,686  | )       |   |   |  |   |   |        | (60,590 | )      
|                                        | Purchases of treasury stock                              |                                                     |   | (2,388 | )          |      |       |           |         |   |              |        |         |   |   |  |   |   |        | (2,388  | )      
|                                        | Proceeds from stock option exercises                     |                                                     |   | 566    |            |      |       |           |         |   |              |        |         |   |   |  |   |   |        | 566     |        
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |  
|                                        |                                                          | Net cash used in financing activities               |   |        | (1,822     | )    |       |            | (55,904 | ) |              |         | (4,686  | ) |   |   |  |   |        |         | (62,412 | )
|Effect of Exchange Rate Changes on Cash |                                                          |                                                     |  |        |            |      |      |            |         |   | 630          |         |         |   |  |   |   |   | 630    |        
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |  
|Net Decrease in Cash                    |                                                          |                                                     |  |        |            |      | (70   | )          |         |   | (2,578       | )       |         |   |  |   |   |   | (2,648 | )      
|Cash at Beginning of Year               |                                                          |                                                     |  |        |            |      | 2,690 |            |         |   | 19,188       |         |         |   |  |   |   |   | 21,878 |        
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |  
|Cash at End of Year                     |                                                          | $                                                   |  |        |            | $    | 2,620 |            |         | $ | 16,610       |         |         | $ |  |   |   | $ | 19,230 |        
|                                        |                                                          |                                                     |   |        |            |      |       |            |         |   |              |         |         |   |  

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants On
    Accounting and Financial Disclosure

8-K, 10-K.







|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures


13a-15(e) 15d-15(e)


Managements Report on Internal Control over Financial
Reporting






Changes in Internal Controls




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##### Table of Contents



Report of Independent Registered Public Accounting Firm


On Internal Control Over Financial Reporting








Internal Control 
Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated
Framework




Deloitte &
Touche LLP






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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers 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








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting 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:




| |    |                                                                                
| | -- | -------------------------------------------------------------------------------
| | 1. | Our consolidated financial statements are listed on page 34
    of this report.





| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Schedule II  Valuation and Qualifying Accounts
    for the three years ended December 31, 2005.                                                                                                                                                         
|
| | Note: All financial statement schedules not filed with this
    report required by
    Regulation S-X
    have been omitted as not applicable or not required or the
    information required has been included in the notes to financial
    statements.



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).
|
| | 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).                                   

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| |   |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 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 9% Senior Notes due 2009 dated as of
    December 4, 2002, between Grant Prideco Escrow Corp. and
    Wells Fargo Bank, N.A., as trustee (incorporated by reference to
    Exhibit 4.2 to Grant Prideco, Inc.s Current Report on
    Form 8-K, File No. 1-15423, filed on January 3,
    2003).                                                                                                                                                                                                                                                                                              
|
| | 4 | .11 |  | Form of 9% Senior Notes due 2009 (included as part of
    Exhibit 4.10).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | 4 | .12 |  | Supplemental Indenture dated as of December 20, 2002, among
    Grant Prideco, Inc., Grant Prideco Escrow Corp., certain of
    Grant Prideco, Inc.s subsidiaries, and Wells Fargo Bank,
    N.A., as trustee (incorporated by reference to Exhibit 4.4
    to Grant Prideco, Inc.s Current Report on Form 8-K,
    File No. 1-15423, filed on January 3, 2003).                                                                                                                                                                                                                                                  
|
| | 4 | .13 |  | 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 | .14 |  | Registration Rights Agreement relating to the
    61/8% Senior
    Notes due 2015, dated as of July 27, 2005, among Grant
    Prideco, Inc., certain subsidiary guarantors and Banc of America
    Securities LLC, as representative of the initial purchasers
    (incorporated by reference to Exhibit 4.2 to Grant Prideco,
    Inc.s Current Report on Form 8-K, filed on
    July 29, 2005).                                                                                                                                                                                                                  
|
| | 4 | .15 |  | 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 | .16 |  | 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).

89



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| |    |      |  |                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 4  | .17  |  | Security Agreement, dated as of May 12, 2005, among Grant
    Prideco, Inc., certain subsidiaries of Grant Prideco, Inc. and
    Wells Fargo Bank, National Association, in its capacity as
    administrative agent (incorporated by reference to
    Exhibit 99.3 to Grant Prideco, Inc.s Current Report
    on Form 8-K, filed on May 23, 2005).
|
| | 4  | .18  |  | Security Agreement, dated as of December 19, 2002 between
    Grant Prideco Canada Ltd. and Deutsche Bank AG, Canada Branch,
    as agent (incorporated by reference to Exhibit 4.9 to Grant
    Prideco, Inc.s Current Report on Form 8-K, File
    No. 1-15423, filed on January 3, 2003).                                                       
|
| | 4  | .19  |  | 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  | .20* |  | 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  | .21* |  | Form of Executive Restricted-Stock Agreement (with tandem tax
    rights incorporated by reference to Exhibit 4.21 to Grant
    Prideco, Inc.s Annual Report on Form 10-K for the
    year ended December 31, 2004, File No. 1-5423).                                                                                                              
|
| | 4  | .22* |  | Form of Executive Restricted-Stock Agreement (incorporated by
    reference to Exhibit 4.22 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                     
|
| | 4  | .23* |  | Form of Executive Stock Option Agreement (with accelerated
    vesting upon termination incorporated by reference to
    Exhibit 4.23 to Grant Prideco, Inc.s Annual Report on
    Form 10-K for the year ended December 31, 2004, File
    No. 1-5423).                                                                                           
|
| | 4  | .24* |  | Form of Executive Stock Option Agreement (without accelerated
    vesting upon termination incorporated by reference to
    Exhibit 4.24 to Grant Prideco, Inc.s Annual Report on
    Form 10-K for the year ended December 31, 2004, File
    No. 1-5423).                                                                                        
|
| | 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 William Chunn, Dan
    Latham, Warren Avery and 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, Jay Mitchell, 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   |  | Preferred Supplier Agreement dated April 14, 2000, between
    Grant Prideco, Inc. and Weatherford International, Inc.
    (incorporated by reference to Exhibit 10.12 to Weatherford
    International, Inc.s Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2000, File
    No. 1-13086).                                      
|
| | 10 | .8   |  | Amendment No. 1 to preferred supplier agreement
    (incorporated by reference to Exhibit 10.1 of Grant
    Prideco, Inc.s Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003).                                                                                                                                                
|
| | 10 | .9   |  | 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 | .10  |  | 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).                                                                           

90



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| |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10 | .11  |  | 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 | .12  |  | Supply Agreement, dated as of August 1, 2003, by and
    between VAT Stahlrohr Kindberg GmbH & Co KG and Grant
    Prideco, Inc. (Incorporated by reference to Exhibit 10.12
    of Grant Pridecos Annual Report on Form 10-K for the
    year ended December 31, 2003, File No. 1-15423)                                                                                                                                                 
|
| | 10 | .13  |  | Amendment No. 1 to VAT Supply Agreement (incorporated by
    reference to Exhibit 10.13 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                
|
| | 10 | .14  |  | Amendment No. 2 to VAT Supply Agreement (incorporated by
    reference to Exhibit 10.14 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                
|
| | 10 | .15  |  | Stock Purchase Agreement, dated as of June 19, 1998, by and
    between Weatherford, Pridecomex Holding, S.A. de C.V., Tubos de
    Acero de Mexico S.A. and Tamsider S.A. de C.V. (incorporated by
    reference to Exhibit 10.16 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File No. 1-15423,
    as amended).                                                                                                      
|
| | 10 | .16  |  | 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 | .17  |  | Agreement, dated as of November 12, 1998, by and between
    Tubos de Acero de Mexico, Tamsider S.A. de C.V., DST
    Distributors of Steel Tubes Limited, Techint Engineering
    Company, Weatherford, Grand Prideco, Pridecomex Holding, S.A. de
    C.V. and Grant Prideco, S.A. de C.V. (incorporated by reference
    to Exhibit 10.18 to Grant Prideco, Inc.s Registration
    Statement on Form 10, File No. 1-15423, as amended).
|
| | 10 | .18  |  | Agreement, dated as of December 1, 1998, by and between
    Tubos de Acero de Mexico, Tamsider S.A. de C.V., Weatherford and
    Pridecomex Holdings, S.A. de C.V. (incorporated by reference to
    Exhibit 10.19 to Grant Prideco, Inc.s Registration
    Statement on Form 10, File No. 1-15423, as amended).                                                                                                                          
|
| | 10 | .19* |  | 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).                                                                                                                                                                                                                                      
|
| | 21 | .1   |  | Subsidiaries of Registrant (incorporated by reference to
    Exhibit 21.1 of Grant Pridecos Annual Report on
    Form 10K for the year ended December 31, 2003, File
    No. 1-15423).                                                                                                                                                                                                                                                    
|
| | 23 | .1   |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | 23 | .2   |  | Consent of Ernst & Young 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.

91



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##### Table of Contents



SCHEDULE II





VALUATION AND QUALIFYING ACCOUNTS


For the Years Ended December 31, 2005, 2004 and 2003


|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |        | 
|------------ | ------------------------------------ | -------------- | - | ---------- |  | ---------- | - | ---------- |  | ------- | - | ----- | - |  | - | ----- |  |  | - | ------ | 
|             |                                      |                |   | Additions  |  |            |   |           
|             |                                      |                |   |            |  |            |   |           
|             |                                      | Balance At     |   | Charged to |  | Charged to |   |            |  | Balance
|             |                                      | Beginning      |   | Cost and   |  | Other      |   |            |  | At End 
|Descriptions |                                      | of Year        |   | Expenses   |  | Accounts   |   | Deductions |  | of Year
|             |                                      |                |   |            |  |            |   |            |  |        
|             |                                      | (In thousands)
|2005:        |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Allowance for Uncollectible Accounts |                | $ | 8,024      |  |            | $ | 1,682      |  |         | $ | 210   |   |  | $ | 4,060 |  |  | $ | 5,856  | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Inventory Reserves                   |                |   | 13,013     |  |            |   | 9,572      |  |         |   | 6     |   |  |   | 4,991 |  |  |   | 17,600 | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|2004:        |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Allowance for Uncollectible Accounts |                |   | 3,539      |  |            |   | 3,844      |  |         |   | 1,141 |   |  |   | 500   |  |  |   | 8,024  | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Inventory Reserves                   |                |   | 14,910     |  |            |   | 6,961      |  |         |   | 226   |   |  |   | 9,084 |  |  |   | 13,013 | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|2003:        |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Allowance for Uncollectible Accounts |                |   | 2,815      |  |            |   | 1,948      |  |         |   | (397  | ) |  |   | 827   |  |  |   | 3,539  | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       
|             | Inventory Reserves                   |                |   | 10,695     |  |            |   | 11,718     |  |         |   | (312  | ) |  |   | 7,191 |  |  |   | 14,910 | 
|             |                                      |                |   |            |  |            |   |            |  |         |   |       |   |  |   |       |  |  |   |       

92



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SIGNATURES






| |                    
| | -------------------
| | GRANT PRIDECO, INC.



| |     |                    
| | --- | -------------------
| | By: | /s/ Michael McShane

| |                                    
| | -----------------------------------
| |                                    
| | 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) |  | March 3, 2006
|                                                  
|/s/ Matthew D.
    FitzgeraldMatthew D. Fitzgerald |  | Senior Vice President and Chief Financial Officer
    (Principal Financial Officer)                |  | March 3, 2006
|                                                  
|/s/ Greg L. BoaneGreg L. Boane                     |  | Corporate Controller
    (Principal Accounting Officer)                                            |  | March 3, 2006
|                                                  
|/s/ David J. ButtersDavid J. Butters               |  | Director                                                                                           |  | March 3, 2006
|                                                  
|/s/ Eliot M. FriedEliot M. Fried                   |  | Director                                                                                           |  | March 3, 2006
|                                                  
|/s/ Dennis R. HendrixDennis R. Hendrix             |  | Director                                                                                           |  | March 3, 2006
|                                                  
|/s/ Harold E. LaymanHarold E. Layman               |  | Director                                                                                           |  | March 3, 2006
|                                                  
|/s/ Sheldon B. LubarSheldon B. Lubar               |  | Director                                                                                           |  | March 3, 2006
|                                                  
|/s/ Robert K.
    Moses, Jr.Robert K. Moses, Jr.   |  | Director                                                                                           |  | March 3, 2006

93



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##### Table of Contents



|                                 |  |                          |  |               |  | 
|-------------------------------- |  | ------------------------ |  | ------------- |  | 
|Signature                        |  | Capacity in Which Signed |  | Date         
|                                 |  |                          |  |              
|                                
|/s/ Joseph E. ReidJoseph E. Reid |  | Director                 |  | March 3, 2006
|                                
|/s/ David A. TriceDavid A. Trice |  | Director                 |  | March 3, 2006

94



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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).                                                                                                                                                           
|
| | 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 9% Senior Notes due 2009 dated as of
    December 4, 2002, between Grant Prideco Escrow Corp. and
    Wells Fargo Bank, N.A., as trustee (incorporated by reference to
    Exhibit 4.2 to Grant Prideco, Inc.s Current Report on
    Form 8-K, File No. 1-15423, filed on January 3,
    2003).                                                                            
|
| | 4 | .11 |  | Form of 9% Senior Notes due 2009 (included as part of
    Exhibit 4.10).                                                                                                                                                                                                                                                                                                                          
|
| | 4 | .12 |  | Supplemental Indenture dated as of December 20, 2002, among
    Grant Prideco, Inc., Grant Prideco Escrow Corp., certain of
    Grant Prideco, Inc.s subsidiaries, and Wells Fargo Bank,
    N.A., as trustee (incorporated by reference to Exhibit 4.4
    to Grant Prideco, Inc.s Current Report on Form 8-K,
    File No. 1-15423, filed on January 3, 2003).                                
|
| | 4 | .13 |  | 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 | .14 |  | Registration Rights Agreement relating to the
    61/8% Senior
    Notes due 2015, dated as of July 27, 2005, among Grant
    Prideco, Inc., certain subsidiary guarantors and Banc of America
    Securities LLC, as representative of the initial purchasers
    (incorporated by reference to Exhibit 4.2 to Grant Prideco,
    Inc.s Current Report on Form 8-K, filed on
    July 29, 2005).



---



##### Table of Contents



| |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 4  | .15  |  | 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  | .16  |  | 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  | .17  |  | Security Agreement, dated as of May 12, 2005, among Grant
    Prideco, Inc., certain subsidiaries of Grant Prideco, Inc. and
    Wells Fargo Bank, National Association, in its capacity as
    administrative agent (incorporated by reference to
    Exhibit 99.3 to Grant Prideco, Inc.s Current Report
    on Form 8-K, filed on May 23, 2005).                                                                                                                                                                                                                                                                
|
| | 4  | .18  |  | Security Agreement, dated as of December 19, 2002 between
    Grant Prideco Canada Ltd. and Deutsche Bank AG, Canada Branch,
    as agent (incorporated by reference to Exhibit 4.9 to Grant
    Prideco, Inc.s Current Report on Form 8-K, File
    No. 1-15423, filed on January 3, 2003).                                                                                                                                                                                                                                                                                                                       
|
| | 4  | .19  |  | 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  | .20* |  | 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  | .21* |  | Form of Executive Restricted-Stock Agreement (with tandem tax
    rights incorporated by reference to Exhibit 4.21 to Grant
    Prideco, Inc.s Annual Report on Form 10-K for the
    year ended December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                                                                                                                                                              
|
| | 4  | .22* |  | Form of Executive Restricted-Stock Agreement (incorporated by
    reference to Exhibit 4.22 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | 4  | .23* |  | Form of Executive Stock Option Agreement (with accelerated
    vesting upon termination incorporated by reference to
    Exhibit 4.23 to Grant Prideco, Inc.s Annual Report on
    Form 10-K for the year ended December 31, 2004, File
    No. 1-5423).                                                                                                                                                                                                                                                                                                                                                           
|
| | 4  | .24* |  | Form of Executive Stock Option Agreement (without accelerated
    vesting upon termination incorporated by reference to
    Exhibit 4.24 to Grant Prideco, Inc.s Annual Report on
    Form 10-K for the year ended December 31, 2004, File
    No. 1-5423).                                                                                                                                                                                                                                                                                                                                                        
|
| | 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 William Chunn, Dan
    Latham, Warren Avery and 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, Jay Mitchell, 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   |  | Preferred Supplier Agreement dated April 14, 2000, between
    Grant Prideco, Inc. and Weatherford International, Inc.
    (incorporated by reference to Exhibit 10.12 to Weatherford
    International, Inc.s Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2000, File
    No. 1-13086).                                                                                                                                                                                                                                                                                                      



---



##### Table of Contents



| |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10 | .8   |  | Amendment No. 1 to preferred supplier agreement
    (incorporated by reference to Exhibit 10.1 of Grant
    Prideco, Inc.s Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003).                                                                                                                                                                                                                                       
|
| | 10 | .9   |  | 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 | .10  |  | 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 | .11  |  | 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 | .12  |  | Supply Agreement, dated as of August 1, 2003, by and
    between VAT Stahlrohr Kindberg GmbH & Co KG and Grant
    Prideco, Inc. (Incorporated by reference to Exhibit 10.12
    of Grant Pridecos Annual Report on Form 10-K for the
    year ended December 31, 2003, File No. 1-15423)                                                                                                                                                 
|
| | 10 | .13  |  | Amendment No. 1 to VAT Supply Agreement (incorporated by
    reference to Exhibit 10.13 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                
|
| | 10 | .14  |  | Amendment No. 2 to VAT Supply Agreement (incorporated by
    reference to Exhibit 10.14 to Grant Prideco, Inc.s
    Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-5423).                                                                                                                                                                                                                                
|
| | 10 | .15  |  | Stock Purchase Agreement, dated as of June 19, 1998, by and
    between Weatherford, Pridecomex Holding, S.A. de C.V., Tubos de
    Acero de Mexico S.A. and Tamsider S.A. de C.V. (incorporated by
    reference to Exhibit 10.16 to Grant Prideco, Inc.s
    Registration Statement on Form 10, File No. 1-15423,
    as amended).                                                                                                      
|
| | 10 | .16  |  | 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 | .17  |  | Agreement, dated as of November 12, 1998, by and between
    Tubos de Acero de Mexico, Tamsider S.A. de C.V., DST
    Distributors of Steel Tubes Limited, Techint Engineering
    Company, Weatherford, Grand Prideco, Pridecomex Holding, S.A. de
    C.V. and Grant Prideco, S.A. de C.V. (incorporated by reference
    to Exhibit 10.18 to Grant Prideco, Inc.s Registration
    Statement on Form 10, File No. 1-15423, as amended).
|
| | 10 | .18  |  | Agreement, dated as of December 1, 1998, by and between
    Tubos de Acero de Mexico, Tamsider S.A. de C.V., Weatherford and
    Pridecomex Holdings, S.A. de C.V. (incorporated by reference to
    Exhibit 10.19 to Grant Prideco, Inc.s Registration
    Statement on Form 10, File No. 1-15423, as amended).                                                                                                                          
|
| | 10 | .19* |  | 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).                                                                                                                                                                                                                                      
|
| | 21 | .1   |  | Subsidiaries of Registrant (incorporated by reference to
    Exhibit 21.1 of Grant Pridecos Annual Report on
    Form 10K for the year ended December 31, 2003, File
    No. 1-15423).                                                                                                                                                                                                                                                    
|
| | 23 | .1   |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | 23 | .2   |  | Consent of Ernst & Young 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.