##### 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, 2004                                                 
| 
|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 o






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  | 
|                                             |  | Other Segment                                                                                                         |  |      | 8  | 
|                                             |  | Other Business Data                                                                                                   |  |      | 8  | 
|Item 2.                                      |  | Properties                                                                                                            |  |      | 10 | 
|Item 3.                                      |  | Legal Proceedings                                                                                                     |  |      | 11 | 
|Item 4.                                      |  | Submission of Maters to a Vote of Security
    Holders                                                                |  |      | 11 | 
|PART II                                     
|Item 5.                                      |  | Market For Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities |  |      | 11 | 
|Item 6.                                      |  | Selected Financial Data                                                                                               |  |      | 12 | 
|Item 7.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                             |  |      | 13 | 
|                                             |  | General                                                                                                               |  |      | 13 | 
|                                             |  | Market Trends and Outlook                                                                                             |  |      | 13 | 
|                                             |  | Future Market Trends and Expectations                                                                                 |  |      | 14 | 
|                                             |  | Results of Operations                                                                                                 |  |      | 15 | 
|                                             |  | Liquidity and Capital Resources                                                                                       |  |      | 19 | 
|                                             |  | Related-Party Transactions                                                                                            |  |      | 23 | 
|                                             |  | Off-Balance Sheet Financing                                                                                           |  |      | 23 | 
|                                             |  | Recent Accounting Pronouncements                                                                                      |  |      | 24 | 
|                                             |  | Critical Accounting Policies and
    Estimates                                                                        |  |      | 25 | 
|                                             |  | Forward-Looking Statements and Exposures                                                                              |  |      | 27 | 
|Item 7A.                                     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                        |  |      | 32 | 
|Item 8.                                      |  | Financial Statements and Supplementary
    Data                                                                       |  |      | 33 | 
|Item 9.                                      |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |  |      | 88 | 
|Item 9A.                                     |  | Controls and Procedures                                                                                               |  |      | 88 | 
|PART III                                    
|Item 10.                                     |  | Directors and Executive Officers of the
    Registrant                                                                |  |      | 92 | 
|Item 11.                                     |  | Executive Compensation                                                                                                |  |      | 92 | 
|Item 12.                                     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                    |  |      | 92 | 
|Item 13.                                     |  | Certain Relationships and Related
    Transactions                                                                    |  |      | 92 | 
|Item 14.                                     |  | Principle Accounting Fees and Services                                                                                |  |      | 92 | 
|PART IV                                     
|Item 15.                                     |  | Exhibits and Financial Statement
    Schedules                                                                        |  |      | 92 | 
|                                             |  | Schedule II  Valuation and Qualifying Accounts                                                                       |  |      | 96 | 
|                                             |  | Signatures                                                                                                            |  |      | 97 | 
|Form of Executive Restricted-Stock Agreement
|Form of Executive Restricted-Stock Agreement
|Form of Executive Stock Option Agreement    
|Form of Executive Stock Option Agreement    
|Amendment 1 to Supplier Agreement           
|Amendment 2 to Supplier Agreement           
|Consent of Ernst & Young LLP                
|Certification of Michael McShane            
|Certification of Matthew D. Fitzgerald      
|Certification Pursuant to Section 906       



1



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##### Table of Contents



FORM 10-K





PART I







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




General













Drilling Products and Services Segment






2



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tm tm








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





7 8 1 2 5 8




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



3



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##### Table of Contents





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







| |                           
| | --------------------------
| | IntelliServtmJoint Venture





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








Drill Bits Segment








4



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





tm tm






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



tm tm tm


5



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








Tubular Technology and Services Segment












| |                                      
| | -------------------------------------
| | Atlas Bradford® Threading and Service

tm






6



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| |                        
| | -----------------------
| | Tube-AlloytmAccessories





| |      
| | -----
| | TCAtm



tm




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

tm


5 8 3 8




7



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##### Table of Contents





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






Other Segment









Other Business Data




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





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





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





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



8



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







i.e.




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



9



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

(http://www.sec.gov)


(http://www.grantprideco.com)







|        |           
|------- | ----------
|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 drill pipe                        
|Baimi Town, Jiangyan, Jiangsu China |  | Leased |  |          | 49,428  |  |             | Manufacture of drill pipe                                        
|Jianjin, 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 drill 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            

10



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|                            |  |        |  |          |        |  |             |                                                         
|--------------------------- |  | ------ |  | -------- | ------ |  | ----------- | --------------------------------------------------------
|                            |  |        |  | Facility |        |  |            
|                            |  |        |  | Size     |        |  |            
|Location                    |  | Tenure |  | (Sq.Ft.) |        |  | Utilization
|                            |  |        |  |          |        |  |            
|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                   |  |        |  |          |        |  |             |                                                         
|Houston, Texas              |  | Leased |  |          | 39,350 |  |             | Corporate headquarters                                  
|The Woodlands, Texas        |  | Leased |  |          | 61,831 |  |             | Sales and administrative offices                        






|        |                  
|------- | -----------------
|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 | 
|     |                |      |   |       |     | 
|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 | 
|2003 |                |      |   |       |     |  |   |      
|     | First quarter  |      | $ | 12.81 |     |  | $ | 9.77  | 
|     | Second quarter |      |   | 14.87 |     |  |   | 10.75 | 
|     | Third quarter  |      |   | 12.26 |     |  |   | 10.00 | 
|     | Fourth quarter |      |   | 13.68 |     |  |   | 10.00 | 

5 8


11



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



|                                          |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |         |       |  
|----------------------------------------- | ----------------------------------------------------------- | ------------------------------------- | - | --------- | ---- |  | - | --------- | ---- |  | ---- | --------- | ---- | ---- | - | ------- | ---- |  | - | ------- | ----- | -
|                                          |                                                             | Year Ended December 31,               |  
|                                          |                                                             |                                       |  
|                                          |                                                             | 2004                                  |   |           | 2003 |  |   | 2002      |      |  | 2001 |           |      | 2000 |  
|                                          |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |  
|                                          |                                                             | (In thousands, except per share data) |  
|Operating Data:                           |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |        
|                                          | Revenues                                                    |                                       | $ | 945,643   |      |  | $ | 803,818   |      |  | $    | 609,390   |      |      | $ | 688,056 |      |  | $ | 451,659 |      
|                                          | Operating Income (Loss)                                     |                                       |   | 141,672   |      |  |   | 45,297    |      |  |      | 46,995    |      |      |   | 59,976  |      |  |   | (11,029 | )    
|                                          | Income (Loss) From Continuing Operations                    |                                       |   | 64,793    |      |  |   | 4,657     |      |  |      | 13,690    |      |      |   | 24,809  |      |  |   | (14,716 | )    
|                                          | Income (Loss) Before Cumulative Effect of Accounting Change |                                       |   | 55,266    |      |  |   | 5,190     |      |  |      | 13,046    |      |      |   | 28,090  |      |  |   | (14,696 | )    
|                                          | Net Income (Loss)                                           |                                       |   | 55,266    |      |  |   | 5,190     |      |  |      | 6,634     | (b)  |      |   | 28,090  |      |  |   | (16,485 | )(c) 
|Income (Loss) Per Share(a):               |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |        
|Income (Loss) from Continuing Operations: |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |        
|                                          |                                                             | Basic                                 |   |           | 0.53 |  |   |           | 0.04 |  |      |           | 0.12 |      |   |         | 0.23 |  |   |         | (0.13 | )
|                                          |                                                             | Diluted                               |   |           | 0.51 |  |   |           | 0.04 |  |      |           | 0.12 |      |   |         | 0.22 |  |   |         | (0.13 | )
|                                          | Net Income (Loss):                                          |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |         |      
|                                          |                                                             | Basic                                 |   |           | 0.45 |  |   |           | 0.04 |  |      |           | 0.06 |      |   |         | 0.26 |  |   |         | (0.15 | )
|                                          |                                                             | Diluted                               |   |           | 0.44 |  |   |           | 0.04 |  |      |           | 0.06 |      |   |         | 0.25 |  |   |         | (0.15 | )
|Balance Sheet Data (At End of Period):    |                                                             |                                       |   |           |      |  |   |           |      |  |      |           |      |      |   |         |      |  |   |        
|                                          | Total Assets                                                |                                       | $ | 1,344,466 |      |  | $ | 1,262,061 |      |  | $    | 1,315,349 |      |      | $ | 915,598 |      |  | $ | 892,564 |      
|                                          | Long-Term Debt                                              |                                       |   | 377,773   |      |  |   | 426,853   |      |  |      | 478,846   |      |      |   | 205,024 |      |  |   | 219,104 |      
|                                          | Stockholders Equity                                        |                                       |   | 705,541   |      |  |   | 606,114   |      |  |      | 588,872   |      |      |   | 468,967 |      |  |   | 431,503 |      






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | We did not have a separate capital structure prior to being spun
    off from Weatherford on April 14, 2000; accordingly we have
    calculated our 2000 pro forma earnings per share using pro forma
    basic and diluted weighted average shares outstanding prior to
    the spin-off. In calculating our pro forma basic weighted
    average shares, we have adjusted Weatherfords historical
    basic weighted average shares outstanding for the applicable
    period to reflect the number of shares that would have been
    outstanding at the time assuming a distribution of one share of
    our common stock for each share of Weatherford common stock. The
    effect of stock options and restricted stock is not included in
    the 2000 diluted weighted average shares computation because to
    do so would have been anti-dilutive.
|   
|(b) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

12



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|    |  |                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | Includes a cumulative effect of accounting change related to SEC
    Staff Accounting Bulletin (SAB) No. 101 of
    $1.8 million, net of tax.






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








General







Market Trends and Outlook




13



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|                            |         |                         |   |       |      |  |   |       |  |  |   |       | 
|--------------------------- | ------- | ----------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                            |         | Year Ended December 31, |  
|                            |         |                         |  
|                            |         | 2004                    |   |       | 2003 |  |   | 2002  | 
|                            |         |                         |   |       |      |  |   |       | 
|WTI Oil(a)                  |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         | $ | 41.51 |      |  | $ | 31.06 |  |  | $ | 26.17 | 
|                            | Ending  |                         |   | 43.45 |      |  |   | 32.52 |  |  |   | 31.20 | 
|Henry Hub Gas(b)            |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         | $ | 5.90  |      |  | $ | 5.49  |  |  | $ | 3.37  | 
|                            | Ending  |                         |   | 6.01  |      |  |   | 5.80  |  |  |   | 4.59  | 
|North American Rig Count(c) |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         |   | 1,559 |      |  |   | 1,404 |  |  |   | 1,097 | 
|                            | Ending  |                         |   | 1,686 |      |  |   | 1,531 |  |  |   | 1,204 | 
|International Rig Count(c)  |         |                         |   |       |      |  |   |       |  |  |   |      
|                            | Average |                         |   | 836   |      |  |   | 771   |  |  |   | 732   | 
|                            | Ending  |                         |   | 869   |      |  |   | 803   |  |  |   | 753   | 






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




Future Market Trends and Expectations






14



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##### Table of Contents






Results of Operations




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



|                         |                                 |                         |   |         |         |  |   |         |         | 
|------------------------ | ------------------------------- | ----------------------- | - | ------- | ------- |  | - | ------- | ------- | 
|                         |                                 | Year Ended December 31, |  
|                         |                                 |                         |  
|                         |                                 | 2004                    |   |         | 2003    | 
|                         |                                 |                         |   |         |         | 
|                         |                                 | (In thousands)          |  
|Revenues:                |                                 |                         |   |         |         |  |   |        
|                         | Drilling Products and Services  |                         | $ | 390,617 |         |  | $ | 308,297 |        
|                         | Drill Bits                      |                         |   | 326,918 |         |  |   | 258,975 |        
|                         | Tubular Technology and Services |                         |   | 226,233 |         |  |   | 226,607 |        
|                         | Other                           |                         |   | 1,875   |         |  |   | 9,939   |        
|                         |                                 |                         |   |         |         | 
|                         |                                 | Total Revenues          |   |         | 945,643 |  |   |         | 803,818 | 
|Operating Income (Loss): |                                 |                         |   |         |         |  |   |        
|                         | Drilling Products and Services  |                         | $ | 90,509  | (a)     |  | $ | 18,776  | (a)    
|                         | Drill Bits                      |                         |   | 70,542  |         |  |   | 58,443  | (d)    
|                         | Tubular Technology and Services |                         |   | 20,884  | (b)     |  |   | 7,634   | (e)    
|                         | Other                           |                         |   | (2,117  | )       |  |   | (16,754 | )(e)(f)
|                         | Corporate                       |                         |   | (38,146 | )(c)    |  |   | (22,802 | )(g)   
|                         |                                 |                         |   |         |         | 
|                         |                                 | Total Operating Income  |   |         | 141,672 |  |   |         | 45,297  | 






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



15



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##### Table of Contents














Segment Results




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





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

tm tm tm tm


16



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##### Table of Contents







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





| |      
| | -----
| | Other









| |          
| | ---------
| | Corporate





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year Ended December 31, 2003 Compared to the Year
    Ended December 31, 2002



|                         |                                 |                         |   |         |         |  |   |         |         | 
|------------------------ | ------------------------------- | ----------------------- | - | ------- | ------- |  | - | ------- | ------- | 
|                         |                                 | Year Ended December 31, |  
|                         |                                 |                         |  
|                         |                                 | 2003                    |   |         | 2002    | 
|                         |                                 |                         |   |         |         | 
|                         |                                 | (In thousands)          |  
|Revenues:                |                                 |                         |   |         |         |  |   |        
|                         | Drilling Products and Services  |                         | $ | 308,297 |         |  | $ | 317,280 |        
|                         | Drill Bits                      |                         |   | 258,975 |         |  |   | 5,270   |        
|                         | Tubular Technology and Services |                         |   | 226,607 |         |  |   | 258,458 |        
|                         | Other                           |                         |   | 9,939   |         |  |   | 28,382  |        
|                         |                                 |                         |   |         |         | 
|                         |                                 | Total Revenues          |   |         | 803,818 |  |   |         | 609,390 | 
|Operating Income (Loss): |                                 |                         |   |         |         |  |   |        
|                         | Drilling Products and Services  |                         |   | 18,776  | (a)     |  |   | 58,029  | (f)    
|                         | Drill Bits                      |                         |   | 58,443  | (b)     |  |   | 796     |        
|                         | Tubular Technology and Services |                         |   | 7,634   | (c)     |  |   | 12,824  | (f)    
|                         | Other                           |                         |   | (16,754 | )(c)(d) |  |   | (1,124  | )      
|                         | Corporate                       |                         |   | (22,802 | )(e)    |  |   | (23,530 | )(g)   
|                         |                                 |                         |   |         |         | 
|                         |                                 | Total Operating Income  |   |         | 45,297  |  |   |         | 46,995  | 

17



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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | 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 transition costs of $3.9 million related to the
    ReedHycalog acquisition in December 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(c) |  | Includes other charges of $6.4 million, $0.4 million
    in Tubular Technology and Services and $6.0 million in
    Other, classified as Cost of Sales related to the write-down of
    industrial inventory drilling 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.                                                                                                                      
|   
|(d) |  | 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.                                                                                                                                                                                                                                                   
|   
|(e) |  | 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.                                                                                    
|   
|(f) |  | Includes other charges of $2.6 million, $2.4 million
    in Drilling Products and Services and $0.2 million in
    Tubular Technology and Services, related to fixed asset
    write-downs for idle assets that were taken out of service
    pursuant to our ongoing automation and efficiency initiatives
    and were classified as held for sale. 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.                  
|   
|(g) |  | Includes other charges of $4.5 million related to an
    executive terminated in June 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                      







18



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##### Table of Contents





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





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





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





| |      
| | -----
| | Other







| |          
| | ---------
| | Corporate






Liquidity and Capital Resources




19



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|                                                    |  |                         |         |   |      |   |         |      |  |   |          |  
|--------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                    |  | Year Ended December 31, |        
|                                                    |  |                         |        
|                                                    |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                                    |  |                         |         |   |      |   |         |      | 
|                                                    |  | (In thousands)          |        
|Net Cash Provided by Operating Activities           |  | $                       | 113,170 |   |      | $ | 82,938  |      |  | $ | 118,686  |  
|Net Cash Used in Investing Activities               |  |                         | (45,381 | ) |      |   | (23,804 | )    |  |   | (313,836 | )
|Net Cash Provided by (Used in) Financing Activities |  |                         | (39,890 | ) |      |   | (62,412 | )    |  |   | 206,040  |  



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







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







20



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







| |                                                
| | -----------------------------------------------
| | Senior Credit Facility and Other Long-Term Debt

5 8




| |                       
| | ----------------------
| | Senior Credit Facility









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



21



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

5 8 5 8 3 4 5 8 5 8 5 8


5 8 5 8




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







|                         |                               |                |         |         |        |   |       |           |  |       |           |         |  |         |         |         |  |   |        |        | 
|------------------------ | ----------------------------- | -------------- | ------- | ------- | ------ | - | ----- | --------- |  | ----- | --------- | ------- |  | ------- | ------- | ------- |  | - | ------ | ------ | 
|                         |                               |                |         |         |        |   |       |           |  | After |          
|                         |                               | Total          |         |         | 1 Year |   |       | 2-4 Years |  |       | 5-6 Years |         |  | 6 Years |        
|                         |                               |                |         |         |        |   |       |           |  |       |           |         |  |         |        
|                         |                               | (In thousands) |        
|Contractual Obligations: |                               |                |         |         |        |   |       |           |  |       |           |         |  |         |         |         |  |   |        |       
|Long-Term Debt           |                               | $              | 381,954 |         |        | $ | 4,181 |           |  | $     | 201,212   |         |  | $       | 175,382 |         |  | $ | 1,179  |       
|Operating Leases         |                               |                | 47,453  |         |        |   | 9,992 |           |  |       | 19,095    |         |  |         | 4,822   |         |  |   | 13,544 |       
|Purchase Obligation(a)   |                               |                | 6,618   |         |        |   | 2,562 |           |  |       | 4,056     |         |  |         |        |         |  |   |       |       
|                         |                               |                |         |         |        |   |       |           |  |       |           |         |  |         |        
|                         | Total Contractual Obligations |                | $       | 436,025 |        |   | $     | 16,735    |  |       | $         | 224,363 |  |         | $       | 180,204 |  |   | $      | 14,723 | 
|                         |                               |                |         |         |        |   |       |           |  |       |           |         |  |         |        

|                       |  |       |       |  |        |   |       |           |  |       |           |  |         |   |   |  |  |   |   | 
|---------------------- |  | ----- | ----- |  | ------ | - | ----- | --------- |  | ----- | --------- |  | ------- | - | - |  |  | - | - | 
|                       |  |       |       |  |        |   |       |           |  | After
|                       |  | Total |       |  | 1 Year |   |       | 2-4 Years |  |       | 5-6 Years |  | 6 Years
|                       |  |       |       |  |        |   |       |           |  |       |           |  |        
|Commercial Commitments |  |       |       |  |        |   |       |           |  |       |           |  |         |   |   |  |  |   |   | 
|Letters of Credit      |  | $     | 9,484 |  |        | $ | 6,209 |           |  | $     | 3,275     |  |         | $ |  |  |  | $ |  | 

22



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##### Table of Contents








|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | We have entered into a supply agreement with Voest-Alpine which
    provides that we purchase a minimum quantity of tubulars per
    year through July 31, 2007. Although we are not
    contractually obligated to purchase an annual minimum
    commitment, the contract does include a penalty for every metric
    ton that a two-year average of purchases fall below the annual
    purchase minimum. The maximum annual penalty due under the
    contract would be approximately 1.9 million Euros annually.
    The amounts in the table reflect the amount of this contractual
    penalty assuming we made no purchases from Voest-Alpine and were
    converted from Euros to U.S. dollars using the average 2004
    foreign currency exchange rate.




Related-Party Transactions













Off-Balance Sheet Financing




23



---



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Recent Accounting Pronouncements












24



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##### Table of Contents










Critical Accounting Policies and Estimates






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





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



25



---



##### Table of Contents







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





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





| |                  
| | -----------------
| | Long-Lived Assets





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



26



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##### Table of Contents







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





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







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






Forward-Looking Statements and Exposures -




27



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



28



---



##### Table of Contents





| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | An economic downturn could adversely affect demand for our
    products and services and our results of operations.





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









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







29



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##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our results of operations and financial condition are
    dependent upon our ability to successfully increase and
    decrease, without material disruption, our manufacturing
    capacity and expense in response to changes in demand and to
    maintain prices for our products, which can be adversely
    affected by changes in industry conditions and competitive
    forces.





| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our 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.                                               







30



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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.







31



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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.










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

Financial Instruments




Foreign Currency Risk




32



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##### Table of Contents



Interest Rates






|                |                       |                |   |       |      |  |   |       |   |  |      |         |   |      |   |      |            |  |   |         |   |  |   |       |  
|--------------- | --------------------- | -------------- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------- | - | ---- | - | ---- | ---------- |  | - | ------- | - |  | - | ----- | -
|                |                       | 2005           |   |       | 2006 |  |   | 2007  |   |  | 2008 |         |   | 2009 |   |      | Thereafter | 
|2004            |                       |                |   |       |      |  |   |       |   |  |      |         |   |      |   |      |            | 
|                |                       | (In thousands) |  
|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  | %

|                |                       |                |   |       |      |  |   |       |   |  |      |        |   |      |   |         |            |  |   |      |   |  |   |         |  
|--------------- | --------------------- | -------------- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - | ---- | - | ------- | ---------- |  | - | ---- | - |  | - | ------- | -
|                |                       | 2004           |   |       | 2005 |  |   | 2006  |   |  | 2007 |        |   | 2008 |   |         | Thereafter | 
|2003            |                       |                |   |       |      |  |   |       |   |  |      |        |   |      |   |         |            | 
|                |                       | (In thousands) |  
|Long-term debt: |                       |                |   |       |      |  |   |       |   |  |      |        |   |      |   |         |            |  |   |      |   |  |   |        
|                | Fixed rate            |                | $ | 2,642 |      |  | $ | 285   |   |  | $    | 212    |   |      | $ | 199,528 |            |  | $ | 234  |   |  | $ | 176,559 |  
|                | Average interest rate |                |   | 9.30  | %    |  |   | 9.32  | % |  |      | 9.33   | % |      |   | 9.22    | %          |  |   | 8.96 | % |  |   | 8.97    | %
|                | Variable rate         |                | $ | 7,143 |      |  | $ | 7,143 |   |  | $    | 42,892 |   |      | $ |        |            |  | $ |     |   |  | $ |        |  
|                | Average interest rate |                |   | 4.13  | %    |  |   | 4.12  | % |  |      | 4.12   | % |      |   |        |            |  |   |     |   |  |   |        |  





|                                |  |               |       |  |       |   |       |          |  |   |       |  |  |   |       | 
|------------------------------- |  | ------------- | ----- |  | ----- | - | ----- | -------- |  | - | ----- |  |  | - | ----- | 
|                                |  | December 31,  |      
|                                |  |               |      
|                                |  | 2004          |       |  | 2003  |  
|                                |  |               |       |  |       |  
|                                |  | Carrying      |       |  | Fair  |   |       | Carrying |  |   | Fair  | 
|                                |  | Value         |       |  | Value |   |       | Value    |  |   | Value | 
|                                |  |               |       |  |       |   |       |          |  |   |       | 
|                                |  | (In millions) |      
|95/8% Senior
    Notes due 2007 |  | $             | 199.5 |  |       | $ | 225.1 |          |  | $ | 199.3 |  |  | $ | 229.0 | 
|9% Senior Notes due 2009        |  |               | 175.0 |  |       |   | 196.7 |          |  |   | 175.0 |  |  |   | 196.8 | 






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





| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Report of Independent Registered Public Accounting Firm                                                              
|
| | Report of Independent Registered Public Accounting Firm on
    Internal Control over Financial Reporting             
|
| | Consolidated Statements of Operations for each of the three
    years in the period ended December 31, 2004          
|
| | Consolidated Balance Sheets at December 31, 2004 and 2003                                                            
|
| | Consolidated Statements of Cash Flows for each of the three
    years in the period ended December 31, 2004          
|
| | Consolidated Statements of Stockholders Equity for each of
    the three years in the period ended December 31, 2004
|
| | Notes to Consolidated Financial Statements                                                                           

33



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















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





34



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GRANT PRIDECO, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                 |                                             |                                       |         |         |      |   |         |         |  |   |         |         |  
|-------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | -
|                                                                                 |                                             | Year Ended December 31,               |        
|                                                                                 |                                             |                                       |        
|                                                                                 |                                             | 2004                                  |         |         | 2003 |   |         | 2002    | 
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 |                                             | (In thousands, except per share data) |        
|Revenues                                                                         |                                             | $                                     | 945,643 |         |      | $ | 803,818 |         |  | $ | 609,390 |        
|Operating Expenses:                                                              |                                             |                                       |         |         |      |   |         |         |  |   |         |        
|                                                                                 | Cost of sales                               |                                       |         | 560,807 |      |   |         | 533,572 |  |   |         | 472,220 |  
|                                                                                 | Sales and marketing                         |                                       |         | 128,585 |      |   |         | 106,589 |  |   |         | 27,828  |  
|                                                                                 | General and administrative                  |                                       |         | 85,071  |      |   |         | 69,251  |  |   |         | 52,112  |  
|                                                                                 | Research and engineering                    |                                       |         | 20,473  |      |   |         | 17,711  |  |   |         | 3,190   |  
|                                                                                 | Other charges                               |                                       |         | 9,035   |      |   |         | 31,398  |  |   |         | 7,045   |  
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 |                                             |                                       | 803,971 |         |      |   | 758,521 |         |  |   | 562,395 |        
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Operating Income                                                                 |                                             |                                       | 141,672 |         |      |   | 45,297  |         |  |   | 46,995  |        
|Interest Expense                                                                 |                                             |                                       | (41,889 | )       |      |   | (43,871 | )       |  |   | (27,040 | )      
|Other Income (Expense), Net                                                      |                                             |                                       | 398     |         |      |   | 11,164  |         |  |   | (982    | )      
|Equity Income (Loss) in Unconsolidated Affiliates                                |                                             |                                       | 1,565   |         |      |   | (478    | )       |  |   | 5,342   |        
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 |                                             |                                       | (39,926 | )       |      |   | (33,185 | )       |  |   | (22,680 | )      
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Income From Continuing Operations Before Income Taxes and
    Minority Interests |                                             |                                       | 101,746 |         |      |   | 12,112  |         |  |   | 24,315  |        
|Income Tax Provision                                                             |                                             |                                       | (31,710 | )       |      |   | (4,239  | )       |  |   | (7,574  | )      
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Income from Continuing Operations Before Minority Interests                      |                                             |                                       | 70,036  |         |      |   | 7,873   |         |  |   | 16,741  |        
|Minority Interests                                                               |                                             |                                       | (5,243  | )       |      |   | (3,216  | )       |  |   | (3,051  | )      
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Income from Continuing Operations                                                |                                             |                                       | 64,793  |         |      |   | 4,657   |         |  |   | 13,690  |        
|Income (Loss) from Discontinued Operations, Net of Tax                           |                                             |                                       | (9,527  | )       |      |   | 533     |         |  |   | (644    | )      
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Income Before Cumulative Effect of Accounting Change                             |                                             |                                       | 55,266  |         |      |   | 5,190   |         |  |   | 13,046  |        
|Cumulative Effect of Accounting Change, Net of Tax                               |                                             |                                       |        |         |      |   |        |         |  |   | (6,412  | )      
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Net Income                                                                       |                                             | $                                     | 55,266  |         |      | $ | 5,190   |         |  | $ | 6,634   |        
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|Basic Net Income Per Share:                                                      |                                             |                                       |         |         |      |   |         |         |  |   |         |        
|                                                                                 | Income from continuing operations           |                                       | $       | 0.53    |      |   | $       | 0.04    |  |   | $       | 0.12    |  
|                                                                                 | Income (loss) from discontinued operations  |                                       |         | (0.08   | )    |   |         |        |  |   |         |        |  
|                                                                                 | Cumulative effect of accounting change      |                                       |         |        |      |   |         |        |  |   |         | (0.06   | )
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 | Net income                                  |                                       | $       | 0.45    |      |   | $       | 0.04    |  |   | $       | 0.06    |  
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 | Basic weighted average shares outstanding   |                                       |         | 123,325 |      |   |         | 121,646 |  |   |         | 111,459 |  
|Diluted Net Income Per Share:                                                    |                                             |                                       |         |         |      |   |         |         |  |   |         |        
|                                                                                 | Income from continuing operations           |                                       | $       | 0.51    |      |   | $       | 0.04    |  |   | $       | 0.12    |  
|                                                                                 | Income (loss) from discontinued operations  |                                       |         | (0.07   | )    |   |         |        |  |   |         |        |  
|                                                                                 | Cumulative effect of accounting change      |                                       |         |        |      |   |         |        |  |   |         | (0.06   | )
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 | Net income                                  |                                       | $       | 0.44    |      |   | $       | 0.04    |  |   | $       | 0.06    |  
|                                                                                 |                                             |                                       |         |         |      |   |         |         | 
|                                                                                 | Diluted weighted average shares outstanding |                                       |         | 126,091 |      |   |         | 123,401 |  |   |         | 112,854 |  



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GRANT PRIDECO, INC.


CONSOLIDATED BALANCE SHEETS


|                                                         |                                                                                                                             |                           |           |         |      |   |           |         |  
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------- | ------- | ---- | - | --------- | ------- | -
|                                                         |                                                                                                                             | December 31,              |          
|                                                         |                                                                                                                             |                           |          
|                                                         |                                                                                                                             | 2004                      |           |         | 2003 |  
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             | (In thousands, except par |          
|                                                         |                                                                                                                             | value amounts)            |          
|ASSETS                                                  
|Current Assets:                                          |                                                                                                                             |                           |           |         |      |   |           |        
|                                                         | Cash                                                                                                                        |                           | $         | 47,552  |      |   | $         | 19,230  |  
|                                                         | Restricted cash                                                                                                             |                           |           | 231     |      |   |           | 283     |  
|                                                         | Accounts receivable, net of allowance for uncollectible accounts
    of $8,024 and $3,539 for 2004 and 2003, respectively   |                           |           | 202,084 |      |   |           | 212,285 |  
|                                                         | Inventories                                                                                                                 |                           |           | 288,820 |      |   |           | 231,994 |  
|                                                         | Deferred charges                                                                                                            |                           |           | 17,204  |      |   |           |        |  
|                                                         | Current deferred tax assets                                                                                                 |                           |           | 26,473  |      |   |           | 30,283  |  
|                                                         | Prepaid expenses                                                                                                            |                           |           | 12,033  |      |   |           | 12,924  |  
|                                                         | Other current assets                                                                                                        |                           |           | 2,370   |      |   |           | 3,864   |  
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             |                           | 596,767   |         |      |   | 510,863   |        
|Property, Plant and Equipment, Net                       |                                                                                                                             |                           | 244,305   |         |      |   | 251,236   |        
|Goodwill                                                 |                                                                                                                             |                           | 393,993   |         |      |   | 396,944   |        
|Intangible Assets, Net                                   |                                                                                                                             |                           | 43,807    |         |      |   | 36,250    |        
|Investments In and Advances to Unconsolidated Affiliates |                                                                                                                             |                           | 49,159    |         |      |   | 47,786    |        
|Other Assets                                             |                                                                                                                             |                           | 16,435    |         |      |   | 18,982    |        
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             | $                         | 1,344,466 |         |      | $ | 1,262,061 |        
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                        
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|Current Liabilities:                                     |                                                                                                                             |                           |           |         |      |   |           |        
|                                                         | Short-term borrowings and current portion of long-term debt                                                                 |                           | $         | 4,181   |      |   | $         | 11,073  |  
|                                                         | Accounts payable                                                                                                            |                           |           | 71,741  |      |   |           | 74,408  |  
|                                                         | Accrued labor and benefits                                                                                                  |                           |           | 53,060  |      |   |           | 30,406  |  
|                                                         | Deferred revenues                                                                                                           |                           |           | 21,413  |      |   |           |        |  
|                                                         | Federal income taxes payable                                                                                                |                           |           | 8,144   |      |   |           | 14,401  |  
|                                                         | Current deferred tax liabilities                                                                                            |                           |           | 3,108   |      |   |           | 3,763   |  
|                                                         | Other accrued liabilities                                                                                                   |                           |           | 33,854  |      |   |           | 32,204  |  
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             |                           | 195,501   |         |      |   | 166,255   |        
|Long-Term Debt                                           |                                                                                                                             |                           | 377,773   |         |      |   | 426,853   |        
|Deferred Tax Liabilities                                 |                                                                                                                             |                           | 36,433    |         |      |   | 26,965    |        
|Other Long-Term Liabilities                              |                                                                                                                             |                           | 13,224    |         |      |   | 23,843    |        
|Commitments and Contingencies (See Notes 15 and 16)      |                                                                                                                             |                           |          |         |      |   |          |        
|Minority Interests                                       |                                                                                                                             |                           | 15,994    |         |      |   | 12,031    |        
|Stockholders Equity:                                    |                                                                                                                             |                           |           |         |      |   |           |        
|                                                         | Preferred stock, $0.01 par value; authorized
    10,000 shares; no shares issued in 2004 or 2003                            |                           |           |        |      |   |           |        |  
|                                                         | Common stock, $0.01 par value; authorized
    300,000 shares; issued 124,516 and 121,250 in 2004 and
    2003, respectively |                           |           | 1,245   |      |   |           | 1,212   |  
|                                                         | Capital in excess of par value                                                                                              |                           |           | 530,687 |      |   |           | 488,350 |  
|                                                         | Unearned compensation                                                                                                       |                           |           | (8,300  | )    |   |           | (6,228  | )
|                                                         | Retained earnings                                                                                                           |                           |           | 192,289 |      |   |           | 137,023 |  
|                                                         | Accumulated other comprehensive loss                                                                                        |                           |           | (12,291 | )    |   |           | (16,917 | )
|                                                         | Treasury stock, at cost, 617 and 535 shares in 2004 and
    2003, respectively                                              |                           |           | (8,483  | )    |   |           | (6,692  | )
|                                                         | Deferred compensation obligation                                                                                            |                           |           | 10,394  |      |   |           | 9,366   |  
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             |                           | 705,541   |         |      |   | 606,114   |        
|                                                         |                                                                                                                             |                           |           |         |      |  
|                                                         |                                                                                                                             | $                         | 1,344,466 |         |      | $ | 1,262,061 |        
|                                                         |                                                                                                                             |                           |           |         |      |  



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GRANT PRIDECO, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |         |         |        |          |        |          |  
|--------------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | -------- | ------ | -------- | -
|                                        |                                                                                        | Year Ended December 31,                                                 |                                                    
|                                        |                                                                                        |                                                                         |                                                    
|                                        |                                                                                        | 2004                                                                    |                                                     |         | 2003    |         |        | 2002    |        
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|                                        |                                                                                        | (In thousands)                                                          |                                                    
|Cash Flows From Operating Activities:   |                                                                                        |                                                                         |                                                     |         |         |         |        |         |         |         |        |         
|                                        | Net Income                                                                             |                                                                         | $                                                   | 55,266  |         |         | $      | 5,190   |         |         | $      | 6,634    |       
|                                        | Adjustments to reconcile net income to net cash provided by
    operating activities:  |                                                                         |                                                     |         |         |         |        |         |         |         |        |          |       
|                                        |                                                                                        | Cumulative effect of accounting change                                  |                                                     |         |        |         |        |         |        |         |        |          | 6,412  |         
|                                        |                                                                                        | Loss on sale of discontinued operations                                 |                                                     |         | 11,746  |         |        |         |        |         |        |          |       |         
|                                        |                                                                                        | Gain on sale of businesses, net                                         |                                                     |         | (774    | )       |        |         | (3,393  | )       |        |          |       |         
|                                        |                                                                                        | Depreciation and amortization                                           |                                                     |         | 43,220  |         |        |         | 44,688  |         |        |          | 28,831 |         
|                                        |                                                                                        | Non-cash portion of other charges                                       |                                                     |         | 6,010   |         |        |         | 31,247  |         |        |          | 2,580  |         
|                                        |                                                                                        | Bad debt expense                                                        |                                                     |         | 3,844   |         |        |         | 1,948   |         |        |          | 1,106  |         
|                                        |                                                                                        | Deferred income tax                                                     |                                                     |         | 20,096  |         |        |         | (16,133 | )       |        |          | (3,317 | )       
|                                        |                                                                                        | Equity (income) loss in unconsolidated affiliates, net of
    dividends |                                                     |         | 6,525   |         |        |         | 14,127  |         |        |          | 10,746 |         
|                                        |                                                                                        | Stock-based compensation expense                                        |                                                     |         | 4,660   |         |        |         | 2,866   |         |        |          | 2,135  |         
|                                        |                                                                                        | Deferred compensation expense                                           |                                                     |         | 1,682   |         |        |         | 1,595   |         |        |          | 1,526  |         
|                                        |                                                                                        | Minority interests in consolidated subsidiaries, net of dividends       |                                                     |         | 2,103   |         |        |         | 1,326   |         |        |          | 2,360  |         
|                                        |                                                                                        | (Gain) loss on sale of assets                                           |                                                     |         | (4,466  | )       |        |         | 645     |         |        |          | 595    |         
|                                        | Change in operating assets and liabilities, net of effects of
    businesses acquired: |                                                                         |                                                     |         |         |         |        |         |         |         |        |          |       
|                                        |                                                                                        | Accounts receivable                                                     |                                                     |         | 2,278   |         |        |         | (29,747 | )       |        |          | 20,643 |         
|                                        |                                                                                        | Inventories                                                             |                                                     |         | (60,039 | )       |        |         | (4,413  | )       |        |          | 50,169 |         
|                                        |                                                                                        | Deferred charges                                                        |                                                     |         | (17,204 | )       |        |         |        |         |        |          |       |         
|                                        |                                                                                        | Other current assets                                                    |                                                     |         | 6,768   |         |        |         | 29,500  |         |        |          | 4,370  |         
|                                        |                                                                                        | Other assets                                                            |                                                     |         | 3,087   |         |        |         | (281    | )       |        |          | (2,011 | )       
|                                        |                                                                                        | Accounts payable                                                        |                                                     |         | 64      |         |        |         | 13,075  |         |        |          | (1,039 | )       
|                                        |                                                                                        | Deferred revenues                                                       |                                                     |         | 21,413  |         |        |         |        |         |        |          |       |         
|                                        |                                                                                        | Other accrued liabilities                                               |                                                     |         | 17,197  |         |        |         | (5,652  | )       |        |          | (6,121 | )       
|                                        |                                                                                        | Other, net                                                              |                                                     |         | (10,306 | )       |        |         | (3,650  | )       |        |          | (6,933 | )       
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|                                        |                                                                                        |                                                                         | Net cash provided by operating activities           |         |         | 113,170 |        |         |         | 82,938  |        |          |        | 118,686  |  
|Cash Flows From Investing Activities:   |                                                                                        |                                                                         |                                                     |         |         |         |        |         |         |         |        |         
|                                        | Acquisition of businesses, net of cash acquired                                        |                                                                         |                                                     | (33,833 | )       |         |        | (8,272  | )       |         |        | (265,172 | )     
|                                        | Proceeds from sales of businesses, net of cash disposed                                |                                                                         |                                                     | 2,180   |         |         |        | 30,364  |         |         |        |         |       
|                                        | Proceeds from sale of discontinued operations, net of cash
    disposed                |                                                                         |                                                     | 19,859  |         |         |        |        |         |         |        |         |       
|                                        | Investments in and advances to unconsolidated affiliates                               |                                                                         |                                                     | (4,167  | )       |         |        | (5,459  | )       |         |        | (3,794   | )     
|                                        | Capital expenditures for property, plant and equipment                                 |                                                                         |                                                     | (37,879 | )       |         |        | (41,418 | )       |         |        | (45,781  | )     
|                                        | Proceeds from sales of fixed assets                                                    |                                                                         |                                                     | 8,459   |         |         |        | 981     |         |         |        | 911      |       
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|                                        |                                                                                        |                                                                         | Net cash used in investing activities               |         |         | (45,381 | )      |         |         | (23,804 | )      |          |        | (313,836 | )
|Cash Flows From Financing Activities:   |                                                                                        |                                                                         |                                                     |         |         |         |        |         |         |         |        |         
|                                        | Repayments on revolver debt, net                                                       |                                                                         |                                                     | (14,320 | )       |         |        | (42,982 | )       |         |        | (2,391   | )     
|                                        | Borrowings on debt                                                                     |                                                                         |                                                     |        |         |         |        |        |         |         |        | 226,635  |       
|                                        | Repayments on debt                                                                     |                                                                         |                                                     | (49,781 | )       |         |        | (17,608 | )       |         |        | (17,098  | )     
|                                        | Purchases of treasury stock                                                            |                                                                         |                                                     | (2,508  | )       |         |        | (2,388  | )       |         |        | (2,279   | )     
|                                        | Proceeds from stock option exercises                                                   |                                                                         |                                                     | 25,791  |         |         |        | 566     |         |         |        | 1,173    |       
|                                        | Employee stock purchase plan purchases                                                 |                                                                         |                                                     | 928     |         |         |        |        |         |         |        |         |       
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|                                        |                                                                                        |                                                                         | Net cash provided by (used in) financing activities |         |         | (39,890 | )      |         |         | (62,412 | )      |          |        | 206,040  |  
|Effect of Exchange Rate Changes on Cash |                                                                                        |                                                                         | 423                                                 |         |         |         | 630    |         |         |         | 604    |         
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|Net Increase (Decrease) in Cash         |                                                                                        |                                                                         | 28,322                                              |         |         |         | (2,648 | )       |         |         | 11,494 |         
|Cash at Beginning of Year               |                                                                                        |                                                                         | 19,230                                              |         |         |         | 21,878 |         |         |         | 10,384 |         
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        
|Cash at End of Year                     |                                                                                        | $                                                                       | 47,552                                              |         |         | $       | 19,230 |         |         | $       | 21,878 |         
|                                        |                                                                                        |                                                                         |                                                     |         |         |         |        |         |        



37



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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      |                |        | Income |          |         | Shares       |  |   | Amount  |        |   | Obligation |      |      | Total |  
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  
|                             |                                                                         |              |         |        |           |   |       |          |  | (In thousands) |              |             |  |               |                |        |        |          |        
|Balance at December 31, 2001 |                                                                         |              | 109,293 |        |           | $ | 1,093 |          |  | $              | 364,193      |             |  | $             | (2,328         | )      |        | $        | 125,199 |              |  | $ | (22,551 | )      |   |            | (168 | )    |       | $ | (2,551 | )      |   | $ | 5,912  |        |   | $ | 468,967 |        
|                             | Components of Comprehensive Income:                                     |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         |         |  
|                             | Net Income                                                              |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         | 6,634        |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 6,634   |  
|                             | Currency Translation Adjustment                                         |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         | (1,740 | ) |            |      |     |       |   |        |       |   |   |        |       |   |   |         | (1,740  | )
|                             | Change in Fair Value of Derivative Instruments, net of tax of
    ($74) |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         | 164    |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 164     |  
|                             | Unrealized Gain on Securities, net of tax of ($24)                      |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         | 54     |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 54      |  
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  
|                             | Total Comprehensive Income                                              |              |         |        |           |   |       |          |  |                |              |             |  |               |                |       |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         | 5,112   |  
|                             | Stock Grant and Options Exercised                                       |              |         | 169    |           |   |       | 2        |  |                |              | 1,171       |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 1,173   |  
|                             | Tax Benefit of Options Exercised                                        |              |         |       |           |   |       |         |  |                |              | 733         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 733     |  
|                             | Deferred Compensation Obligation                                        |              |         |       |           |   |       |         |  |                |              | 374         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      | 28   |       |   |        | 421    |   |   |        | (954   | ) |   |         | (159    | )
|                             | Issuance of Stock for Acquisition                                       |              |         | 11,353 |           |   |       | 113      |  |                |              | 110,798     |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 110,911 |  
|                             | Issuance of Restricted Stock                                            |              |         |       |           |   |       |         |  |                |              | 7,550       |  |               |                | (7,550 | )      |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         |        |  
|                             | Amortization of Restricted Stock                                        |              |         |       |           |   |       |         |  |                |              |            |  |               |                | 2,135  |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 2,135   |  
|                             | Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      | (202 | )     |   |        | (2,279 | ) |   |        | 2,279  |   |   |         |        |  
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  
|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 Income:                                     |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         |         |  
|                             | 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 Income                                              |              |         |        |           |   |       |          |  |                |              |             |  |               |                |       |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         | 12,346  |  
|                             | Stock Grant and Options Exercised                                       |              |         | 85     |           |   |       | 1        |  |                |              | 565         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 566     |  
|                             | Tax Benefit of Options Exercised                                        |              |         |       |           |   |       |         |  |                |              | 120         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 120     |  
|                             | Deferred Compensation Obligation                                        |              |         |       |           |   |       |         |  |                |              | 10          |  |               |                |       |        |          |         |             |  |   |         |        |   |            |      | 11   |       |   |        | 105    |   |   |        | (259   | ) |   |         | (144    | )
|                             | Issuance of Restricted Stock                                            |              |         | 350    |           |   |       | 3        |  |                |              | 2,496       |  |               |                | (2,499 | )      |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         |        |  
|                             | Amortization of Restricted Stock, Net                                   |              |         |       |           |   |       |         |  |                |              |            |  |               |                | 4,014  |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 4,014   |  
|                             | Compensation Expense for Accelerated Vesting                            |              |         |       |           |   |       |         |  |                |              | 340         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 340     |  
|                             | Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      | (204 | )     |   |        | (2,388 | ) |   |        | 2,388  |   |   |         |        |  
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  
|Balance at December 31, 2003 |                                                                         |              | 121,250 |        |           | $ | 1,212 |          |  | $              | 488,350      |             |  | $             | (6,228         | )      |        | $        | 137,023 |              |  | $ | (16,917 | )      |   |            | (535 | )    |       | $ | (6,692 | )      |   | $ | 9,366  |        |   | $ | 606,114 |        
|                             | Components of Comprehensive Income:                                     |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         |         |  
|                             | 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 Income                                              |              |         |        |           |   |       |          |  |                |              |             |  |               |                |       |        |          |         |              |  |   |         |        |   |            |      |      |       |   |        |        |   |   |        |        |   |   |         | 59,892  |  
|                             | Stock Grant and Options Exercised                                       |              |         | 2,998  |           |   |       | 30       |  |                |              | 25,761      |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 25,791  |  
|                             | Tax Benefit of Options Exercised                                        |              |         |       |           |   |       |         |  |                |              | 6,717       |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 6,717   |  
|                             | Deferred Compensation Obligation                                        |              |         | 177    |           |   |       | 2        |  |                |              | 46          |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      | 68   |       |   |        | 717    |   |   |        | (1,480 | ) |   |         | (715    | )
|                             | Issuance of Restricted Stock                                            |              |         |       |           |   |       |         |  |                |              | 5,582       |  |               |                | (5,582 | )      |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         |        |  
|                             | Employee Stock Purchase Plan Issuance                                   |              |         | 91     |           |   |       | 1        |  |                |              | 927         |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 928     |  
|                             | Amortization of Restricted Stock                                        |              |         |       |           |   |       |         |  |                |              |            |  |               |                | 3,510  |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 3,510   |  
|                             | Compensation Expense for Accelerated Vesting                            |              |         |       |           |   |       |         |  |                |              | 3,304       |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      |     |       |   |        |       |   |   |        |       |   |   |         | 3,304   |  
|                             | Purchase of Treasury Stock for Executive Deferred Compensation
    Plan |              |         |       |           |   |       |         |  |                |              |            |  |               |                |       |        |          |         |             |  |   |         |       |   |            |      | (150 | )     |   |        | (2,508 | ) |   |        | 2,508  |   |   |         |        |  
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  
|Balance at December 31, 2004 |                                                                         |              | 124,516 |        |           | $ | 1,245 |          |  | $              | 530,687      |             |  | $             | (8,300         | )      |        | $        | 192,289 |              |  | $ | (12,291 | )      |   |            | (617 | )    |       | $ | (8,483 | )      |   | $ | 10,394 |        |   | $ | 705,541 |        
|                             |                                                                         |              |         |        |           |   |       |          |  |                |              |             |  |               |                |        |        |          |         |              |  |   |         |        |   |            |      |      |       |  



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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



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







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



|                                                     |  |             |    |  
|---------------------------------------------------- |  | ----------- | -- | -
|                                                     |  | % Ownership |   
|                                                     |  |             |   
|Jiangsu Shuguang Grant Prideco Tubular Limited (JSG) |  |             | 70 | %
|Tianjin Grant Prideco (TGP)                          |  |             | 60 | %
|H-Tech                                               |  |             | 54 | %







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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








| |     
| | ----
| | Cash





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





|                                       |  |                |         |  |      |   |         | 
|-------------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                                       |  | December 31,   |        
|                                       |  |                |        
|                                       |  | 2004           |         |  | 2003 |  
|                                       |  |                |         |  |      |  
|                                       |  | (In thousands) |        
|Raw Materials, Components and Supplies |  | $              | 104,543 |  |      | $ | 96,528  | 
|Work in Process                        |  |                | 59,308  |  |      |   | 36,889  | 
|Finished Goods                         |  |                | 124,969 |  |      |   | 98,577  | 
|                                       |  |                |         |  |      |  
|                                       |  | $              | 288,820 |  |      | $ | 231,994 | 
|                                       |  |                |         |  |      |  







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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                           |  |      |            | 
|-------------------------- |  | ---- | ---------- | 
|                           |  | Life |           
|                           |  |      |           
|Buildings and Improvements |  |      | 7-30 years | 
|Machinery and Equipment    |  |      | 2-10 years | 
|Furniture and Fixtures     |  |      | 3-7 years  | 



|                               |  |                |          |   |      |   |          |  
|------------------------------ |  | -------------- | -------- | - | ---- | - | -------- | -
|                               |  | December 31,   |         
|                               |  |                |         
|                               |  | 2004           |          |   | 2003 |  
|                               |  |                |          |   |      |  
|                               |  | (In thousands) |         
|Land                           |  | $              | 21,521   |   |      | $ | 22,715   |  
|Buildings and Improvements     |  |                | 78,557   |   |      |   | 85,322   |  
|Machinery and Equipment        |  |                | 269,517  |   |      |   | 255,788  |  
|Furniture and Fixtures         |  |                | 29,058   |   |      |   | 23,479   |  
|Construction in Progress       |  |                | 19,655   |   |      |   | 19,856   |  
|                               |  |                |          |   |      |  
|                               |  |                | 418,308  |   |      |   | 407,160  |  
|Less: Accumulated Depreciation |  |                | (174,003 | ) |      |   | (155,924 | )
|                               |  |                |          |   |      |  
|                               |  | $              | 244,305  |   |      | $ | 251,236  |  
|                               |  |                |          |   |      |  







| |                                            
| | -------------------------------------------
| | 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,                                                                                                                     |  
|                             |                             |                                                                                                                                             |  
|                             |                             | 2004                                                                                                                                        |   |        | 2003   |   |   | 2002   |        
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|                             |                             | (In thousands, except per share                                                                                                             |  
|                             |                             | amounts)                                                                                                                                    |  
|Net Income                   |                             |                                                                                                                                             |   |        |        |   |   |        |         |   |   |        
|                             | As Reported                 |                                                                                                                                             | $ | 55,266 |        |   | $ | 5,190  |         |   | $ | 6,634   |        
|                             |                             | Add: Stock-Based Employee Compensation Expense Included in
    Reported Net Income, Net of Related Tax Effects(a)                           |   |        | 4,642  |   |   |        | 2,831   |   |   |         | 1,388   |  
|                             |                             | Deduct: Stock-Based Employee Compensation Expense Determined
    Under the Fair Value Method for All Awards, Net of Related Tax
    Effects |   |        | (9,565 | ) |   |        | (12,208 | ) |   |         | (18,299 | )
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|                             | Pro Forma Net Income (Loss) |                                                                                                                                             | $ | 50,343 |        |   | $ | (4,187 | )       |   | $ | (10,277 | )      
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|Net Income (Loss) Per Share: |                             |                                                                                                                                             |   |        |        |   |   |        |         |   |   |        
|                             | Basic as Reported           |                                                                                                                                             | $ | 0.45   |        |   | $ | 0.04   |         |   | $ | 0.06    |        
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|                             | Basic Pro Forma             |                                                                                                                                             | $ | 0.41   |        |   | $ | (0.03  | )       |   | $ | (0.09   | )      
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|                             | Diluted as Reported         |                                                                                                                                             | $ | 0.44   |        |   | $ | 0.04   |         |   | $ | 0.06    |        
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        
|                             | Diluted Pro Forma           |                                                                                                                                             | $ | 0.40   |        |   | $ | (0.03  | )       |   | $ | (0.09   | )      
|                             |                             |                                                                                                                                             |   |        |        |   |   |        |        






|    |  |                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes stock based compensation, which is included in the
    non-cash portion of other charges in the Consolidated Statements
    of Cash Flows.



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






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







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





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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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





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





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







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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






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





| |                            
| | ---------------------------
| | Net Income (Loss) Per Share





|                                                                                                        |  |                |         |  |      |  |         |      |  |  |         | 
|------------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- | 
|                                                                                                        |  | December 31,   |        
|                                                                                                        |  |                |        
|                                                                                                        |  | 2004           |         |  | 2003 |  |         | 2002 | 
|                                                                                                        |  |                |         |  |      |  |         |      | 
|                                                                                                        |  | (In thousands) |        
|Basic Weighted Average Number of Shares Outstanding                                                     |  |                | 123,325 |  |      |  | 121,646 |      |  |  | 111,459 | 
|Dilutive Effect of Stock Options and Restricted Stock, Net of
    Assumed Repurchase of Treasury Shares |  |                | 2,766   |  |      |  | 1,755   |      |  |  | 1,395   | 
|                                                                                                        |  |                |         |  |      |  |         |      | 
|Diluted Weighted Average Number of Shares Outstanding                                                   |  |                | 126,091 |  |      |  | 123,401 |      |  |  | 112,854 | 
|                                                                                                        |  |                |         |  |      |  |         |      | 



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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)














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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|   |                                       
|-- | --------------------------------------
|2. | Accumulated Other Comprehensive Income



|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                             |  | Year Ended December 31, |        
|                                             |  |                         |        
|                                             |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                             |  |                         |         |   |      |   |         |      | 
|                                             |  | (In thousands)          |        
|Foreign Currency Translation Adjustments     |  | $                       | (12,289 | ) |      | $ | (16,255 | )    |  | $ | (24,073 | )
|Minimum Pension Liability                    |  |                         | (2      | ) |      |   | (662    | )    |  |   |        |  
|                                             |  |                         |         |   |      |   |         |      | 
|Total Accumulated Other Comprehensive Income |  | $                       | (12,291 | ) |      | $ | (16,917 | )    |  | $ | (24,073 | )
|                                             |  |                         |         |   |      |   |         |      | 



|   |              
|-- | -------------
|3. | Other Charges



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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                           |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |   |       |     |  |   |       |       | 
|------------------------------------------ | ------------------------- | ----------------- | ----- | ------- | ------------ | - | ----- | --------- |  | - | ----- | - | --------- | -------- | ----- | ----- | -------- | - | ----- | --- |  | - | ----- | ----- | 
|                                           |                           |                   |       | Tubular |              |   |       |           |  |   |       |   | Liability |         
|                                           |                           | Drilling Products |       |         | Technology   |   |       |           |  |   |       |   |           | Balance  |      
|                                           |                           | and Services      |       |         | and Services |   |       | Corporate |  |   | Total |   |           | Utilized |       |       | 12/31/04 |  
|                                           |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |  
|                                           |                           | (In thousands)    |      
|Drilling Products Rationalization Program: |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |   |       |     |  |   |       |      
|                                           | Lease termination cost(a) |                   | $     | 1,430   |              |   | $     |          |  |   | $     |  |           |          | $     | 1,430 |          |   | $     | 276 |  |   | $     | 1,154 | 
|                                           | Severance costs(b)        |                   |       | 272     |              |   |       |          |  |   |       |  |           |          |       | 272   |          |   |       | 272 |  |   |       |      | 
|                                           | Other exit costs(c)       |                   |       | 349     |              |   |       |          |  |   |       |  |           |          |       | 349   |          |   |       | 349 |  |   |       |      | 
|                                           |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |  
|                                           |                           |                   | 2,051 |         |              |   |      |           |  |   |      |   |           |          | 2,051 |       |          |   | 897   |     |  |   | 1,154 |      
|Severance Costs(d)                         |                           |                   |      |         |              |   | 3,207 |           |  |   |      |   |           |          | 3,207 |       |          |   | 3,207 |     |  |   |      |      
|Corporate Relocation Charge(e)             |                           |                   |      |         |              |   |      |           |  |   | 3,777 |   |           |          | 3,777 |       |          |   | N/A   |     |  |   |      |      
|                                           |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |  
|                                           |                           | $                 | 2,051 |         |              | $ | 3,207 |           |  | $ | 3,777 |   |           | $        | 9,035 |       |          | $ | 4,104 |     |  | $ | 1,154 |      
|                                           |                           |                   |       |         |              |   |       |           |  |   |       |   |           |          |       |       |          |  






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



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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                               |  |                   |        |  |                    |   |     |       |  |   |           |  |  |       |        |   |  |   |        |  
|---------------------------------------------- |  | ----------------- | ------ |  | ------------------ | - | --- | ----- |  | - | --------- |  |  | ----- | ------ | - |  | - | ------ | -
|                                               |  | Drilling Products |        |  | Tubular Technology |   |     |       |  |   |           | 
|                                               |  | and Services      |        |  | and Services       |   |     | Other |  |   | Corporate |  |  | 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 |  |                    |   |    |       |  |   | 6,396     |  |  |       | 78     |   |  |   | 31,398 |  
|Inventory Reserves for Exited Product Lines(e) |  |                   |       |  |                    |   | 425 |       |  |   | 6,000     |  |  |       |       |   |  |   | 6,425  |  
|                                               |  |                   |        |  |                    |   |     |       |  |   |           |  |  |       |       
|                                               |  | $                 | 24,924 |  |                    | $ | 425 |       |  | $ | 12,396    |  |  | $     | 78     |   |  | $ | 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 12).                                                                                                                                                               
|   
|(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
    taken 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. This inventory has been
    completely liquidated as of December 31, 2004.

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |             
| | ------------
| | 2002 Charges



|                           |  |                |       |  |              |   |     |           |  |   |       |  |  |   |       | 
|-------------------------- |  | -------------- | ----- |  | ------------ | - | --- | --------- |  | - | ----- |  |  | - | ----- | 
|                           |  | Drilling       |       |  | Tubular      |   |     |           |  |  
|                           |  | Products       |       |  | Technology   |   |     |           |  |  
|                           |  | and Services   |       |  | and Services |   |     | Corporate |  |   | Total | 
|                           |  |                |       |  |              |   |     |           |  |   |       | 
|                           |  | (In thousands) |      
|Fixed Asset Write-Downs(a) |  | $              | 2,360 |  |              | $ | 220 |           |  | $ |      |  |  | $ | 2,580 | 
|Severance(b)               |  |                |      |  |              |   |    |           |  |   | 4,465 |  |  |   | 4,465 | 
|                           |  |                |       |  |              |   |     |           |  |   |       | 
|                           |  | $              | 2,360 |  |              | $ | 220 |           |  | $ | 4,465 |  |  | $ | 7,045 | 
|                           |  |                |       |  |              |   |     |           |  |   |       | 






|    |  |                                                                                                                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The fixed asset write-downs relate to idle assets taken out of
    service pursuant to the Companys ongoing automation and
    efficiency initiatives and are classified as held for sale. The
    amount was determined by use of internal appraisals and
    evaluations to assess the estimated fair value upon disposition.
|   
|(b) |  | The severance charges relate to an executive employee terminated
    during June 2002. The amount accrued for severance was based
    upon the terminated employees employment contract, which was
    paid in July 2002.                                                                                                       



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







50



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|                                    |                                    |                                           |   |                  |             |  |  |  |      | 
|----------------------------------- | ---------------------------------- | ----------------------------------------- | - | ---------------- | ----------- |  |  |  | ---- | 
|                                    |                                    |                                           |   | Intangibles      |            
|                                    |                                    |                                           |   | Weighted Average |            
|                                    |                                    | Amount                                    |   |                  | Useful Life | 
|                                    |                                    |                                           |   |                  |             | 
|                                    |                                    | (In thousands)                            |   |                  |            
|Final Allocation of Purchase Price: |                                    |                                           |   |                  |             |  |  | 
|                                    | Cash Paid                          |                                           | $ | 259,271          |             |  |  |  |     
|                                    | Grant Prideco Common Stock Issued  |                                           |   | 90,000           |             |  |  |  |     
|                                    | Non-Current Liabilities Assumed    |                                           |   | 13,899           |             |  |  |  |     
|                                    | Accrued Working Capital Adjustment |                                           |   | 1,745            |             |  |  |  |     
|                                    | Acquisition Costs                  |                                           |   | 5,151            |             |  |  |  |     
|                                    |                                    |                                           |   |                  |             | 
|                                    |                                    | Total Consideration and Acquisition Costs |   | $                | 370,066     |  |  |  |      | 
|                                    |                                    |                                           |   |                  |             | 
|Final Allocation of Purchase Price: |                                    |                                           |   |                  |             |  |  | 
|                                    | Current Assets                     |                                           | $ | 149,417          |             |  |  |  |     
|                                    | Property, Plant, and Equipment     |                                           |   | 45,794           |             |  |  |  |     
|                                    | Other Assets                       |                                           |   | 618              |             |  |  |  |     
|                                    | Identifiable Intangible Assets:    |                                           |   |                  |             |  |  |  |     
|                                    |                                    | Patents                                   |   |                  | 29,350      |  |  |  | 15.0 | 
|                                    |                                    | Customer Relationships                    |   |                  | 3,300       |  |  |  | 20.0 | 
|                                    |                                    | Covenant Not to Compete                   |   |                  | 1,000       |  |  |  | 1.5  | 
|                                    | Goodwill                           |                                           |   | 161,807          |             |  |  |  |     
|                                    | Liabilities Assumed                |                                           |   | (21,220          | )           |  |  |  |     
|                                    |                                    |                                           |   |                  |             | 
|                                    |                                    | Net Assets Acquired                       |   | $                | 370,066     |  |  |  |      | 
|                                    |                                    |                                           |   |                  |             | 





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)




|                                                         |  |                        |         | 
|-------------------------------------------------------- |  | ---------------------- | ------- | 
|                                                         |  | December 31, 2002      |        
|                                                         |  |                        |        
|                                                         |  | (In thousands,         |        
|                                                         |  | except per share data) |        
|Revenues                                                 |  | $                      | 853,598 | 
|Net Income Before Cumulative Effect of Accounting Change |  |                        | 23,737  | 
|Net Income                                               |  |                        | 17,325  | 
|Basic Earnings Per Share                                 |  |                        | 0.14    | 
|Diluted Earnings Per Share                               |  |                        | 0.14    | 





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











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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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





|                                           |  |                         |         |   |      |   |        |      |  |   |        |  
|------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                           |  | Year Ended December 31, |        
|                                           |  |                         |        
|                                           |  | 2004                    |         |   | 2003 |   |        | 2002 | 
|                                           |  |                         |         |   |      |   |        |      | 
|                                           |  | (In thousands)          |        
|Revenues                                   |  | $                       | 12,833  |   |      | $ | 34,638 |      |  | $ | 30,358 |  
|Income (Loss) Before Income Taxes          |  |                         | 1,369   |   |      |   | 820    |      |  |   | (990   | )
|Income Tax (Provision) Benefit             |  |                         | (479    | ) |      |   | (287   | )    |  |   | 346    |  
|                                           |  |                         |         |   |      |   |        |      | 
|Income (Loss) from Operations, Net of Tax  |  |                         | 890     |   |      |   | 533    |      |  |   | (644   | )
|Loss on Disposal, Net of Tax               |  |                         | (10,417 | ) |      |   |       |      |  |   |       |  
|                                           |  |                         |         |   |      |   |        |      | 
|Income (Loss) from Discontinued Operations |  | $                       | (9,527  | ) |      | $ | 533    |      |  | $ | (644   | )
|                                           |  |                         |         |   |      |   |        |      | 





|                                   |                      |   |        |        | 
|---------------------------------- | -------------------- | - | ------ | ------ | 
|Accounts Receivable                |                      | $ | 4,116  |       
|Inventories                        |                      |   | 13,654 |       
|                                   |                      |   |       
|                                   | Total Current Assets |   |        | 17,770 | 
|Property, Plant and Equipment, Net |                      |   | 8,287  |       
|Goodwill                           |                      |   | 8,038  |       
|                                   |                      |   |       
|                                   | Total Assets         |   | $      | 34,095 | 
|                                   |                      |   |       
|Accounts Payable                   |                      | $ | 3,750  |       
|Other Current Liabilities          |                      |   | 102    |       
|                                   |                      |   |       
|                                   | Total Liabilities    |   | $      | 3,852  | 
|                                   |                      |   |       

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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



|             |  |                |        |               |        |   |        |            |               |   |        |  |  |   |        |  
|------------ |  | -------------- | ------ | ------------- | ------ | - | ------ | ---------- | ------------- | - | ------ |  |  | - | ------ | -
|             |  | December 31,   |       
|             |  |                |       
|             |  | 2004           |        |               | 2003   |  
|             |  |                |        |               |        |  
|             |  |                |        | Equity Income |        |   |        |            | Equity Income |  
|             |  | Investment     |        |               | (Loss) |   |        | Investment |               |   | (Loss) | 
|             |  |                |        |               |        |   |        |            |               |   |        | 
|             |  | (In thousands) |       
|Voest-Alpine |  | $              | 38,308 |               |        | $ | 6,413  |            |               | $ | 36,649 |  |  | $ | 4,028  |  
|IntelliServ  |  |                | 10,851 |               |        |   | (4,848 | )          |               |   | 11,137 |  |  |   | (3,567 | )
|GPEX         |  |                |       |               |        |   |       |            |               |   |       |  |  |   | (939   | )





|                     |  |                |         |  |      |   |         | 
|-------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                     |  | December 31,   |        
|                     |  |                |        
|                     |  | 2004           |         |  | 2003 |  
|                     |  |                |         |  |      |  
|                     |  | (In thousands) |        
|Current Assets       |  | $              | 103,561 |  |      | $ | 68,141  | 
|Other Assets         |  |                | 58,912  |  |      |   | 56,885  | 
|                     |  |                |         |  |      |  
|                     |  | $              | 162,473 |  |      | $ | 125,026 | 
|                     |  |                |         |  |      |  
|Current Liabilities  |  | $              | 58,259  |  |      | $ | 32,176  | 
|Other Liabilities    |  |                | 65,827  |  |      |   | 54,482  | 
|Stockholders Equity |  |                | 38,387  |  |      |   | 38,368  | 
|                     |  |                |         |  |      |  
|                     |  | $              | 162,473 |  |      | $ | 125,026 | 
|                     |  |                |         |  |      |  

|                        |  |                         |         |  |      |   |         |      |  |   |         | 
|----------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                        |  | Year Ended December 31, |        
|                        |  |                         |        
|                        |  | 2004                    |         |  | 2003 |   |         | 2002 | 
|                        |  |                         |         |  |      |   |         |      | 
|                        |  | (In thousands)          |        
|Net Sales               |  | $                       | 320,141 |  |      | $ | 224,960 |      |  | $ | 220,266 | 
|Gross Profit            |  |                         | 31,862  |  |      |   | 22,008  |      |  |   | 33,280  | 
|Net Income              |  |                         | 13,104  |  |      |   | 7,268   |      |  |   | 16,443  | 
|Companys Equity Income |  |                         | 6,413   |  |      |   | 4,028   |      |  |   | 8,446   | 
|Dividends Received      |  |                         | 8,090   |  |      |   | 13,649  |      |  |   | 16,088  | 



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|   |                
|-- | ---------------
|8. | Short-Term Debt



56



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |               
|-- | --------------
|9. | Long-Term Debt



|                                                                                                                 |                           |                |         |   |      |   |         |        | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------- | ------- | - | ---- | - | ------- | ------ | 
|                                                                                                                 |                           | December 31,   |        
|                                                                                                                 |                           |                |        
|                                                                                                                 |                           | 2004           |         |   | 2003 |  
|                                                                                                                 |                           |                |         |   |      |  
|                                                                                                                 |                           | (In thousands) |        
|Senior Credit Facility:                                                                                          |                           |                |         |   |      |   |         |       
|                                                                                                                 | Term loan                 |                | $       |  |      |   | $       | 42,857 | 
|                                                                                                                 | Revolving credit facility |                |         |  |      |   |         | 14,320 | 
|95/8% Senior
    Notes due 2007, Net of Unamortized Discount of $518 and $695 in
    2004 and 2003, Respectively |                           |                | 199,482 |   |      |   | 199,305 |       
|9% Senior Notes due 2009                                                                                         |                           |                | 175,000 |   |      |   | 175,000 |       
|Capital Lease Obligations Under Various Agreements                                                               |                           |                |        |   |      |   | 1,441   |       
|Other                                                                                                            |                           |                | 7,472   |   |      |   | 3,715   |       
|                                                                                                                 |                           |                |         |   |      |  
|                                                                                                                 |                           |                | 381,954 |   |      |   | 436,638 |       
|Less: Current Portion of Long-Term Debt                                                                          |                           |                | 4,181   |   |      |   | 9,785   |       
|                                                                                                                 |                           |                |         |   |      |  
|                                                                                                                 |                           | $              | 377,773 |   |      | $ | 426,853 |       
|                                                                                                                 |                           |                |         |   |      |  



|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 4,181   | 
|2006       |  |   | 1,273   | 
|2007       |  |   | 199,705 | 
|2008       |  |   | 234     | 
|2009       |  |   | 175,245 | 
|Thereafter |  |   | 1,316   | 
|           |  |   |        
|           |  | $ | 381,954 | 
|           |  |   |        



| |                       
| | ----------------------
| | Senior Credit Facility







57



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








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





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

5 8 5 8 5 8 3 4 5 8 5 8 5 8


5 8 5 8




|    |                                     
|--- | ------------------------------------
|10. | Goodwill and Other Intangible Assets



58



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|                                  |  |                   |         |  |            |   |                    |              |  |   |         |   |  |       |        |   |  |   |         |  
|--------------------------------- |  | ----------------- | ------- |  | ---------- | - | ------------------ | ------------ |  | - | ------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                  |  | Drilling Products |         |  |            |   | Tubular Technology |              |  |   |         |  
|                                  |  | and Services      |         |  | Drill Bits |   |                    | and Services |  |   | Other   |   |  | Total |       
|                                  |  |                   |         |  |            |   |                    |              |  |   |         |   |  |       |       
|                                  |  | (In thousands)    |        
|Balance, December 31, 2002        |  | $                 | 125,199 |  |            | $ | 155,983            |              |  | $ | 111,367 |   |  | $     | 1,534  |   |  | $ | 394,083 |  
|Acquisitions                      |  |                   |        |  |            |   | 5,823              |              |  |   | 3,047   |   |  |       |       |   |  |   | 8,870   |  
|Dispositions                      |  |                   |        |  |            |   |                   |              |  |   | (6,443  | ) |  |       | (1,534 | ) |  |   | (7,977  | )
|Translation and Other Adjustments |  |                   | 4,259   |  |            |   | 509                |              |  |   | (2,800  | ) |  |       | 2,500  |   |  |   | 4,468   |  
|Impairment Loss                   |  |                   |        |  |            |   |                   |              |  |   |        |   |  |       | (2,500 | ) |  |   | (2,500  | )
|                                  |  |                   |         |  |            |   |                    |              |  |   |         |   |  |       |       
|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 |  
|                                  |  |                   |         |  |            |   |                    |              |  |   |         |   |  |       |       



59



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                         |  |                   |        |  |                   |   |         |             |  |   |             |  |  |              |        |  |             |   |        |   |  |   |        | 
|------------------------ |  | ----------------- | ------ |  | ----------------- | - | ------- | ----------- |  | - | ----------- |  |  | ------------ | ------ |  | ----------- | - | ------ | - |  | - | ------ | 
|                         |  | December 31, 2004 |        |  | December 31, 2003 |  
|                         |  |                   |        |  |                   |  
|                         |  | Gross             |        |  | Accumulated       |   |         | Net         |  |   | Gross       |  |  | Accumulated  |        |  | Net         |  
|                         |  | Intangibles       |        |  | Amortization      |   |         | Intangibles |  |   | Intangibles |  |  | Amortization |        |  | Intangibles |  
|                         |  |                   |        |  |                   |   |         |             |  |   |             |  |  |              |        |  |             |  
|                         |  | (In thousands)    |       
|Patents                  |  | $                 | 43,380 |  |                   | $ | (5,908  | )           |  | $ | 37,472      |  |  | $            | 33,160 |  |             | $ | (2,877 | ) |  | $ | 30,283 | 
|Technology Licenses      |  |                   | 1,438  |  |                   |   | (498    | )           |  |   | 940         |  |  |              | 1,288  |  |             |   | (373   | ) |  |   | 915    | 
|Customer Relationships   |  |                   | 4,600  |  |                   |   | (335    | )           |  |   | 4,265       |  |  |              | 3,300  |  |             |   | (167   | ) |  |   | 3,133  | 
|Trademarks               |  |                   | 1,610  |  |                   |   | (815    | )           |  |   | 795         |  |  |              | 1,610  |  |             |   | (424   | ) |  |   | 1,186  | 
|Covenants Not To Compete |  |                   | 3,125  |  |                   |   | (2,790  | )           |  |   | 335         |  |  |              | 4,150  |  |             |   | (3,417 | ) |  |   | 733    | 
|                         |  |                   |        |  |                   |   |         |             |  |   |             |  |  |              |        |  |             |  
|                         |  | $                 | 54,153 |  |                   | $ | (10,346 | )           |  | $ | 43,807      |  |  | $            | 43,508 |  |             | $ | (7,258 | ) |  | $ | 36,250 | 
|                         |  |                   |        |  |                   |   |         |             |  |   |             |  |  |              |        |  |             |  





|    |                                   
|--- | ----------------------------------
|11. | Supplemental Cash Flow Information



|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                  |  | Year Ended December 31, |       
|                                  |  |                         |       
|                                  |  | 2004                    |        |  | 2003 |   |        | 2002 | 
|                                  |  |                         |        |  |      |   |        |      | 
|                                  |  | (In thousands)          |       
|Interest Paid                     |  | $                       | 38,241 |  |      | $ | 41,168 |      |  | $ | 26,068 | 
|Income Taxes Paid, Net of Refunds |  |                         | 22,369 |  |      |   | 13,530 |      |  |   | 21,139 | 



|                                           |  |                         |        |   |      |   |        |      |  |   |          |  
|------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | -------- | -
|                                           |  | Year Ended December 31, |       
|                                           |  |                         |       
|                                           |  | 2004                    |        |   | 2003 |   |        | 2002 | 
|                                           |  |                         |        |   |      |   |        |      | 
|                                           |  | (In thousands)          |       
|Fair Value of Assets, Net of Cash Acquired |  | $                       | 38,248 |   |      | $ | (2,826 | )    |  | $ | 263,061  |  
|Goodwill                                   |  |                         | 5,089  |   |      |   | 8,870  |      |  |   | 171,955  |  
|Fair Value of Liabilities Assumed          |  |                         | (9,504 | ) |      |   | 2,228  |      |  |   | (58,933  | )
|Grant Prideco Common Stock Issued          |  |                         |       |   |      |   |       |      |  |   | (110,911 | )
|                                           |  |                         |        |   |      |   |        |      | 
|Cash Consideration, Net of Cash Acquired   |  | $                       | 33,833 |   |      | $ | 8,272  |      |  | $ | 265,172  |  
|                                           |  |                         |        |   |      |   |        |      | 



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                         
|--- | ------------------------
|12. | Stock-Based Compensation



| |                                        
| | ---------------------------------------
| | Stock Option and Restricted Stock Plans











|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          |  |            |   |  |   |       | 
|---------------------------------------- |  | --------- | ---------- | -------- | -------- | - | ----- | --------- | -------- |  | ---------- | - |  | --------- | ----- |  | -------- |  | ---------- | - |  | - | ----- | 
|                                         |  | 2004      |            |          | 2003     |   |       | 2002      |         
|                                         |  |           |            |          |          |   |       |           |         
|                                         |  |           |            | 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 |  |           | 12,510,605 |          |          | $ | 11.69 |           |          |  | 12,330,533 |   |  | $         | 11.81 |  |          |  | 12,305,863 |   |  | $ | 11.80 | 
|Options Granted During the Year          |  |           | 713,500    |          |          |   | 13.61 |           |          |  | 993,500    |   |  |           | 10.72 |  |          |  | 427,002    |   |  |   | 10.79 | 
|Options Exercised                        |  |           | (2,998,289 | )        |          |   | 8.69  |           |          |  | (96,428    | ) |  |           | 8.29  |  |          |  | (168,832   | ) |  |   | 6.95  | 
|Options Canceled                         |  |           | (131,012   | )        |          |   | 10.22 |           |          |  | (717,000   | ) |  |           | 12.87 |  |          |  | (233,500   | ) |  |   | 12.84 | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 
|Outstanding at the End of the Year       |  |           | 10,094,804 |          |          | $ | 12.74 |           |          |  | 12,510,605 |   |  | $         | 11.69 |  |          |  | 12,330,533 |   |  | $ | 11.81 | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 
|Exercisable at the End of the Year       |  |           | 5,648,654  |          |          | $ | 15.54 |           |          |  | 6,437,883  |   |  | $         | 13.66 |  |          |  | 3,039,883  |   |  | $ | 7.74  | 
|                                         |  |           |            |          |          |   |       |           |          |  |            |   |  |           |       |  |          | 

61



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                         |  |                     |            |          |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | ---------- | -------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                         |  | 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    |          
|                         |  |                     |            |          |                     |  |          |          |  |   |             |          |  |          |          
|$2.47 - $7.41            |  |                     | 3,476,241  |          |                     |  | 9.36     |          |  | $ | 6.84        |          |  |          | 1,008,591 |  |  | $ | 6.11  | 
|$8.35 - $14.19           |  |                     | 2,768,296  |          |                     |  | 9.75     |          |  |   | 11.57       |          |  |          | 849,796   |  |  |   | 11.51 | 
|$14.55 - $19.99          |  |                     | 3,850,267  |          |                     |  | 8.45     |          |  |   | 18.90       |          |  |          | 3,790,267 |  |  |   | 18.96 | 
|                         |  |                     |            |          |                     |  |          |          |  |   |             |          |  |          |          
|                         |  |                     | 10,094,804 |          |                     |  | 9.12     |          |  | $ | 12.74       |          |  |          | 5,648,654 |  |  | $ | 15.54 | 
|                         |  |                     |            |          |                     |  |          |          |  |   |             |          |  |          |          



|                                                     |                              |                         |      |       |      |   |      |       |   |   |      |       |  
|---------------------------------------------------- | ---------------------------- | ----------------------- | ---- | ----- | ---- | - | ---- | ----- | - | - | ---- | ----- | -
|                                                     |                              | Year Ended December 31, |     
|                                                     |                              |                         |     
|                                                     |                              | 2004                    |      |       | 2003 |   |      | 2002  |  
|                                                     |                              |                         |      |       |      |   |      |       |  
|Weighted Average Fair Value of Stock Options Granted |                              | $                       | 7.03 |       |      | $ | 5.47 |       |   | $ | 5.88 |      
|Valuation Assumptions:                               |                              |                         |      |       |      |   |      |       |   |   |      |      
|                                                     | Expected Option Term (Years) |                         |      | 7.4   |      |   |      | 7.4   |   |   |      | 7.4   |  
|                                                     | Expected Volatility          |                         |      | 42.50 | %    |   |      | 41.14 | % |   |      | 43.00 | %
|                                                     | Expected Dividend Rate       |                         |      |      |      |   |      |      |   |   |      |      |  
|                                                     | Risk Free Interest Rate      |                         |      | 3.66  | %    |   |      | 3.64  | % |   |      | 4.58  | %



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







62



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                        |  |                                      |         |  |      |   |       |      |  |   |         | 
|------------------------------------------------------- |  | ------------------------------------ | ------- |  | ---- | - | ----- | ---- |  | - | ------- | 
|                                                        |  | Year Ended December 31,              |        
|                                                        |  |                                      |        
|                                                        |  | 2004                                 |         |  | 2003 |   |       | 2002 | 
|                                                        |  |                                      |         |  |      |   |       |      | 
|                                                        |  | (In thousands, except share amounts) |        
|Shares Awarded                                          |  |                                      | 390,550 |  |      |   |      |      |  |   | 500,000 | 
|Weighted Average Fair Value of Restricted Stock Granted |  | $                                    | 13.59   |  |      | $ |      |      |  | $ | 15.10   | 
|Compensation Expense Recognized                         |  | $                                    | 3,510   |  |      | $ | 4,014 |      |  | $ | 2,135   | 



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







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



63



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                      
|--- | -------------------------------------
|13. | Retirement and Employee Benefit Plans



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





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





| |                   
| | ------------------
| | U.S. Pension Plans





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



|                                                       |                                                |                                          |        |        |        |   |        |        |        |  
|------------------------------------------------------ | ---------------------------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                       |                                                | 2004                                     |        |        | 2003   |  
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | (In thousands)                           |       
|Change in Benefit Obligation:                          |                                                |                                          |        |        |        |   |        |       
|                                                       | Benefit obligation at beginning of year        |                                          | $      | 13,675 |        |   | $      | 12,658 |       
|                                                       | Service cost                                   |                                          |        | 367    |        |   |        | 413    |       
|                                                       | Interest cost                                  |                                          |        | 734    |        |   |        | 825    |       
|                                                       | Benefits paid                                  |                                          |        | (486   | )      |   |        | (478   | )     
|                                                       | Actuarial (gain) loss                          |                                          |        | (913   | )      |   |        | 257    |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Benefit obligation at end of year        |        | $      | 13,377 |   |        | $      | 13,675 |  
|                                                       |                                                |                                          |        |        |        |  
|Change in Plan Assets:                                 |                                                |                                          |        |        |        |   |        |       
|                                                       | Fair value of plan assets at beginning of year |                                          | $      | 8,796  |        |   | $      | 9,372  |       
|                                                       | Actual return on plan assets                   |                                          |        | 787    |        |   |        | (46    | )     
|                                                       | Employer contributions                         |                                          |        | 244    |        |   |        |       |       
|                                                       | Benefits paid                                  |                                          |        | (486   | )      |   |        | (478   | )     
|                                                       | Administrative expenses                        |                                          |        | (176   | )      |   |        | (51    | )     
|                                                       | Exchange rate changes                          |                                          |        |       |        |   |        |       |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Fair value of plan assets at end of year |        | $      | 9,165  |   |        | $      | 8,797  |  
|                                                       |                                                |                                          |        |        |        |  
|Funded Status at End of Year                           |                                                |                                          | (4,212 | )      |        |   | (4,878 | )     
|Unrecognized Net Actuarial Loss                        |                                                |                                          | 4      |        |        |   | 1,018  |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,208 | ) |        | $      | (3,860 | )
|                                                       |                                                |                                          |        |        |        |  
|Amounts Recognized on the Consolidated Balance Sheets: |                                                |                                          |        |        |        |   |        |       
|                                                       | Accrued benefit liability                      |                                          | $      | (4,212 | )      |   | $      | (4,878 | )     
|                                                       | Accumulated other comprehensive income         |                                          |        | 4      |        |   |        | 1,018  |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,208 | ) |        | $      | (3,860 | )
|                                                       |                                                |                                          |        |        |        |  

64



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|                               |  |                |        |  |      |   |        | 
|------------------------------ |  | -------------- | ------ |  | ---- | - | ------ | 
|                               |  | 2004           |        |  | 2003 |  
|                               |  |                |        |  |      |  
|                               |  | (In thousands) |       
|Projected Benefit Obligation   |  | $              | 13,377 |  |      | $ | 13,675 | 
|Accumulated Benefit Obligation |  |                | 13,377 |  |      |   | 13,675 | 
|Fair Value of Plan Assets      |  |                | 9,165  |  |      |   | 8,797  | 



|                               |                           |                |      |     |      |   |      |     | 
|------------------------------ | ------------------------- | -------------- | ---- | --- | ---- | - | ---- | --- | 
|                               |                           | 2004           |      |     | 2003 |  
|                               |                           |                |      |     |      |  
|                               |                           | (In thousands) |     
|Service Cost                   |                           | $              | 367  |     |      | $ | 413  |    
|Interest Cost                  |                           |                | 734  |     |      |   | 825  |    
|Expected Return on Plan Assets |                           |                | (560 | )   |      |   | (755 | )  
|Administration Expenses        |                           |                | 51   |     |      |   | 91   |    
|                               |                           |                |      |     |      |  
|                               | Net Periodic Benefit Cost |                | $    | 592 |      |   | $    | 574 | 
|                               |                           |                |      |     |      |  



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



|                                                                                    |  |                |        |   |      |   |       | 
|----------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ----- | 
|                                                                                    |  | 2004           |        |   | 2003 |  
|                                                                                    |  |                |        |   |      |  
|                                                                                    |  | (In thousands) |       
|Increase (Decrease) in Minimum Liability Included in Other
    Comprehensive Income |  | $              | (1,014 | ) |      | $ | 1,018 | 



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



|                              |  |      |      |   |      |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                              |  | 2004 |      |   | 2003 | 
|                              |  |      |      |   |      | 
|Discount rate                 |  |      | 5.78 | % |      |  | 6.15 | %
|Rate of compensation increase |  |      | N/A  |   |      |  | N/A  |  



|                               |  |      |      |   |      |  |      |  
|------------------------------ |  | ---- | ---- | - | ---- |  | ---- | -
|                               |  | 2004 |      |   | 2003 | 
|                               |  |      |      |   |      | 
|Discount rate                  |  |      | 6.15 | % |      |  | 6.75 | %
|Expected return on plan assets |  |      | 6.58 | % |      |  | 8.50 | %
|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 |     |              | 2004 |  |     | 2003 | 
|                  |  |        |     |              |      |  |     |      | 
|Equity Securities |  |        | 65  | %            |      |  | 68  | %    |  |  | 0   | %
|Fixed Income      |  |        | 33  | %            |      |  | 31  | %    |  |  | 0   | %
|Other             |  |        | 2   | %            |      |  | 1   | %    |  |  | 100 | %
|                  |  |        |     |              |      |  |     |      | 
|                  |  |        | 100 | %            |      |  | 100 | %    |  |  | 100 | %
|                  |  |        |     |              |      |  |     |      | 







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





|                   |  |            |        | 
|------------------ |  | ---------- | ------ | 
|Fiscal Year Ending |  | Payments   |       
|                   |  |            |       
|                   |  | (In        |       
|                   |  | thousands) |       
|2005               |  | $          | 651    | 
|2006               |  |            | 764    | 
|2007               |  |            | 753    | 
|2008               |  |            | 911    | 
|2009               |  |            | 1,060  | 
|Next 5 years       |  |            | 5,916  | 
|                   |  |            |       
|Total              |  | $          | 10,055 | 
|                   |  |            |       



| |                       
| | ----------------------
| | Non-U.S. Pension Plans



66



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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



|                                                       |                                                |                                          |        |        |        |   |        |        |        |  
|------------------------------------------------------ | ---------------------------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                       |                                                | 2004                                     |        |        | 2003   |  
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | (In thousands)                           |       
|Change in Benefit Obligation:                          |                                                |                                          |        |        |        |   |        |       
|                                                       | Benefit obligation at beginning of year        |                                          | $      | 21,480 |        |   | $      | 11,155 |       
|                                                       | Interest cost                                  |                                          |        | 863    |        |   |        | 841    |       
|                                                       | Employee contributions                         |                                          |        |       |        |   |        | 77     |       
|                                                       | Benefits paid                                  |                                          |        | (256   | )      |   |        | (216   | )     
|                                                       | Acquisitions                                   |                                          |        |       |        |   |        | 8,688  |       
|                                                       | Actuarial (gain) loss                          |                                          |        | (1,439 | )      |   |        | 935    |       
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Benefit obligation at end of year        |        | $      | 20,648 |   |        | $      | 21,480 |  
|                                                       |                                                |                                          |        |        |        |  
|Change in Plan Assets:                                 |                                                |                                          |        |        |        |   |        |       
|                                                       | Fair value of plan assets at beginning of year |                                          | $      | 17,956 |        |   | $      | 9,230  |       
|                                                       | Actual return on plan assets                   |                                          |        | 3,429  |        |   |        | 2,339  |       
|                                                       | Employer contributions                         |                                          |        |       |        |   |        | 6,526  |       
|                                                       | Employee contributions                         |                                          |        |       |        |   |        | 77     |       
|                                                       | Benefits paid                                  |                                          |        | (256   | )      |   |        | (216   | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Fair value of plan assets at end of year |        | $      | 21,129 |   |        | $      | 17,956 |  
|                                                       |                                                |                                          |        |        |        |  
|Funded Status at End of Year                           |                                                |                                          | 481    |        |        |   | (3,524 | )     
|Unrecognized Net Actuarial Gain                        |                                                |                                          | (5,120 | )      |        |   | (712   | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,639 | ) |        | $      | (4,236 | )
|                                                       |                                                |                                          |        |        |        |  
|Amounts Recognized on the Consolidated Balance Sheets: |                                                |                                          |        |        |        |   |        |       
|                                                       | Accrued benefit liability                      |                                          | $      | (4,639 | )      |   | $      | (4,236 | )     
|                                                       |                                                |                                          |        |        |        |  
|                                                       |                                                | Net amount recognized at end of year     |        | $      | (4,639 | ) |        | $      | (4,236 | )
|                                                       |                                                |                                          |        |        |        |  





|                               |  |      |        | 
|------------------------------ |  | ---- | ------ | 
|                               |  | 2003 |       
|                               |  |      |       
|Projected Benefit Obligation   |  | $    | 21,480 | 
|Accumulated Benefit Obligation |  |      | 21,480 | 
|Fair Value of Plan Assets      |  |      | 17,956 | 



67



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                          |  |                |      |   |      |   |      |  
|----------------------------------------- |  | -------------- | ---- | - | ---- | - | ---- | -
|                                          |  | 2004           |      |   | 2003 |  
|                                          |  |                |      |   |      |  
|                                          |  | (In thousands) |     
|Interest Cost                             |  | $              | 863  |   |      | $ | 841  |  
|Expected Return on Plan Assets            |  |                | (927 | ) |      |   | (692 | )
|Amortization of Net Actuarial (Gain) Loss |  |                | (293 | ) |      |   |     |  
|                                          |  |                |      |   |      |  
|Net Periodic Benefit Cost (Benefit)       |  | $              | (357 | ) |      | $ | 149  |  
|                                          |  |                |      |   |      |  



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





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



|                              |  |      |      |   |      |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                              |  | 2004 |      |   | 2003 | 
|                              |  |      |      |   |      | 
|Discount rate                 |  |      | 4.75 | % |      |  | 5.50 | %
|Rate of compensation increase |  |      | N/A  |   |      |  | N/A  |  



|                               |  |      |      |   |      |  |      |  
|------------------------------ |  | ---- | ---- | - | ---- |  | ---- | -
|                               |  | 2004 |      |   | 2003 | 
|                               |  |      |      |   |      | 
|Discount rate                  |  |      | 5.00 | % |      |  | 5.50 | %
|Expected return on plan assets |  |      | 5.00 | % |      |  | 6.75 | %
|Rate of compensation increase  |  |      | N/A  |   |      |  | N/A  |  



68



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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





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





|                   |  |                |       | 
|------------------ |  | -------------- | ----- | 
|Fiscal Year Ending |  | Payments       |      
|                   |  |                |      
|                   |  | (In thousands) |      
|2005               |  | $              | 235   | 
|2006               |  |                | 262   | 
|2007               |  |                | 277   | 
|2008               |  |                | 283   | 
|2009               |  |                | 307   | 
|Next 5 years       |  |                | 2,227 | 
|                   |  |                |      
|Total              |  | $              | 3,591 | 
|                   |  |                |      

14. Income Taxes




|         |                                  |                         |        |         |      |   |         |        |  |   |        |        | 
|-------- | -------------------------------- | ----------------------- | ------ | ------- | ---- | - | ------- | ------ |  | - | ------ | ------ | 
|         |                                  | Year Ended December 31, |       
|         |                                  |                         |       
|         |                                  | 2004                    |        |         | 2003 |   |         | 2002   | 
|         |                                  |                         |        |         |      |   |         |        | 
|         |                                  | (In thousands)          |       
|Domestic |                                  | $                       | 44,975 |         |      | $ | (42,768 | )      |  | $ | (5,058 | )     
|Foreign  |                                  |                         | 56,771 |         |      |   | 54,880  |        |  |   | 29,373 |       
|         |                                  |                         |        |         |      |   |         |        | 
|         | Total Income Before Income Taxes |                         | $      | 101,746 |      |   | $       | 12,112 |  |   | $      | 24,315 | 
|         |                                  |                         |        |         |      |   |         |        | 



|          |                                     |                         |         |         |      |  |         |         |   |  |         |        |  
|--------- | ----------------------------------- | ----------------------- | ------- | ------- | ---- |  | ------- | ------- | - |  | ------- | ------ | -
|          |                                     | Year Ended December 31, |        
|          |                                     |                         |        
|          |                                     | 2004                    |         |         | 2003 |  |         | 2002    |  
|          |                                     |                         |         |         |      |  |         |         |  
|          |                                     | (In thousands)          |        
|Current:  |                                     |                         |         |         |      |  |         |         |   |  |         |       
|          | U.S. federal and state income taxes |                         | $       | (460    | )    |  | $       | (500    | ) |  | $       | (1,441 | )
|          | Foreign                             |                         |         | (11,154 | )    |  |         | (19,872 | ) |  |         | (9,450 | )
|          |                                     |                         |         |         |      |  |         |         |  
|          |                                     |                         | (11,614 | )       |      |  | (20,372 | )       |   |  | (10,891 | )     
|          |                                     |                         |         |         |      |  |         |         |  
|Deferred: |                                     |                         |         |         |      |  |         |         |   |  |         |       
|          | U.S. federal and state income taxes |                         |         | (14,879 | )    |  |         | 16,136  |   |  |         | 5,870  |  
|          | Foreign                             |                         |         | (5,217  | )    |  |         | (3      | ) |  |         | (2,553 | )
|          |                                     |                         |         |         |      |  |         |         |  
|          |                                     |                         | (20,096 | )       |      |  | 16,133  |         |   |  | 3,317   |       
|          |                                     |                         |         |         |      |  |         |         |  
|          | Total Income Tax Provision(a)       |                         | $       | (31,710 | )    |  | $       | (4,239  | ) |  | $       | (7,574 | )
|          |                                     |                         |         |         |      |  |         |         |  






|    |  |                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes the deferred tax benefit of $2.9 million relating
    to the cumulative effect of the accounting change for the year
    ended 2002 (see Note 10). Also excludes $0.9 million,
    ($0.3) million and

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |  |                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $0.3 million of deferred taxes from the income (loss) from
    discontinued operations for the years ended 2004, 2003 and 2002,
    respectively (see Note 6).



|                                                                        |                            |                         |         |         |      |   |        |        |   |   |        |        |  
|----------------------------------------------------------------------- | -------------------------- | ----------------------- | ------- | ------- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                                        |                            | Year Ended December 31, |        
|                                                                        |                            |                         |        
|                                                                        |                            | 2004                    |         |         | 2003 |   |        | 2002   |  
|                                                                        |                            |                         |         |         |      |   |        |        |  
|                                                                        |                            | (In thousands)          |        
|Provision for Income Taxes at Statutory Rates                           |                            | $                       | (35,610 | )       |      | $ | (4,239 | )      |   | $ | (8,510 | )     
|Effect of Foreign Income Tax, Net                                       |                            |                         | 4,236   |         |      |   |       |        |   |   | (975   | )     
|Change in Valuation Allowance                                           |                            |                         | (4,523  | )       |      |   | (4,300 | )      |   |   | (2,000 | )     
|Preferred Supplier Credit                                               |                            |                         | 1,339   |         |      |   | 3,080  |        |   |   | 955    |       
|Extraterritorial Income Benefit                                         |                            |                         | 1,145   |         |      |   | 700    |        |   |   | 350    |       
|Equity in Earnings of Unconsolidated Affiliates                         |                            |                         | 3,032   |         |      |   | 1,409  |        |   |   | 3,144  |       
|State and Local Income Taxes Net of U.S. Federal Income Tax
    Benefit |                            |                         | 900     |         |      |   | (500   | )      |   |   | (305   | )     
|Amortization of Restricted Stock Award                                  |                            |                         | (2,220  | )       |      |   |       |        |   |   |       |       
|Other Permanent Items                                                   |                            |                         | (9      | )       |      |   | (389   | )      |   |   | (233   | )     
|                                                                        |                            |                         |         |         |      |   |        |        |  
|                                                                        | Provision for Income Taxes |                         | $       | (31,710 | )    |   | $      | (4,239 | ) |   | $      | (7,574 | )
|                                                                        |                            |                         |         |         |      |   |        |        |  





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                          |                                       |                                       |   |         |         |   |   |         |         |  
|------------------------- | ------------------------------------- | ------------------------------------- | - | ------- | ------- | - | - | ------- | ------- | -
|                          |                                       | Year Ended                            |  
|                          |                                       | December 31,                          |  
|                          |                                       |                                       |  
|                          |                                       | 2004                                  |   |         | 2003    |  
|                          |                                       |                                       |   |         |         |  
|                          |                                       | (In thousands)                        |  
|Deferred Tax Assets:      |                                       |                                       |   |         |         |   |   |        
|                          | Foreign tax credits                   |                                       | $ | 23,393  |         |   | $ | 14,365  |        
|                          | Domestic and foreign operating losses |                                       |   | 1,367   |         |   |   | 7,910   |        
|                          | Accrued liabilities and reserves      |                                       |   | 17,951  |         |   |   | 11,726  |        
|                          | Inventory basis differences           |                                       |   | 4,778   |         |   |   | 11,727  |        
|                          | Goodwill and other intangibles        |                                       |   |        |         |   |   | 4,250   |        
|                          | Investments in unconsolidated subs    |                                       |   | 3,164   |         |   |   | 2,611   |        
|                          |                                       |                                       |   |         |         |  
|                          |                                       | Total deferred tax assets             |   |         | 50,653  |   |   |         | 52,589  |  
|                          |                                       |                                       |   |         |         |  
|Deferred Tax Liabilities: |                                       |                                       |   |         |         |   |   |        
|                          | Goodwill and other intangibles        |                                       |   | (6,176  | )       |   |   |        |        
|                          | Property and equipment and other      |                                       |   | (36,042 | )       |   |   | (34,776 | )      
|                          | Tax on non-repatriated foreign income |                                       |   | (5,510  | )       |   |   | (6,345  | )      
|                          |                                       |                                       |   |         |         |  
|                          |                                       | Total deferred tax liabilities        |   |         | (47,728 | ) |   |         | (41,121 | )
|                          |                                       |                                       |   |         |         |  
|Valuation Allowance:      |                                       |                                       |   |         |         |   |   |        
|                          | Foreign tax credits                   |                                       |   | (13,924 | )       |   |   | (9,400  | )      
|                          |                                       |                                       |   |         |         |  
|                          | Total valuation allowance             |                                       |   | (13,924 | )       |   |   | (9,400  | )      
|                          |                                       |                                       |   |         |         |  
|                          |                                       | Net deferred tax assets (liabilities) |   | $       | (10,999 | ) |   | $       | 2,068   |  
|                          |                                       |                                       |   |         |         |  





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)








15. Disputes, Litigation, and Contingencies




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





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



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |            
|--- | -----------
|16. | Commitments



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



|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 9,992  | 
|2006       |  |   | 7,833  | 
|2007       |  |   | 5,917  | 
|2008       |  |   | 5,345  | 
|2009       |  |   | 2,553  | 
|Thereafter |  |   | 15,813 | 
|           |  |   |       
|           |  | $ | 47,453 | 
|           |  |   |       



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







|    |                
|--- | ---------------
|17. | Related Parties





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                    
|--- | -------------------
|18. | Segment Information



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







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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|     |                                                         |                   |   |         |            |         |                |          |   |  |       |         |   |           |   |         |       |  |   |         |   |  |   |           |  
|---- | ------------------------------------------------------- | ----------------- | - | ------- | ---------- | ------- | -------------- | -------- | - |  | ----- | ------- | - | --------- | - | ------- | ----- |  | - | ------- | - |  | - | --------- | -
|     |                                                         |                   |   |         |            | Tubular |                |          |   |  |       |         |  
|     |                                                         | Drilling Products |   |         |            |         | Technology and |          |   |  |       |         |   |          
|     |                                                         | and Services      |   |         | Drill Bits |         |                | Services |   |  | Other |         |   | Corporate |   |         | Total | 
|     |                                                         |                   |   |         |            |         |                |          |   |  |       |         |   |           |   |         |       | 
|     |                                                         | (In thousands)    |  
|2004 |                                                         |                   |   |         |            |         |                |          |   |  |       |         |   |           |   |         |       |  |   |         |   |  |   |          
|     | Revenues from Unaffiliated Customers                    |                   | $ | 390,617 |            |         | $              | 326,918  |   |  | $     | 226,233 |   |           | $ | 1,875   |       |  | $ |        |   |  | $ | 945,643   |  
|     | Intersegment Revenues                                   |                   |   |        |            |         |                |         |   |  |       | 348     |   |           |   |        |       |  |   |        |   |  |   | 348       |  
|     | Other Charges                                           |                   |   | 2,051   |            |         |                |         |   |  |       | 3,207   |   |           |   |        |       |  |   | 3,777   |   |  |   | 9,035     |  
|     | Depreciation and Amortization                           |                   |   | 15,237  |            |         |                | 12,121   |   |  |       | 12,751  |   |           |   | 195     |       |  |   | 2,916   |   |  |   | 43,220    |  
|     | Equity Income in Unconsolidated Affiliates              |                   |   | 1,565   |            |         |                |         |   |  |       |        |   |           |   |        |       |  |   |        |   |  |   | 1,565     |  
|     | Operating Income (Loss)                                 |                   |   | 90,509  |            |         |                | 70,542   |   |  |       | 20,884  |   |           |   | (2,117  | )     |  |   | (38,146 | ) |  |   | 141,672   |  
|     | (Provision) Benefit for Income Taxes                    |                   |   | (27,624 | )          |         |                | (20,242  | ) |  |       | (5,267  | ) |           |   | 394     |       |  |   | 21,029  |   |  |   | (31,710   | )
|     | Capital Expenditures for Property, Plant, and Equipment |                   |   | 8,808   |            |         |                | 18,794   |   |  |       | 4,986   |   |           |   | 446     |       |  |   | 4,845   |   |  |   | 37,879    |  
|     | Interest Expense                                        |                   |   | 614     |            |         |                | 110      |   |  |       | 213     |   |           |   | 2       |       |  |   | 40,950  |   |  |   | 41,889    |  
|     | Total Assets                                            |                   |   | 489,684 |            |         |                | 519,258  |   |  |       | 258,517 |   |           |   | 359     |       |  |   | 76,648  |   |  |   | 1,344,466 |  
|2003 |                                                         |                   |   |         |            |         |                |          |   |  |       |         |   |           |   |         |       |  |   |         |   |  |   |          
|     | Revenues from Unaffiliated Customers                    |                   | $ | 308,297 |            |         | $              | 258,975  |   |  | $     | 226,607 |   |           | $ | 9,939   |       |  | $ |        |   |  | $ | 803,818   |  
|     | Other Charges                                           |                   |   | 24,924  |            |         |                |         |   |  |       | 425     |   |           |   | 12,396  |       |  |   | 78      |   |  |   | 37,823    |  
|     | Depreciation and Amortization                           |                   |   | 14,912  |            |         |                | 11,191   |   |  |       | 13,424  |   |           |   | 3,356   |       |  |   | 1,805   |   |  |   | 44,688    |  
|     | Equity Income (Loss) in Unconsolidated Affiliates       |                   |   | 461     |            |         |                |         |   |  |       |        |   |           |   | (939    | )     |  |   |        |   |  |   | (478      | )
|     | Operating Income (Loss)                                 |                   |   | 18,776  |            |         |                | 58,443   |   |  |       | 7,634   |   |           |   | (16,754 | )     |  |   | (22,802 | ) |  |   | 45,297    |  
|     | (Provision) Benefit for Income Taxes                    |                   |   | (8,366  | )          |         |                | (15,062  | ) |  |       | 1,082   |   |           |   | 4,681   |       |  |   | 13,426  |   |  |   | (4,239    | )
|     | Capital Expenditures for Property, Plant, and Equipment |                   |   | 16,260  |            |         |                | 10,175   |   |  |       | 9,664   |   |           |   | 940     |       |  |   | 4,379   |   |  |   | 41,418    |  
|     | Interest Expense                                        |                   |   | 514     |            |         |                | 7        |   |  |       | 507     |   |           |   | 5       |       |  |   | 42,838  |   |  |   | 43,871    |  
|     | Total Assets                                            |                   |   | 478,714 |            |         |                | 450,653  |   |  |       | 273,587 |   |           |   | 8,721   |       |  |   | 50,386  |   |  |   | 1,262,061 |  
|2002 |                                                         |                   |   |         |            |         |                |          |   |  |       |         |   |           |   |         |       |  |   |         |   |  |   |          
|     | Revenues from Unaffiliated Customers                    |                   | $ | 317,280 |            |         | $              | 5,270    |   |  | $     | 258,458 |   |           | $ | 28,382  |       |  | $ |        |   |  | $ | 609,390   |  
|     | Other Charges                                           |                   |   | 2,360   |            |         |                |         |   |  |       | 220     |   |           |   |        |       |  |   | 4,465   |   |  |   | 7,045     |  
|     | Depreciation and Amortization                           |                   |   | 12,252  |            |         |                | 249      |   |  |       | 13,914  |   |           |   | 1,475   |       |  |   | 941     |   |  |   | 28,831    |  
|     | Equity Income (Loss) in Unconsolidated Affiliates       |                   |   | 5,989   |            |         |                |         |   |  |       |        |   |           |   | (647    | )     |  |   |        |   |  |   | 5,342     |  
|     | Operating Income (Loss)                                 |                   |   | 58,029  |            |         |                | 796      |   |  |       | 12,824  |   |           |   | (1,124  | )     |  |   | (23,530 | ) |  |   | 46,995    |  
|     | (Provision) Benefit for Income Taxes                    |                   |   | (20,835 | )          |         |                | (276     | ) |  |       | (695    | ) |           |   | 425     |       |  |   | 13,807  |   |  |   | (7,574    | )
|     | Capital Expenditures for Property, Plant, and Equipment |                   |   | 22,781  |            |         |                |         |   |  |       | 14,879  |   |           |   | 2,041   |       |  |   | 6,080   |   |  |   | 45,781    |  
|     | Interest Expense                                        |                   |   | 605     |            |         |                |         |   |  |       | 810     |   |           |   | 5       |       |  |   | 25,620  |   |  |   | 27,040    |  
|     | Total Assets                                            |                   |   | 497,243 |            |         |                | 394,352  |   |  |       | 298,393 |   |           |   | 58,988  |       |  |   | 66,373  |   |  |   | 1,315,349 |  

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




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



|     |                   |                |   |         |        |  |       |         |  |  |       |        |  |      |   |        |       |  |   |         |  |  |   |         |  |  |   |         | 
|---- | ----------------- | -------------- | - | ------- | ------ |  | ----- | ------- |  |  | ----- | ------ |  | ---- | - | ------ | ----- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|     |                   | United         |   |         |        |  | Latin |         |  |  |       |        |  |      |   |       
|     |                   | States         |   |         | Canada |  |       | America |  |  | Italy |        |  | Asia |   |        | Other |  |   | Total   | 
|     |                   |                |   |         |        |  |       |         |  |  |       |        |  |      |   |        |       |  |   |         | 
|     |                   | (In thousands) |  
|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 | 
|2002 |                   |                |   |         |        |  |       |         |  |  |       |        |  |      |   |        |       |  |   |         |  |  |   |         |  |  |   |        
|     | Revenues          |                | $ | 445,114 |        |  | $     | 38,175  |  |  | $     | 10,212 |  |      | $ | 24,564 |       |  | $ | 63,746  |  |  | $ | 27,579  |  |  | $ | 609,390 | 
|     | Long-Lived Assets |                |   | 518,406 |        |  |       | 19,806  |  |  |       | 88,163 |  |      |   | 35,757 |       |  |   | 85,465  |  |  |   | 45,248  |  |  |   | 792,845 | 



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





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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                              
|--- | ---------------------------------------------
|19. | Selected Quarterly Financial Data (Unaudited)



|                                                       |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |      | 
|------------------------------------------------------ | ------------------------------------------ | ------------------------------------- | ------- | ---- | ------- | - | ------- | ------- | - | - | ------- | ---- |  | - | ------- | ---- | 
|                                                       |                                            | 2004 (a)                              |        
|                                                       |                                            |                                       |        
|                                                       |                                            | 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   | (b)  |         |   | 2,498   | (c)     |   |   | 3,803   | (d)  |  |   |        |     
|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(e):                         |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |     
|                                                       | 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(e):                       |                                            |                                       |         |      |         |   |         |         |   |   |         |      |  |   |         |     
|                                                       | 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 |     

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |      |  |   |         |       |  
|------------------------------------------------------ | ------------------------------------------ | ------------------------------------- | ------- | ---- | ------- | - | ------- | ------- |  | - | ------- | ---- |  | - | ------- | ----- | -
|                                                       |                                            | 2003                                  |        
|                                                       |                                            |                                       |        
|                                                       |                                            | First                                 |         |      | Second  |   |         | Third   |  |   | Fourth  |     
|                                                       |                                            | Quarter                               |         |      | Quarter |   |         | Quarter |  |   | Quarter |     
|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |     
|                                                       |                                            | (In thousands, except per share data) |        
|Revenues                                               |                                            | $                                     | 182,885 |      |         | $ | 181,243 |         |  | $ | 212,928 |      |  | $ | 226,762 |      
|Gross Profit                                           |                                            |                                       | 59,416  |      |         |   | 52,868  | (f)     |  |   | 74,338  |      |  |   | 83,624  |      
|Other Charges                                          |                                            |                                       |        |      |         |   | 78      | (g)     |  |   |        |      |  |   | 31,320  | (h)  
|Selling, General, and Administrative                   |                                            |                                       | 42,531  |      |         |   | 43,475  |         |  |   | 51,962  |      |  |   | 55,583  |      
|Operating Income (Loss)                                |                                            |                                       | 16,885  |      |         |   | 9,315   | (a)(b)  |  |   | 22,376  |      |  |   | (3,279  | )    
|Income (Loss) from Continuing Operations               |                                            |                                       | 4,354   |      |         |   | 3,477   | (a)(b)  |  |   | 7,405   |      |  |   | (10,579 | )    
|Income (Loss) from Discontinued Operations, Net of Tax |                                            |                                       | (320    | )    |         |   | 349     |         |  |   | 79      |      |  |   | 425     |      
|Net Income (Loss)                                      |                                            |                                       | 4,034   |      |         |   | 3,826   |         |  |   | 7,484   |      |  |   | (10,154 | )    
|Basic Net Income (Loss) Per Share(e):                  |                                            |                                       |         |      |         |   |         |         |  |   |         |      |  |   |         |      
|                                                       | Income (loss) from continuing operations   |                                       | $       | 0.03 |         |   | $       | 0.03    |  |   | $       | 0.06 |  |   | $       | (0.08 | )
|                                                       | Income (loss) from discontinued operations |                                       |         |     |         |   |         |        |  |   |         |     |  |   |         |      |  
|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |     
|                                                       | Net income (loss)                          |                                       | $       | 0.03 |         |   | $       | 0.03    |  |   | $       | 0.06 |  |   | $       | (0.08 | )
|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |     
|Basic Weighted Average Shares Outstanding              |                                            |                                       | 121,377 |      |         |   | 121,636 |         |  |   | 121,775 |      |  |   | 121,792 |      
|Diluted Net Income (Loss) Per Share(e):                |                                            |                                       |         |      |         |   |         |         |  |   |         |      |  |   |         |      
|                                                       | Income (loss) from continuing operations   |                                       | $       | 0.03 |         |   | $       | 0.03    |  |   | $       | 0.06 |  |   | $       | (0.08 | )
|                                                       | Income (loss) from discontinued operations |                                       |         |     |         |   |         |        |  |   |         |     |  |   |         |      |  
|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |     
|                                                       | Net income (loss)                          |                                       | $       | 0.03 |         |   | $       | 0.03    |  |   | $       | 0.06 |  |   | $       | (0.08 | )
|                                                       |                                            |                                       |         |      |         |   |         |         |  |   |         |     
|Diluted Weighted Average Shares Outstanding            |                                            |                                       | 122,977 |      |         |   | 123,576 |         |  |   | 123,308 |      |  |   | 121,792 |      






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | As a result of the Companys testing of internal controls
    in connection with Sarbanes-Oxley Section 404 requirements,
    the Company reported a material weakness in its revenue
    recognition practices. The material weakness relates to
    inadequate documentation supporting the Companys revenue
    recognition procedures in certain of its operating divisions
    (See ITEM 9A. Controls and Procedures).As a result of the
    material weakness, the Company tested revenue transactions and
    determined that while title and risk of loss had transferred to
    the customer, in certain instances the supporting documentation
    did not meet all of the requirements to recognize revenue prior
    to the products being in the physical possession of the
    customer. Therefore, the revenue and profits from these
    transactions are required to be deferred until the period in
    which the customer takes physical possession. The first three
    quarters of 2004 have been restated, as previously reported in
    the Companys 10-Qs, to properly reflect these
    deferred revenue transactions. The impact of this restatement on
    the first, second and third quarters of 2004 was:a)revenues were
    increased (decreased) by $(28,077,000), $(549,000) and
    $(3,895,000), respectively, b) operating income was
    increased (decreased) by $(5,230,000), $(217,000) and
    $(2,153,000), respectively, c) net income from continuing
    operations was increased (decreased) by $(3,399,500),
    $(141,050) and $(1,399,450), respectively, and d) basic and
    diluted net income per share was increased (decreased) by
    $(0.03), $0.00 and $(0.01), respectively. The impact on prior
    years financial statements was not material.
|   
|(b) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(c) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |  |                                                                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) |  | 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.                                                                                                                                                                                                   
|   
|(e) |  | 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.
|   
|(f) |  | Includes $6.4 million of other charges in the second
    quarter of 2003 related to inventory reserves for exited product
    lines, which were classified as cost of sales.                                                                                                                                                                                  
|   
|(g) |  | Includes other charges of $1.5 million for stock
    compensation expense and a $1.4 million credit for a
    previously recorded contingent liability in the second quarter
    of 2003.                                                                                                                                                                     
|   
|(h) |  | Includes other charges of $31.3 million in the fourth
    quarter of 2003 related to fixed asset write-downs and asset
    impairments related to two technology joint ventures.                                                                                                                                                                              



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                           
|--- | ------------------------------------------
|20. | Subsidiary Guarantor Financial Information

5 8


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 | )      
|Equity in Subsidiaries, Net of Taxes                                            |                                     |                | 80,383  |   |            |      |        |            |  |   |             |         |  |       | (80,383 | ) |  |   |        |        
|Other Income (Expense), Net                                                     |                                     |                |        |   |            |      | 2,425   |            |  |   | (2,027       | )       |  |       |        |   |  |   | 398     |        
|Equity Income in Unconsolidated Affiliates                                      |                                     |                |        |   |            |      | 1,565   |            |  |   |             |         |  |       |        |   |  |   | 1,565   |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                |                                     |                | 43,625  |   |            |      | (496    | )          |  |   | (2,672       | )       |  |       | (80,383 | ) |  |   | (39,926 | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations Before Income Taxes and
    Minority Interest |                                     |                | 43,625  |   |            |      | 84,010  |            |  |   | 54,494       |         |  |       | (80,383 | ) |  |   | 101,746 |        
|Income Tax (Provision) Benefit                                                  |                                     |                | 11,641  |   |            |      | (30,100 | )          |  |   | (13,251      | )       |  |       |        |   |  |   | (31,710 | )      
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|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  |        
|                                                                                |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        

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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 | )      
|Equity in Subsidiaries, Net of Taxes                                                   |                                     |                | 26,741  |   |            |      |        |            |  |   |             |         |  |       | (26,741 | ) |  |   |        |        
|Other Income (Expense), Net                                                            |                                     |                | 3,489   |   |            |      | 17,245  |            |  |   | (9,570       | )       |  |       |        |   |  |   | 11,164  |        
|Equity Loss in Unconsolidated Affiliates                                               |                                     |                |        |   |            |      | (478    | )          |  |   |             |         |  |       |        |   |  |   | (478    | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     |                | (6,414  | ) |            |      | 10,203  |            |  |   | (10,233      | )       |  |       | (26,741 | ) |  |   | (33,185 | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income (Loss) From Continuing Operations Before Income Taxes and
    Minority Interest |                                     |                | (6,414  | ) |            |      | (10,827 | )          |  |   | 56,094       |         |  |       | (26,741 | ) |  |   | 12,112  |        
|Income Tax (Provision) Benefit                                                         |                                     |                | 11,604  |   |            |      | 4,032   |            |  |   | (19,875      | )       |  |       |        |   |  |   | (4,239  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income (Loss) 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 OPERATIONS


Year Ended December 31, 2002


|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |         | 
|-------------------------------------------------------------------------------------- | ----------------------------------- | -------------- | ------- | - | ---------- | ---- | ------- | ---------- |  | - | ------------ | ------- |  | ----- | ------- | - |  | - | ------- | ------- | 
|                                                                                       |                                     |                |         |   |            | Non- |         |            |  |   |             
|                                                                                       |                                     | Parent         |         |   | Guarantors |      |         | Guarantors |  |   | Eliminations |         |  | Total |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     | (In thousands) |        
|Revenues                                                                               |                                     | $              |        |   |            | $    | 445,114 |            |  | $ | 164,276      |         |  | $     |        |   |  | $ | 609,390 |        
|Operating Expenses                                                                     |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |         |   |  |   |         |        
|                                                                                       | Cost of sales                       |                |         |  |            |      |         | 361,477    |  |   |              | 110,743 |  |       |         |  |  |   |         | 472,220 | 
|                                                                                       | Selling, general and administrative |                |         |  |            |      |         | 64,043     |  |   |              | 19,087  |  |       |         |  |  |   |         | 83,130  | 
|                                                                                       | Other charges                       |                |         |  |            |      |         | 5,745      |  |   |              | 1,300   |  |       |         |  |  |   |         | 7,045   | 
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     |                |        |   |            |      | 431,265 |            |  |   | 131,130      |         |  |       |        |   |  |   | 562,395 |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Operating Income                                                                       |                                     |                |        |   |            |      | 13,849  |            |  |   | 33,146       |         |  |       |        |   |  |   | 46,995  |        
|Interest Expense                                                                       |                                     |                | (23,003 | ) |            |      | (2,919  | )          |  |   | (1,118       | )       |  |       |        |   |  |   | (27,040 | )      
|Equity in Subsidiaries, Net of Taxes                                                   |                                     |                | 22,506  |   |            |      |        |            |  |   |             |         |  |       | (22,506 | ) |  |   |        |        
|Other Income (Expense), Net                                                            |                                     |                |        |   |            |      | 1,265   |            |  |   | (2,247       | )       |  |       |        |   |  |   | (982    | )      
|Equity Income in Unconsolidated Affiliates                                             |                                     |                |        |   |            |      | 5,342   |            |  |   |             |         |  |       |        |   |  |   | 5,342   |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|                                                                                       |                                     |                | (497    | ) |            |      | 3,688   |            |  |   | (3,365       | )       |  |       | (22,506 | ) |  |   | (22,680 | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income (Loss) From Continuing Operations Before Income Taxes and
    Minority Interest |                                     |                | (497    | ) |            |      | 17,537  |            |  |   | 29,781       |         |  |       | (22,506 | ) |  |   | 24,315  |        
|Income Tax (Provision) Benefit                                                         |                                     |                | 7,131   |   |            |      | (2,702  | )          |  |   | (12,003      | )       |  |       |        |   |  |   | (7,574  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations Before Minority Interests                            |                                     |                | 6,634   |   |            |      | 14,835  |            |  |   | 17,778       |         |  |       | (22,506 | ) |  |   | 16,741  |        
|Minority Interests                                                                     |                                     |                |        |   |            |      |        |            |  |   | (3,051       | )       |  |       |        |   |  |   | (3,051  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income From Continuing Operations                                                      |                                     |                | 6,634   |   |            |      | 14,835  |            |  |   | 14,727       |         |  |       | (22,506 | ) |  |   | 13,690  |        
|Loss From Discontinued Operations, Net of Tax                                          |                                     |                |        |   |            |      | (644    | )          |  |   |             |         |  |       |        |   |  |   | (644    | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Income Before Cumulative Effect of Accounting Change                                   |                                     |                | 6,634   |   |            |      | 14,191  |            |  |   | 14,727       |         |  |       | (22,506 | ) |  |   | 13,046  |        
|Cumulative Effect of Accounting Change                                                 |                                     |                |        |   |            |      | (6,412  | )          |  |   |             |         |  |       |        |   |  |   | (6,412  | )      
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        
|Net Income                                                                             |                                     | $              | 6,634   |   |            | $    | 7,779   |            |  | $ | 14,727       |         |  | $     | (22,506 | ) |  | $ | 6,634   |        
|                                                                                       |                                     |                |         |   |            |      |         |            |  |   |              |         |  |       |        

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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                                |                                                             |                |          |       |            |      | 10,536  |            |   |   | 25,897       |        |  |       |           |   |  |   | 36,433    |        
|Other Long-Term Liabilities                             |                                                             |                |          |       |            |      | 11,954  |            |   |   | 1,270        |        |  |       |           |   |  |   | 13,224    |        
|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 |        
|                                                        |                                                             |                |           |       |            |      |         |            |   |   |              |        |  |       |           

83



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GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


CONDENSED BALANCE SHEET


As of December 31, 2003


|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |          |   |  |   |           |         | 
|------------------------------------------------------- | ----------------------------------------------------------- | -------------- | ------- | ----- | ---------- | ---- | ------- | ---------- |  | - | ------------ | ------ |  | ----- | -------- | - |  | - | --------- | ------- | 
|                                                        |                                                             |                |         |       |            | Non- |         |            |  |   |             
|                                                        |                                                             | Parent         |         |       | Guarantors |      |         | Guarantors |  |   | Eliminations |        |  | Total |         
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                        |                                                             | (In thousands) |        
|ASSETS                                                 
|Current Assets:                                         |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |          |   |  |   |           |        
|                                                        | Cash                                                        |                | $       |      |            |      | $       | 2,620      |  |   | $            | 16,610 |  |       | $        |  |  |   | $         | 19,230  | 
|                                                        | Restricted cash                                             |                |         |      |            |      |         | 18         |  |   |              | 265    |  |       |          |  |  |   |           | 283     | 
|                                                        | Accounts receivable, net                                    |                |         |      |            |      |         | 118,303    |  |   |              | 93,982 |  |       |          |  |  |   |           | 212,285 | 
|                                                        | Inventories                                                 |                |         |      |            |      |         | 160,982    |  |   |              | 71,012 |  |       |          |  |  |   |           | 231,994 | 
|                                                        | Current deferred tax assets                                 |                |         |      |            |      |         | 28,345     |  |   |              | 1,938  |  |       |          |  |  |   |           | 30,283  | 
|                                                        | Other current assets                                        |                |         |      |            |      |         | 5,573      |  |   |              | 11,215 |  |       |          |  |  |   |           | 16,788  | 
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                        |                                                             |                |        |       |            |      | 315,841 |            |  |   | 195,022      |        |  |       |         |   |  |   | 510,863   |        
|Property, Plant and Equipment, Net                      |                                                             |                |        |       |            |      | 164,537 |            |  |   | 86,699       |        |  |       |         |   |  |   | 251,236   |        
|Goodwill                                                |                                                             |                |        |       |            |      | 208,952 |            |  |   | 187,992      |        |  |       |         |   |  |   | 396,944   |        
|Investment In and Advances to Subsidiaries              |                                                             |                | 982,881 |       |            |      |        |            |  |   |             |        |  |       | (982,881 | ) |  |   |          |        
|Investment In and Advances to Unconsolidated Affiliates |                                                             |                |        |       |            |      | 47,786  |            |  |   |             |        |  |       |         |   |  |   | 47,786    |        
|Other Assets                                            |                                                             |                | 7,682   |       |            |      | 29,832  |            |  |   | 17,718       |        |  |       |         |   |  |   | 55,232    |        
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                        |                                                             | $              | 990,563 |       |            | $    | 766,948 |            |  | $ | 487,431      |        |  | $     | (982,881 | ) |  | $ | 1,262,061 |        
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Current Liabilities:                                    |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |          |   |  |   |           |        
|                                                        | Short-term borrowings and current portion of long-term debt |                | $       |      |            |      | $       | 9,106      |  |   | $            | 1,967  |  |       | $        |  |  |   | $         | 11,073  | 
|                                                        | Accounts payable                                            |                |         |      |            |      |         | 49,091     |  |   |              | 25,317 |  |       |          |  |  |   |           | 74,408  | 
|                                                        | Current deferred tax liabilities                            |                |         |      |            |      |         | 6          |  |   |              | 3,757  |  |       |          |  |  |   |           | 3,763   | 
|                                                        | Other accrued liabilities                                   |                |         | 3,260 |            |      |         | 39,595     |  |   |              | 34,156 |  |       |          |  |  |   |           | 77,011  | 
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                        |                                                             |                | 3,260   |       |            |      | 97,798  |            |  |   | 65,197       |        |  |       |         |   |  |   | 166,255   |        
|Long-Term Debt                                          |                                                             |                | 374,305 |       |            |      | 50,406  |            |  |   | 2,142        |        |  |       |         |   |  |   | 426,853   |        
|Deferred Tax Liabilities                                |                                                             |                |        |       |            |      | 6,912   |            |  |   | 20,053       |        |  |       |         |   |  |   | 26,965    |        
|Other Long-Term Liabilities                             |                                                             |                | 6,884   |       |            |      | 9,289   |            |  |   | 7,670        |        |  |       |         |   |  |   | 23,843    |        
|Commitments and Contingencies                           |                                                             |                |        |       |            |      |        |            |  |   |             |        |  |       |         |   |  |   |          |        
|Minority Interests                                      |                                                             |                |        |       |            |      |        |            |  |   | 12,031       |        |  |       |         |   |  |   | 12,031    |        
|Stockholders Equity                                    |                                                             |                | 606,114 |       |            |      | 602,543 |            |  |   | 380,338      |        |  |       | (982,881 | ) |  |   | 606,114   |        
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         
|                                                        |                                                             | $              | 990,563 |       |            | $    | 766,948 |            |  | $ | 487,431      |        |  | $     | (982,881 | ) |  | $ | 1,262,061 |        
|                                                        |                                                             |                |         |       |            |      |         |            |  |   |              |        |  |       |         

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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 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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##### Table of Contents



GRANT PRIDECO, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


CONDENSED STATEMENT OF CASH FLOWS


Year Ended December 31, 2002


|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |   |   |   |   |        |          |          |  
|--------------------------------------- | -------------------------------------------------------- | ------------------------------------- | - | -------- | ---------- | ---- | ----- | ---------- | ------- | - | ------------ | ------- | ------ | - | - | - | - | - | ------ | -------- | -------- | -
|                                        |                                                          |                                       |   |          |            | Non- |       |            |         |   |             
|                                        |                                                          | Parent                                |   |          | Guarantors |      |       | Guarantors |         |   | Eliminations |         | Total  |  
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |  
|                                        |                                                          | (In thousands)                        |  
|Cash Flows From Operating Activities:   |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |   |   |   |   |        |         
|                                        | Net cash (used in) provided by operating activities      |                                       | $ | 103,332  |            |      | $     | (991       | )       |   | $            | 16,345  |        |   | $ |  |   |   | $      | 118,686  |         
|Cash Flows From Investing Activities:   |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |   |   |   |   |        |         
|                                        | Acquisition of businesses, net of cash acquired          |                                       |   | (266,543 | )          |      |       |           |         |   |              | 1,371   |        |   |   |  |   |   |        | (265,172 | )       
|                                        | Investments in and advances to unconsolidated affiliates |                                       |   |         |            |      |       | (3,794     | )       |   |              |        |        |   |   |  |   |   |        | (3,794   | )       
|                                        | Capital expenditures for property, plant and equipment   |                                       |   |         |            |      |       | (35,718    | )       |   |              | (10,063 | )      |   |   |  |   |   |        | (45,781  | )       
|                                        | Proceeds from sale of fixed assets                       |                                       |   |         |            |      |       | 860        |         |   |              | 51      |        |   |   |  |   |   |        | 911      |         
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |  
|                                        |                                                          | Net cash used in investing activities |   |          | (266,543   | )    |       |            | (38,652 | ) |              |         | (8,641 | ) |   |   |   |   |        |          | (313,836 | )
|Cash Flows From Financing Activities:   |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |   |   |   |   |        |         
|                                        | Borrowings on debt, net                                  |                                       |   | 164,317  |            |      |       | 40,428     |         |   |              | 2,401   |        |   |   |  |   |   |        | 207,146  |         
|                                        | Purchases of treasury stock                              |                                       |   | (2,279   | )          |      |       |           |         |   |              |        |        |   |   |  |   |   |        | (2,279   | )       
|                                        | Proceeds from stock option exercises                     |                                       |   | 1,173    |            |      |       |           |         |   |              |        |        |   |   |  |   |   |        | 1,173    |         
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |  
|                                        |                                                          | Net cash used in financing activities |   |          | 163,211    |      |       |            | 40,428  |   |              |         | 2,401  |   |   |   |  |   |        |          | 206,040  |  
|Effect of Exchange Rate Changes on Cash |                                                          |                                       |  |          |            |      |      |            |         |   | 604          |         |        |   |  |   |   |   | 604    |         
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |  
|Net Increase in Cash                    |                                                          |                                       |  |          |            |      | 785   |            |         |   | 10,709       |         |        |   |  |   |   |   | 11,494 |         
|Cash at Beginning of Year               |                                                          |                                       |  |          |            |      | 1,905 |            |         |   | 8,479        |         |        |   |  |   |   |   | 10,384 |         
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |  
|Cash at End of Year                     |                                                          | $                                     |  |          |            | $    | 2,690 |            |         | $ | 19,188       |         |        | $ |  |   |   | $ | 21,878 |         
|                                        |                                                          |                                       |   |          |            |      |       |            |         |   |              |         |        |   |  

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








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

Evaluation of Disclosure Controls and Procedures




Managements Report on Internal Control over Financial
Reporting










88



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Actions Taken to Correct Material Weakness




Changes in Internal Controls




89



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


ON INTERNAL CONTROL OVER FINANCIAL REPORTING
















90



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





91



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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 33 of this report.
|
| | 2. Financial Statement Schedules:                                                 



| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Schedule II  Valuation and Qualifying Accounts
    for the three years ended December 31, 2004.                                                                                                                                                 
|
| | 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.



| |                                                   
| | --------------------------------------------------
| | 3. Our exhibits are listed below under Item 15(b).

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 |  | Credit Agreement, dated as of December 19, 2002, among
    Grant Prideco, Inc., certain of its subsidiaries, the Lenders
    party thereto, Deutsche Bank Trust Company Americas, as US,
    Deutsche Bank AG, Canada Branch, as Canadian Agent, Transamerica
    Business Capital Corporation, as Documentation Agent, JP Morgan
    Chase Bank, as Co-Syndication Agent, and Lynch Capital, as
    Co-Syndication Agent (incorporated by reference to
    Exhibit 4.6 to Grant Prideco, Inc.s Current Report on
    Form 8-K, File No. 1-15423, filed on January 3,
    2003).
| | 4 | .14 |  | Security Agreement, dated as of December 19, 2002, among
    Grant Prideco, Inc., certain of its subsidiaries and Deutsche
    Bank Trust Company Americas, as agent (incorporated by Reference
    to Exhibit 4.7 to Grant Prideco, Inc.s Current Report
    on Form 8-K, File No. 1-15423, filed on
    January 3, 2003).                                                                                                                                                                                                                                                     
| | 4 | .15 |  | Amended and Restated Credit 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 4.8 to Grant Prideco, Inc.s
    Current Report on Form 8-K, File No. 1-15423, filed on
    January 3, 2003).                                                                                                                                                                                                                                                             
| | 4 | .16 |  | Amendment No. 1 to Credit Agreement (incorporated by
    reference to Exhibit 4.17 of Grant Pridecos Annual Report
    on Form 10-K for the year ended December 31, 2003,
    File No. 1-15423).                                                                                                                                                                                                                                                                                                                                                                                
| | 4 | .17 |  | Amendment No. 2 to Credit Agreement (incorporated by
    reference to Exhibit 4.18 of Grant Pridecos Annual Report
    on Form 10-K for the year ended December 31, 2003,
    File No. 1-15423).                                                                                                                                                                                                                                                                                                                                                                                

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| |    |      |  |                                                                                                                                                                                                                                                                                                                                      
| | -- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 (incorporated by reference to
    Exhibit 4.21 of Grant Pridecos Annual Report on
    Form 10-K for the year ended December 31, 2003, File
    No. 1-15423).                                                                                                                                           
| | 4  | .21* |  | Form of Executive Restricted-Stock Agreement (with tandem tax
    rights).                                                                                                                                                                                                                                                           
| | 4  | .22* |  | Form of Executive Restricted-Stock Agreement.                                                                                                                                                                                                                                                                                        
| | 4  | .23* |  | Form of Executive Stock Option Agreement (with accelerated
    vesting upon termination).                                                                                                                                                                                                                                            
| | 4  | .24* |  | Form of Executive Stock Option Agreement (without accelerated
    vesting upon termination).                                                                                                                                                                                                                                         
| | 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 Voest-Alpine 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 Voest-Alpine 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 Voest-Alpine 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 Voest-Alpine Supply Agreement.                                                                                                                                                                                                                                                                                    
| | 10 | .14  |  | Amendment No. 2 to Voest-Alpine Supply Agreement.                                                                                                                                                                                                                                                                                    
| | 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).

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| |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 10-K 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 10-K for
    the year ended December 31, 2003, File No. 1-15423).                                                                                                                                                                                                                                                       
| | 23 | .1   |  | 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.

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SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS


For the Years Ended December 31, 2004, 2003 and 2002


|             |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |   |       |  |  |   |        | 
|------------ | ------------------------------------ | -------------- | - | --------- | ---------- |  | - | ---------- |  |  | ---------- | ----- | ------- | ------- | - | ----- |  |  | - | ------ | 
|             |                                      |                |   | Additions |            |  |   |            | 
|             |                                      |                |   |           |            |  |   |            | 
|             |                                      | Balance At     |   |           | Charged to |  |   | Charged to |  |  |            |       | Balance |        
|             |                                      | Beginning      |   |           | Cost and   |  |   | Other      |  |  |            |       | At End  |        
|Descriptions |                                      | of Year        |   |           | Expenses   |  |   | Accounts   |  |  | Deductions |       |         | of Year |  
|             |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |  
|             |                                      | (In thousands) |  
|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 | 
|             |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |  
|2002:        |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |   |       |  |  |   |       
|             | Allowance for Uncollectible Accounts |                | $ | 1,407     |            |  | $ | 1,106      |  |  | $          | 366   |         |         | $ | 64    |  |  | $ | 2,815  | 
|             |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |  
|             | Inventory Reserves                   |                | $ | 9,321     |            |  | $ | 5,844      |  |  | $          | (5    | )       |         | $ | 4,465 |  |  | $ | 10,695 | 
|             |                                      |                |   |           |            |  |   |            |  |  |            |       |         |         |  

96



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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 31, 2005
|                                                      
|/s/ Matthew D.
    FitzgeraldMatthew
    D. Fitzgerald |  | Senior Vice President and Chief Financial Officer
    (Principal Financial Officer)            |  | March 31, 2005
|                                                      
|/s/ Greg L. BoaneGreg
    L. Boane                     |  | Corporate Controller
    (Principal Accounting Officer)                                        |  | March 31, 2005
|                                                      
|/s/ David J. ButtersDavid
    J. Butters               |  | Director                                                                                       |  | March 31, 2005
|                                                      
|/s/ Eliot M. FriedEliot
    M. Fried                   |  | Director                                                                                       |  | March 31, 2005
|                                                      
|/s/ Dennis R. HendrixDennis
    R. Hendrix             |  | Director                                                                                       |  | March 31, 2005
|                                                      
|/s/ Harold E. LaymanHarold
    E. Layman               |  | Director                                                                                       |  | March 31, 2005
|                                                      
|/s/ Sheldon B. LubarSheldon
    B. Lubar               |  | Director                                                                                       |  | March 31, 2005

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|                                                     |  |                          |  |                |  | 
|---------------------------------------------------- |  | ------------------------ |  | -------------- |  | 
|Signature                                            |  | Capacity in Which Signed |  | Date          
|                                                     |  |                          |  |               
|                                                    
|/s/ Robert K. Moses,
    Jr.Robert
    K. Moses, Jr. |  | Director                 |  | March 31, 2005
|                                                    
|/s/ Joseph E. ReidJoseph
    E. Reid                 |  | Director                 |  | March 31, 2005
|                                                    
|/s/ David A. TriceDavid
    A. Trice                 |  | Director                 |  | March 31, 2005

98



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##### Table of Contents



INDEX TO EXHIBITS


|        |   |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | - | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   | Description
|        |   |            
|        | 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         |  | Credit Agreement, dated as of December 19, 2002, among
    Grant Prideco, Inc., certain of its subsidiaries, the Lenders
    party thereto, Deutsche Bank Trust Company Americas, as US,
    Deutsche Bank AG, Canada Branch, as Canadian Agent, Transamerica
    Business Capital Corporation, as Documentation Agent, JP Morgan
    Chase Bank, as Co-Syndication Agent, and Lynch Capital, as
    Co-Syndication Agent (incorporated by reference to
    Exhibit 4.6 to Grant Prideco, Inc.s Current Report on
    Form 8-K, File No. 1-15423, filed on January 3,
    2003).
|        | 4 | .14         |  | Security Agreement, dated as of December 19, 2002, among
    Grant Prideco, Inc., certain of its subsidiaries and Deutsche
    Bank Trust Company Americas, as agent (incorporated by Reference
    to Exhibit 4.7 to Grant Prideco, Inc.s Current Report
    on Form 8-K, File No. 1-15423, filed on
    January 3, 2003).                                                                                                                                                                                                                                                     



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##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                                                                                                     
|------- | -- | ---- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      | Description
|        |    |      |            
|        | 4  | .15  |             | Amended and Restated Credit 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 4.8 to Grant Prideco, Inc.s
    Current Report on Form 8-K, File No. 1-15423, filed on
    January 3, 2003).
|        | 4  | .16  |             | Amendment No. 1 to Credit Agreement (incorporated by
    reference to Exhibit 4.17 of Grant Pridecos Annual Report
    on Form 10-K for the year ended December 31, 2003,
    File No. 1-15423).                                                                                                                   
|        | 4  | .17  |             | Amendment No. 2 to Credit Agreement (incorporated by
    reference to Exhibit 4.18 of Grant Pridecos Annual Report
    on Form 10-K for the year ended December 31, 2003,
    File No. 1-15423).                                                                                                                   
|        | 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 (incorporated by reference to
    Exhibit 4.21 of Grant Pridecos Annual Report on
    Form 10-K for the year ended December 31, 2003, File
    No. 1-15423).                                                                                                                          
|        | 4  | .21* |             | Form of Executive Restricted-Stock Agreement (with tandem tax
    rights).                                                                                                                                                                                                                                          
|        | 4  | .22* |             | Form of Executive Restricted-Stock Agreement.                                                                                                                                                                                                                                                                       
|        | 4  | .23* |             | Form of Executive Stock Option Agreement (with accelerated
    vesting upon termination).                                                                                                                                                                                                                           
|        | 4  | .24* |             | Form of Executive Stock Option Agreement (without accelerated
    vesting upon termination).                                                                                                                                                                                                                        
|        | 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 Voest-Alpine 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 Voest-Alpine 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 Voest-Alpine 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).            



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##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | ---- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      | Description
|        |    |      |            
|        | 10 | .13  |             | Amendment No. 1 to Voest-Alpine Supply Agreement.                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .14  |             | Amendment No. 2 to Voest-Alpine Supply Agreement.                                                                                                                                                                                                                                                                                                                                                                                          
|        | 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 10-K 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 10-K for
    the year ended December 31, 2003, File No. 1-15423).                                                                                                                                                                                                                                                       
|        | 23 | .1   |             | 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.