<PAGE>
 
                                                                      EXHIBIT 19


Varco International, Inc.

1997 Second Quarter Report
<PAGE>
 
To Our Shareholders


As market conditions continued to improve, second quarter Revenues, Net Income 
and order bookings each were the highest in the Company's history. This market 
improvement reflects an extension and acceleration of several trends.
     The key driving force is increasing exploration and production spending by 
oil and gas companies. Salomon Brothers' mid-year update of their Survey and 
Analysis of 1997 Worldwide Oil and Gas Exploration and Production Expenditures 
indicates that these companies are now planning to increase spending 17.9 
per cent this year, above both the 15.2 per cent growth rate for 1996 and the 
initial projection of 14.7 per cent for 1997. This spending translates into 
increased demand for drilling rigs; which, in turn, yields higher day rates and 
rig utilization, resulting in improved cash flow for our key customers--the 
drilling contractors.
     Of particular significance to Varco is the growth in the offshore drilling 
market, since the dollar value of the drilling equipment typical of an offshore 
rig is significantly greater than that of a land rig. Utilization of the 
offshore rig fleet is currently reported to be approximately 95 per cent. 
However, excluding rigs undergoing upgrade or otherwise not available, the 
mobile offshore rig fleet is essentially fully utilized.
     Our customers' response to these conditions is impacting Varco's business 
in three important Ways:
   . first, the increased drilling activity is resulting in greater demand for
     spare and replacement parts and equipment; 
   . second, existing rigs are being upgraded to meet today's drilling
     requirements;
   . third, rigs which had previously been removed from the fleet are being 
     reconverted to drilling use, and new rigs are being constructed.
As a result, we are experiencing improving financial results.   
     Second quarter Revenues of $129.6 million were up 43 per cent from $90.4 
million in the comparable quarter of 1996; and Net Income of $10.8 million, $.33
per share, was 90 per cent above the $5.7 million, $.18 per share, earned in the
year-ago period. Order bookings for the most recent three months totaled $172.7
million, more than double the $85.2 million recorded in the comparable period of
last year.
     The second quarter Revenue level was 28 per cent above that of the
preceding quarter as we began to ramp up our manufacturing capacity and output.
During the first half of the year we invested approximately $8 million in
increasing manufacturing capacity and expect to continue building capacity
over the next few quarters. The strength of our recent order rate dictates that
we make these investments to satisfy the requirements of our customers.
     We believe that our industry is moving from a recovery phase to a state of
healthy growth and expansion. If so, the size and capability of the offshore rig
fleet is not sufficient to meet the current and future needs of the world's oil
and gas companies. As that fleet is expanded, upgraded and replaced, the kinds
of equipment designed and supplied by Varco are a critical component. We have
made a substantial investment of time, energy, and human and financial resources
in positioning ourselves to flourish in such an environment. We are committed to
doing so, and to providing commensurate rewards for our shareholders.
     We appreciate your continued support.


/s/ Walter B. Reinhold                       /s/ George I. Boyadjieff
   
Walter B. Reinhold                           George I. Boyadjieff
Chairman                                     President and
                                             Chief Executive Officer     
August 12, 1997
<PAGE>
 
CONDENSED CONSOLIDATED                              
BALANCE SHEETS                                     
(UNAUDITED)                                        

<TABLE> 
<CAPTION> 
                                           June 30,          December 31, 
(In thousands)                                 1997                  1996 
--------------------------------------------------------------------------------
<S>                                        <C>               <C> 
Current Assets
--------------
Cash and cash equivalents                    $   6,836       $    5,794      
Receivables (net)                              122,956           95,160
Inventories                                    108,912           91,873
Other                                           14,411           13,835 
-------------------------------------------------------------------------------
   Total Current Assets                        253,115          206,662 

Property, plant and equipment at cost 

less accumulated depreciation                   55,545           48,711 
                                                                      
Rental inventory less accumulated                                     
 depreciation                                   15,238           13,601 
                                                                      
Cost in excess of net assets acquired           35,198           35,879
                                                                      
Other assets                                    11,977           11,168 
--------------------------------------------------------------------------------
   Total Assets                              $ 371,073       $  316,021
================================================================================

Current Liabilities
-------------------
Accounts payable                             $  47,941       $   37,815
Other liabilities                               57,064           38,601
Current portion of long-term debt               10,000           10,000
--------------------------------------------------------------------------------
  Total Current Liabilities                    115,005           86,416
Long-term debt                                  28,550           22,715
Other non-current liabilities                   12,149           11,382
--------------------------------------------------------------------------------
  Total Liabilities                            155,704          120,513

Shareholders' Equity
--------------------
Common Stock and additional

paid-in capital                                145,415          143,533 
                                                                     
Retained earnings                               69,954           51,975 
--------------------------------------------------------------------------------
  Total Shareholders' Equity                   215,369          195,508 
--------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity   $ 371,073       $  316,021
-------------------------------------------------------------------------------
</TABLE> 
<PAGE>
 
CONDENSED CONSOLIDATED   
STATEMENTS OF CASH FLOWS
                        
(UNAUDITED)              


<TABLE> 
<CAPTION> 
(In thousands)                                       Six Months Ended June 30,
                                                        1997              1996
--------------------------------------------------------------------------------
<S>                                                       <C>       <C> 
Operating Activities
--------------------
Net income                                                $ 18,154  $   8,707
                                                                    
Depreciation and amoritization                               7,893      6,274

Increase (decrease)in operating
  cash flows:
   Receivables                                             (27,796)   (18,088)
   Inventories                                             (17,039)   (13,355)
   Additions to rental equipment                            (4,741)    (5,957)
   Accounts payable                                         10,126      8,807
   Customer deposits                                        17,632      5,501
   Taxes payable                                              (763)     2,052
   Other                                                       426      3,186
-------------------------------------------------------------------------------
    Net cash from (used in)
      operating activities                                   3,892     (2,873)
-------------------------------------------------------------------------------

Investing Activities
--------------------
   Equipment purchases                                     (11,536)    (4,883)
   Proceeds from equipment sales                             1,130        215
--------------------------------------------------------------------------------
   Net cash (used in) investing activities                 (10,406)    (4,668)
--------------------------------------------------------------------------------

Financing Activities
--------------------
Decrease in long-term debt                                 (10,000)

Increase in long-term debt                                  16,000

Proceeds from issuance of Common Stock                       1,313     15,838

Deferred issue costs                                           243
-------------------------------------------------------------------------------
   Net cash from financing activities                        7,556     15,838
-------------------------------------------------------------------------------
Net change in cash and cash equivalents                      1,042      8,297
-------------------------------------------------------------------------------
Cash and cash equivalents at 
 beginning of year                                           5,794      6,762
-------------------------------------------------------------------------------
Cash and cash equivalent at 
 end of quarter                                           $  6,836  $  15,059
===============================================================================
</TABLE> 
<PAGE>
 
Condensed Consolidated Statements of Income
(unaudited)

<TABLE> 
<CAPTION> 
                                             Three Months Ended June 30,        Six Months Ended June 30,                   
(in thousands, except per share data)             1997             1996           1997              1996               
---------------------------------------------------------------------------------------------------------------
<S>                                          <C>               <C>             <C>                <C> 

Revenues
--------
Net sales                                         $ 118,543     $ 83,005        $ 209,775         $ 146,837
Rental income                                        11,009        6,869           20,761            13,293
Other income                                             82          476              169             1,189
---------------------------------------------------------------------------------------------------------------
                                                    129,634       90,350          230,705           161,319  
---------------------------------------------------------------------------------------------------------------

Costs and Expenses
------------------
Cost of sales                                        81,605       57,904          145,104           101,507
Cost of rental income                                 3,302        1,994            6,175             3,901
Selling, general and administrative expenses         22,048       17,135           40,182            33,252
Research and development costs                        5,012        3,790            9,036             7,362
Interest expense                                      1,074        1,036            2,109             2,041
---------------------------------------------------------------------------------------------------------------
                                                    113,041       81,859          202,606           148,063 
---------------------------------------------------------------------------------------------------------------
Income Before income taxes                           16,593        8,491           28,099            13,256     
Provision for income taxes                            5,823        2,812            9,945             4,549 
---------------------------------------------------------------------------------------------------------------
Net Income                                        $  10,770     $  5,679        $  18,154         $   8,707 
===============================================================================================================
Net income per share of Common Stock              $     .33     $    .18        $     .56         $     .28   
===============================================================================================================
Shares used to calculate earnings per share          32,578       31,448           32,522            31,185
===============================================================================================================
</TABLE> 

Note: These statements are condensed and do not contain disclosures required by
generally accepted accounting principles. Reference should be made to the
financial statements contained in the Annual Report to Shareholders for the year
ended December 31, 1996.
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS

GENERAL INDUSTRY CONDITIONS
------------------------------------
     
     Worldwide drilling activity, as measured by the average number of active 
drilling rigs, increased approximately 18% in the second quarter of 1997 to an 
average of approximately 2,004 from an average of approximately 1,704 during the
same period in 1996.  North American drilling activity increased approximately 
31% to an average of approximately 1,192 rigs and international drilling 
activity increased to an average of approximately 812 rigs as compared to 794 in
the second quarter 1996.

     Offshore drilling activity continued its year-over-year strength, as
reflected by an increase in rig utilization (mobile offshore rigs under contract
as a percent of available rigs). For the second quarter of 1997, mobile offshore
rig utilization averaged 95% as compared to 89% in the second quarter of 1996.  
The higher utilization was accompanied by increasing day rates and longer 
contract periods, particularly among the "premium" offshore rigs.

     The increase in drilling activity, particularly the increase in offshore 
rig utilization, has led to higher day rates and improved profits and cash flow 
for the Company's major customers, the offshore drilling contractors.

RESULTS OF OPERATIONS
------------------------------------

     Set forth below are the net orders and revenues for the Company's five 
operating divisions:

<TABLE> 
<CAPTION> 
                             Three Months Ended June 10,       Six Months Ended June 30,                  
                                  1997        1996                  1997       1996                       
                          ---------------------------------  -----------------------------                 
<S>                       <C>                  <C>           <C>                 <C> 
Net Orders
----------
Varco Drilling Systems         $ 52,533        $ 28,813           $ 92,284       $ 53,156                  
Varco BJ Oil Tools               23,472          13,521             46,975         27,589                    
Martin-Decker/TOTCO                                                                                 
 Instrumentation                 25,431          15,112             46,209         28,739           
Shaffer                          65,515          25,656            119,693         73,607           
Thule Rigtech                     5,723           2,082              7,860          4,313            
------------------------------------------------------------------------------------------
Total                          $172,674        $ 85,184           $313,021       $187,404      
==========================================================================================

Revenues
--------
Varco Drilling Systems         $ 38,569        $ 31,536           $ 65,097       $ 57,231
Varco BJ Oil Tools               15,584          12,234             27,931         24,012
Martin-Decker/TOTCO   
 Instrumentation                 22,434          14,430             38,999         29,069
Shaffer                          51,268          29,396             94,385         44,767
Thule Rigtech                     1,697           2,278              4,124          5,051
------------------------------------------------------------------------------------------
Total                          $129,552        $ 89,874           $230,536       $160,130
==========================================================================================
</TABLE> 
<PAGE>
 
     Order bookings increased $87.5 million, or 103%, in the second quarter of 
1997 and $125.6 million, or 67%, in the first six months of 1997 as compared to 
the same periods of 1996.  These increases are primarily due to orders 
associated with the upgrading and construction of offshore drilling rigs, 
particularly floating rigs that are capable of drilling in water depths 
exceeding 3,000 feet.  Each such rig creates significant potential for the high 
dollar value products provided by the Shaffer and Drilling Systems Divisions as 
well as the products of the Company's other Divisions.  In addition, the 
incoming order rate was favorably impacted by the overall 18% increase in 
worldwide drilling activity discussed above.

     The Company's increased revenue levels in the 1997 periods as compared to 
1996 are generally due to improved industry conditions as discussed above.  
Particularly significant has been the impact on Shaffer of the upgrading, 
conversion and new construction of floating offshore rigs.  Shaffer's product 
line includes a significant amount of equipment of the types essential to these 
activities.  Shaffer Division revenues accounted for 55% of second quarter 
increase from the comparable year-ago period, and 70% of the increase for the 
six-month period.

     At June 30, 1997 the Company's backlog of unshipped orders was 
approximately $269.4 million as compared to $186.9 million at December 31, 1996.
Orders for new rigs and major upgrades generally include the Company's longer 
lead-time products, nine to twelve months.  This has contributed to the 
Company's backlog increasing significantly during the last six months to its 
highest level in the Company's history.  The Company expects that a majority of 
the backlog will ship by December 31, 1997 resulting in revenues for the 
remaining quarters of 1997 being at a higher rate than the second quarter.  In 
accordance with industry practice, orders and commitments generally are 
cancelable by customers at any time.

     Gross margins (net sales and rental income less costs of sales and rental 
income) as a percentage of net sales and rental income were slightly improved 
year-over-year.  For the first half of 1997 gross margins were 34.4%, compared 
to 34.2% for the same period in 1996 and they were 34.5% and 33.4% in the second
quarters of 1997 and 1996, respectively.  Gross margins were favorably impacted 
by improved margins at the Drilling Systems and Oil Tools Divisions due to cost 
improvements.  During the first half of 1996 Drilling Systems experienced low 
margins on TDS-9 units which were improved in 1997.  Oil Tools improved margins 
are mostly due to lower manufacturing cost.  Taken alone, each of the foregoing 
would have improved margins by approximately 1%.  These improved margins were 
offset by the impact of Shaffer's higher proportion of revenues.  Shaffer's 
products carry lower gross margins (due principally to price competition) than 
the combined gross margins of the other Divisions.

     The Company believes that new product development is a significant factor 
for the future of the Company.  During the first six months of 1997 the Company 
spent $9.0 million or 3.9% of revenues on new product development.  This 
compares to $7.4 million or 4.6% of revenues during the same period in 1996.
<PAGE>
 
     The increases in selling, general and administrative expenses in 1997 as 
compared to 1996 are primarily a result of activity related to the increased 
revenues. As a percent of revenues, selling, general and administrative expenses
were down year-to-year. For the first half of 1997 this percent was 17.4% and it
was 17.0% for the second quarter of 1997. As a percent of revenues, selling,
general and administrative expenses were 20.6% and 19.0% for the first half and
second quarter of 1996, respectively.

     Overall Company employment at June 30, 1997 was 2,373 (including 309 
temporary employees) which compares to 1,803 (including 235 temporary employees)
a year ago. This increase is primarily due to an increase in manufacturing 
employees. 

     The effective tax rate for the first half of 1997 was 35.4% as compared to
34.3% for the first half of 1996. The higher tax rate is due to a higher 
effective foreign tax rate in the first half of 1997 as compared to 1996.


LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

     The cash and cash equivalents of $6.8 million are not significantly changed
from the December 31, 1996 balance of $5.8 million.

     In July 1992 the Company sold $50.0 million aggregate principal amount of 
its 8.95% Senior Notes Due June 30, 1999 (the "Senior Notes") to a group of ten 
institutional investors pursuant to a Note Agreement dated as of July 1, 1992
(the "Note Agreement"). The $20.0 million principal balance of the Senior Notes
is payable in two equal installments on June 30, 1998 and June 30, 1999.

     On June 27, 1997 the Company entered into a seven-year unsecured revolving 
credit agreement with three banks (the "Credit Agreement"). The Credit Agreement
provides a credit facility of $65.0 million, inclusive of a $20.0 letter of 
credit subfacility. The maximum available under the Credit Agreement is reduced 
in equal quarterly amounts over the last four years of the Credit Agreement. 
Proceeds from the initial advances were used to payoff a previous credit 
agreement with Citicorp USA, Inc. and Citibank, N.A and to make the June 30, 
1997 principal and interest payment on the Senior Notes. At June 30, 1997 there 
were $19.0 million in advances outstanding and $9.7 million in letters of credit
outstanding under this facility.

     Both the Note Agreement and the Credit Agreement restrict the payment of 
dividends (other than dividends payable solely in shares of Common Stock) on, 
and repurchases of, Common Stock. Under the terms of the Credit Agreement, which
is generally the more restrictive of these, the amount available for the payment
of dividends on, and repurchases of, Common Stock is limited to $5 million plus
25% of the Company's consolidated net income arising after June 30, 1997,
computed on a cumulative basis.

     At June 30, 1997 the Company's working capital was $138.1 million as 
compared to $120.2 million at December 31, 1996 and its current ratio was 2.2 to
1.0 as compared to 2.4 to 1.0 at December 31, 1996. The preceding changes are
primarily due to increases in inventory and receivables during the first half of
1997. Long-term debt as a percent of total capitalization was 12% at June 30,
1997 as compared to 10% at December 31, 1996. The increase in this percentage is
primarily due to capital expenditures made in the first half of 1997.

     The Company's capital expenditures during the first half of 1997 were $11.5
million as compared to $4.9 million for the first half of 1996. The Company's 
current plans for capital expenditures in 1997 is an additional $15.0 million. 
The Company believes its revolving credit facility and its cash and cash 
equivalents will be sufficient to meet its capital expenditures and operating 
cash needs for the next twelve months.

PROFILE
--------------------------------------------------------------------------------

Varco International, Inc. is a leading manufacturer of products used in the oil 
and gas well drilling industry worldwide. The Company also leads in the 
development of new technology and equipment to enhance the safety and 
productivity of the drilling process. Operating through five divisions, the 
Company's products include: integrated systems for rotating and handling the 
various sizes and types of pipe used on a drilling rig; conventional pipe 
handling tools, hoisting equipment and rotary equipment; drilling rig 
instrumentation; pressure control and motion compensation equipment; and solids 
control equipment and systems.

INVESTOR CONTACT
--------------------------------------------------------------------------------

Richard A. Kertson
Vice President -- Finance
Varco International, Inc.
743 North Eckhoff Street
Orange, California 92868
Tel (714) 978-1900
Fax (714) 937-5029

E-mail: investor-relations@ora.varco.com
Web site: http://www.varco.com

VARCO