<PAGE>
 
                                                                     EXHIBIT 4.2

                           VARCO INTERNATIONAL, INC.


                               FIRST AMENDMENT 
                              TO CREDIT AGREEMENT



          This FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated
as of July 15, 1997 and entered into by and among VARCO INTERNATIONAL, INC., a
California corporation ("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "LENDER" and
collectively as "LENDERS"), and UNION BANK OF CALIFORNIA, N.A. ("UBOC"), as
agent for Lenders (in such capacity, "AGENT"), and is made with reference to
that certain Credit Agreement dated as of June 27, 1997 (the "CREDIT
AGREEMENT"), by and among Company, Lenders and Agent.  Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.

                                   RECITALS

          WHEREAS, the parties hereto wish to amend the Credit Agreement to
permit the Issuing Lender to issue Letters of Credit for the benefit of the
Company's Subsidiaries;

          NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

          SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT

          AMENDMENT TO SECTION 3.  LETTERS OF CREDIT
          ------------------------------------------

          Section 3 of the Credit Agreement is hereby amended by adding after
the phrase "that Issuing Lender issue Letters of Credit for the account of
Company" appearing in subsection 3.1A thereof the phrase "for the benefit of
Company or any of its Subsidiaries."

          SECTION 2.  MISCELLANEOUS

          A.   REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.

          (i)  Each reference in the Credit Agreement to "this Agreement",
     "hereunder", "hereof", "herein" or words of like import referring to the
     Credit 

                                       1
<PAGE>
 
     Agreement, and each reference in the other Loan Documents to the "Credit
     Agreement", "thereunder", "thereof" or words of like import referring to
     the Credit Agreement shall mean and be a reference to this Amended
     Agreement.

          (ii)  Except as specifically amended by this Amendment, the Credit
     Agreement and the other Loan Documents shall remain in full force and
     effect and are hereby ratified and confirmed.

          (iii) The execution, delivery and performance of this Amendment
     shall not, except as expressly provided herein, constitute a waiver of any
     provision of, or operate as a waiver of any right, power or remedy of Agent
     or any Lender under, the Credit Agreement or any of the other Loan
     Documents.

          B.    FEES AND EXPENSES.  Company acknowledges that all reasonable
costs, fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.

          C.    HEADINGS.  Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

          D.    APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (INCLUDING
WITHOUT LIMITATION SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA),
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

          E.    COUNTERPARTS; EFFECTIVENESS.  This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.  This Amendment shall become
effective and shall be retroactive to June 27, 1997 upon the execution of a
counterpart hereof by Requisite Lenders and each of the other parties hereto and
receipt by Company and Agent of written or telephonic notification of such
execution and authorization of delivery thereof.


                  [Remainder of page intentionally left blank]

                                       2
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

 
          COMPANY:

                         VARCO INTERNATIONAL, INC.


                         By:  _____________________________
                         Title:
 


                         Notice Address:

                              743 North Eckhoff Street
                              Orange, CA 92868
                              Attention: Chief Financial Officer



          LENDERS:

                         UNION BANK OF CALIFORNIA, N.A.
                         as a Lender, as Issuing Lender and as Agent

                         By:  __________________________________
                         Title:


                         Notice Address:

                              445 South Figueroa Street
                              16th Floor
                              Los Angeles, CA 90071
                              Attention: Andrew G. Ewing, Jr.

                                      S-1
<PAGE>
 
                         THE CHASE MANHATTAN  BANK, as a Lender



                         By:  ________________________________
                         Title:


                         Notice Address:

                              707 Travis Street, 5th Floor
                              Houston, TX  77002
                              Attention: Darl Petty
 
                                      S-2
<PAGE>
 
                         MORGAN GUARANTY TRUST COMPANY OF 
                         NEW YORK, as a Lender


                         By:  _______________________________
                         Title:


                         Notice Address:

                              60 Wall Street
                              New York, NY 10260
                              Attention: Robert Barrett
 
                                      S-3