Inventories

6 Months Ended

Jun. 30, 2011

Note 3. Inventories

Inventories are stated at the lower of cost or market. In the United States, we manufacture certain finished products and parts inventories for drill bits, completion products, bulk materials, and other tools that are recorded using the last-in, first-out method, which totaled $129 million as of June 30, 2011 and $108 million as of December 31, 2010. If the average cost method had been used, total inventories would have been $40 million higher than reported as of June 30, 2011 and $34 million higher than reported as of December 31, 2010. The cost of the remaining inventory was recorded on the average cost method. Inventories consisted of the following:

	June 30,		December 31,
Millions of dollars	2011		2010
Finished products and parts	$	1,559	$	1,369
Raw materials and supplies		621		496
Work in process		55		75
Total	$	2,235	$	1,940

Finished products and parts are reported net of obsolescence reserves of $104 million as of June 30, 2011 and $88 million as of December 31, 2010.