Drilquip Inc. has a market cap of $2.13 billion; its shares were traded at around $53.39 with a P/E ratio of 18.6 and P/S ratio of 4. Drilquip Inc. had an annual average earning growth of 29.2% over the past 10 years.DRQ is in the portfolios of John Keeley of Keeley Fund Management, RS Investment Management, Manning & Napier Advisors, Inc, Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Highlight of Business Operations:According to the July 2010 release of the Short-Term Energy Outlook published by the EIA, West Texas Intermediate crude oil prices are projected to average $78.69 per barrel for the full year 2010 and $82.50 per barrel in 2011. At June 30, 2010 the EIA reported West Texas Intermediate crude oil at a price of $75.63 per barrel.
In its July 2010 report, the EIA projected Henry Hub natural gas prices to average $4.57 per Mcf for the full year 2010 and $5.03 per Mcf in 2011. The 2010 average price is $0.73 per Mcf higher than 2009 average, with most of the increase expected to occur in the third quarter of 2010, due to projections of increased hurricane activity in the Gulf of Mexico for the 2010 hurricane season. At June 30, 2010, OilSpiel reported Henry Hub natural gas prices at a price of $4.49 per Mcf.
Revenues. Revenues increased by $8.8 million, or approximately 6.6%, to $142.0 million in the three months ended June 30, 2010 from $133.2 million in the three months ended June 30, 2009. Product revenues accounted for the entire increase, as a result of increased revenues of $16.2 million in offshore rig equipment, partially offset by decreases of $4.5 million in subsea equipment and $2.9 in surface equipment. Product revenues increased in the Western Hemisphere by approximately $20.3 million, partially offset by decreases in product revenues in the Eastern Hemisphere and Asia-Pacific of $11.3 million and $200,000, respectively. Service revenues increased by approximately $1.3 million in the Western Hemisphere and $700,000 in Asia-Pacific, partially offset by a decrease in the Eastern Hemisphere of $2.0 million. The majority of the changes in service revenues related to a decrease in the rental of running tools offset by increases in technical advisory services and reconditioning of customer-owned Dril-Quip products.
Cost of Sales. Cost of sales increased by $2.1 million, or approximately 2.7%, to $79.5 million for the three months ended June 30, 2010 from $77.4 million for the same period in 2009. As a percentage of revenues, cost of sales were approximately 56.0% and 58.1% for the three-month period ended June 30, 2010 and 2009, respectively. The decrease in cost of sales as a percentage of revenues resulted primarily from changes in product mix.
Selling, General and Administrative Expenses. For the three months ended June 30, 2010, selling, general and administrative expenses increased by approximately $3.2 million, or 24.8%, to $16.1 million from $12.9 million for the same period in 2009. The increase in selling, general and administrative expenses was primarily due to the effect of foreign currency transactions and increased stock option expenses. The Company experienced approximately $1.2 million in foreign currency transaction losses in the second quarter of 2010 as compared to $1.5 million in foreign currency transaction gains in the second quarter of 2009. Stock option expense for the second quarter of 2010 totaled $1.2 million compared to $912,000 in the second quarter of 2009. Selling, general and administrative expenses as a percentage of revenues increased from 9.7% in 2009 to 11.3% in 2010.
Engineering and Product Development Expenses. For the three months ended June 30, 2010, engineering and product development expenses increased by approximately $500,000, or 7.6%, to $7.1 million from $6.6 million in the same period of 2009. Engineering and product development expenses as a percentage of revenues increased from 4.9% in 2009 to 5.0% in 2010.
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