DrilQuip Inc. Reports Operating Results (10-Q)
Drilquip Inc. has a market cap of $2.75 billion; its shares were traded at around $69.84 with a P/E ratio of 24 and P/S ratio of 5.1. 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, Louis Moore Bacon of Moore Capital Management, LP, RS Investment Management, Kenneth Fisher of Fisher Asset Management, LLC, Bruce Kovner of Caxton Associates, Manning & Napier Advisors, Inc, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations: For the quarter ended September 30, 2010, West Texas Intermediate crude oil prices ranged between $71.24 per barrel and $82.52 per barrel with an average quarterly price of $76.06. During the quarter ended September 30, 2009, West Texas Intermediate crude oil prices ranged between $59.52 per barrel and $73.82 per barrel with an average quarterly price of $68.14. During the nine months ended September 30, 2010, West Texas Intermediate crude oil process ranged between $64.78 per barrel and $86.54 per barrel with an average price of $77.54 per barrel, as compared to a range of $33.98 per barrel to $73.82 per barrel with an average price of $57.59 per barrel for the same period in 2009.
According to the October 2010 release of the Short-Term Energy Outlook published by the EIA, West Texas Intermediate crude oil prices are projected to average $77.97 per barrel in 2010 and $83.00 per barrel in 2011. At September 30, 2010, the EIA reported West Texas Intermediate crude oil at a price of $79.95 per barrel.
In its October 2010 report, the EIA revised its projection for Henry Hub natural gas prices to average $4.61 per Mcf in 2010 and $4.72 per Mcf in 2011 from its July 2010 projections of $4.84 per Mcf in 2010 and $5.33 per Mcf in 2011. At September 30, 2010, industry publication OilSpiel reported Henry Hub natural gas prices at a price of $3.99 per Mcf.
Even during periods of high prices for oil and natural gas, companies exploring for oil and gas may cancel or curtail programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons. In addition, a significant and prolonged decline in hydrocarbon prices or other catastrophic accidents relating to drilling would also likely have a material adverse effect on the Companys results of operations. The Company believes that its backlog should help mitigate the impact of negative market conditions; however, a prolonged decline in commodity prices, restrictions on and delays in the resumption of drilling in the U.S. Gulf of Mexico, an extended continuation of the downturn in the global economy or future restrictions or declines in offshore oil and gas exploration and production could have a negative impact on the Company and/or its backlog. The Companys backlog at September 30, 2010 was approximately $625 million compared to approximately $538 million at June 30, 2010 and $563 million at December 31, 2009. The Company can give no assurance that its backlog will remain at current levels. All of the Companys projects currently included in its backlog are subject to change and/or termination at the option of the customer. In the case of a change or termination, the customer is required to pay the Company for work performed and other costs necessarily incurred as a result of the change or termination. In the past, terminations and cancellations have been immaterial to the Companys overall operating results.
At this time, the Company is unable to quantify the extent of the impact that the U.S. Gulf of Mexico drilling moratorium and permitting delays will have on its future revenues. However, revenues associated with the U.S. Gulf of Mexico totaled $177.3 million, or approximately 42% of the Companys worldwide revenues during the nine months ended September 30, 2010. The Company believes that the effects of the moratorium and permitting delays will have little or no impact on revenues related to offshore rig equipment but could have an impact on revenues related to subsea and surface equipment during the final quarter of 2010. In addition, service revenues (which were $22.4 million, or approximately 5% of the Companys total revenues during the nine months ended September 30, 2010) could be substantially negatively impacted by the U.S. Gulf of Mexico drilling moratorium and permitting delays during the last quarter of this year.
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