Evercore ISI Re=Starts Dril-Quip (DRQ) at Buy
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Evercore ISI reinitiates coverage on Dril-Quip (NYSE: DRQ) with a Buy rating and a price target of $59.00 following its acquisition of TIW Corporation.
Analyst James West commented, "TIW Corporation was a privately-owned manufacturer of consumable downhole products for the oil and gas industry. While DRQ already offered a line of conventional liner hanger systems, the acquisition adds expandable liner hanger systems to DRQ's technology portfolio. Liner hanger systems are used downhole during the well construction phase to block the formation's flow channel. Expandable systems are highly desired for HPHT and deepwater applications as they reduce material costs while providing greater well flexibility. For reference, Halliburton grew its VersaFlex™ expandable liner hanger systems business by +40% annually from 2010-2012, but agreed to divest it in October 2015 in pursuit of the failed Baker Hughes acquisition. Baker Oil Tools invented the liner hanger system and is the undisputed industry leader, while Weatherford is also a key supplier to the industry having installed its first expandable liner hanger system in 2002. The acquisition of TIW vaults DRQ to fourth place behind these large integrated services providers and provides a platform for DRQ to continue growing its portfolio of downhole tools."
He added, "In addition, the acquisition of TIW expands DRQ's addressable market opportunities both onshore and internationally."
Shares of Dril-Quip closed at $53.55 yesterday.
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