Dril-Quip (DRQ) Tops Q3 EPS by 45c
Dril-Quip (NYSE: DRQ) reported Q3 EPS of $0.41, $0.45 better than the analyst estimate of ($0.04). Revenue for the quarter came in at $91.3 million versus the consensus estimate of $87.82 million.
Blake DeBerry, Dril-Quip’s Chief Executive Officer, commented, “Our third quarter results reflect the progress we are making as an organization in managing the continued challenges to our operations and the overall commodity price environment brought about by the COVID-19 pandemic and the associated oil and gas demand declines. I am proud of our employees in the manner in which they have remained productive and efficient in our manufacturing plants, aftermarket services and remote work locations. Our third quarter performance was a result of their efforts.”
“We were able to improve our adjusted EBITDA by nearly 70% sequentially on mostly flat revenue as we executed on our previously announced cost reductions in response to the current market environment. We generated free cash flow due to improved collection efforts and a federal income tax refund related to COVID-19 relief legislation. We also saw our quarterly product bookings improve to $50.2 million during the third quarter. These bookings included several subsea tree awards in Europe and Asia and set us on a path toward achieving our $200 million bookings target for the full year 2020.”
“While we have been able to manage the many difficulties and disruptions posed by the global pandemic, we still face obstacles that are out of our control, including in particular, the demand destruction for oil and natural gas stemming from the global economic slowdown associated with the pandemic. Our customers are in the process of evaluating their portfolio of opportunities and determining how to allocate budgets for projects in the coming year. Additionally, they are seeking to delay some current projects to a future period of more stable commodity prices, resulting in higher inventory levels. Consequently, this has had an estimated quarterly impact on cash flow generation of $10 to $15 million and also has affected our ability to grow our bookings.”
“While we have an experienced management team with a track record of navigating through these types of challenges, our expectation is that they will persist into 2021 as the global economy works to regain its footing and commodity prices begin to stabilize. Despite the potential for ongoing headwinds, we remain in a strong financial position that lets us capitalize on opportunities as they arise. This flexibility allows us to evaluate potential acquisitions within our strategic planning framework, which includes profitably expanding market share through consolidation while maintaining a strong balance sheet. We are also actively exploring alternative approaches towards monetizing our innovative technology. We believe the potential to manufacture and deliver subsea tree and wellhead technology to other offshore equipment providers represents a unique opportunity to expand our customer base, participate in more operator projects, help reduce costs and further consolidate capacity in our industry. The pursuit of these strategic initiatives gives me optimism about Dril-Quip’s long-term future and its ability to generate value for all stakeholders.”
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