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Strategies & Market Trends : YEEHAW CANDIDATES -- Ignore unavailable to you. Want to Upgrade?

To: Galirayo who wrote (12771)	10/19/2005 3:45:38 PM
From: ACAN	Read Replies (1) \| Respond to of 23958

Ray; If I had money to put on it, I would. Allan

To: Galirayo who wrote (12771)	10/19/2005 3:48:33 PM
From: ACAN	Respond to of 23958

Ray; BY MARILYN MUCH INVESTOR'S BUSINESS DAILY With high oil prices fueling an acceleration in the search for new supplies, offshore drilling activity is rising. So is demand for equipment to do the work. Dril-Quip DRQ is one company cashing in. It makes offshore drilling and production equipment. Nearly all of its products are geared for use in water more than 5,000 feet deep. During this year’s second quarter, 372 offshore rigs were operating worldwide, according to oil and gas industry equipment service provider Baker Hughes. That was up from 348 the prior year. “Deep water development projects hold the potential for copious amounts of untapped reserves,” said analyst Thiru Ramakrishnan of Simmons & Co. Dril-Quip’s deep-water products include subsea wellheads. These are pressurized metal housings in which casing hangers are landed and sealed underwater. They’re used when drilling from floating drilling rigs. The Houston-based company also makes mudline hanger systems used in jack-up drilling operations to support the weight of various casing strings at the ocean floor while drilling. Another product, its specialty connector, is used to join lengths of conductor or large diameter casing. Specialty connectors offer a more rapid connection than other methods of connecting lengths of pipe, the company says. Dril-Quip holds at least 30% of the global market in its core products, Ramakrishnan estimates. Now the firm looks to grow sales beyond its core expertise. New products include subsea control systems and subsea manifolds, which complement Dril-Quip’s subsea production tree line. The company holds only a 10% worldwide market share in these products, so there’s plenty of room to grow. “The growth story is in these new product offerings,” Ramakrishnan said. With this new gear in its mix, Dril-Quip can provide customers with fully integrated solutions for major subsea field development projects. The fully integrated projects are valued at between $100 million and $500 million. To date, Dril-Quip hasn’t won any major integrated subsea development projects. “But in the future, given Dril-Quip’s track record, we would expect it to eventually win a milestone project,” Ramakrishnan said. Dril-Quip gets most of its revenue from foreign sales. Revenue hit $80.6 million during the second quarter, up 52% from the prior year. Earnings more than doubled to 37 cents a share. Analysts surveyed by First Call see full-year earnings rising 82% to $1.31 a share, then climbing 47% to $1.92 in 2006. Executives weren’t available for comment. Money Trees A couple of factors are fueling Dril-Quip’s growth, Ramakrishnan says. One is the forecast for subsea production trees. “(That’s) a measure of how many deep-water development wells are coming online,” Ramakrishnan said. Worldwide installation of subsea production trees is expected to increase to 425 in 2006 from an estimated 375 in 2005, forecast industry tracker Quest Offshore Resources. Dril-Quip faces tough competition from other makers and suppliers of exploration and production equipment, including Cooper Cameron CAM and FMC Technologies FTI . Several of its rivals are diversified multinational firms with much larger operating staffs and greater resources. One of Dril-Quip’s big competitive edges is that it has in-house forging and heat treating facilities, Ramakrishnan says. This gives Dril-Quip greater control over its costs than rivals, he says. The firm also can do a better job of making its products available than rivals, which depend on outside sources for their forging and heat treatment requirements. Widening Reach As of June 30 Dril-Quip’s backlog stood at $202 million, up from $63 million the prior year. Ramakrishnan estimates its current backlog at more than $225 million. Newer products should help drive future growth. The global market size for subsea control systems and manifolds is a combined $1 billion. “Dril-Quip has only a negligible market share (in these) products,” Ramakrishnan said. “They have a strong base of (customers for) their established products. They can go to these same customers with their new products.” He also expects growth from Dril-Quip’s line of liner hangers, which are used in wells to seal casing set inside previously installed casing strings. Ramakrishnan pegs the worldwide market for liner hangers at about $500 million.