Dril-Quip(US:DRQ)2020-07-31 23:42Summary of Dril-Quip, Inc. Conference Call Company Overview - Company: Dril-Quip, Inc. (NYSE: DRQ) - Participants: - Blake DeBerry - President & CEO - Raj Kumar - Chief Financial Officer - Analyst: Sean Meakim - Oil Services Analyst at JP Morgan Key Points Industry Context - The conference call was held following the release of Dril-Quip's 2Q results, amidst a challenging environment for the offshore oil services industry due to COVID-19 impacts [2][12]. Financial Performance - 2Q Results: - Top line slightly better than consensus, EBITDA in line with expectations despite a challenging quarter [12][25]. - Booked approximately $40 million in orders, below expectations of $50 to $60 million per quarter [21][22]. - The company is targeting a total of $200 million in bookings for the full year [22][23]. COVID-19 Impact - Implemented a business continuity plan in mid-March, allowing 700 employees to work from home while essential personnel continued operations [13][14]. - Production output was affected due to social distancing measures and COVID-related quarantines, leading to lost hours in production [15][26]. Cost Management and Transformation - Achieved $11.5 million in cost savings in Q2, with a target of an additional $9 million for the second half of the year [16][17]. - Focus on capital allocation and working capital management moving forward [11][30]. Product Development and Innovation - Emphasis on developing differentiated products to provide cost savings for customers, particularly in subsea wellhead and connectors [5][6][8]. - New products like the VXTe subsea tree have generated significant interest, with ongoing discussions with peers for potential monetization [8][54]. Market Outlook - Anticipates a challenging market environment for the next few quarters, with recovery expected around 2022 or 2023 [42]. - Differentiation in behavior observed among independent oil companies (IOCs), national oil companies (NOCs), and independents, with independents cutting CapEx more dramatically [44][45]. Strategic Partnerships - Collaboration with Proserv to enhance subsea controls business, reducing the need for R&D spending and leveraging each other's customer bases [35][36][38]. Capital Allocation Strategy - Plans to maintain a cash balance of approximately $350 million, with a focus on maintenance-level CapEx and strategic investments in R&D [57][58]. - Open to M&A opportunities but will require creative financing solutions due to current cash levels [58]. Conclusion - Dril-Quip remains optimistic about its position in the market, emphasizing the resilience of its workforce and the potential for recovery post-pandemic [60][61]. Additional Important Points - The company has successfully adapted to the pandemic, maintaining customer engagement through virtual presentations and online marketing efforts [60]. - The focus on lean operating philosophy has allowed Dril-Quip to monetize excess real estate assets rather than exiting leases [20]. This summary encapsulates the key discussions and insights from the conference call, highlighting Dril-Quip's strategic direction, financial performance, and market outlook amidst ongoing challenges in the oil services industry.