EX-99.1 2 dex991.htm PRESENTATION DATED SEPTEMBER 5, 2006. Presentation dated September 5, 2006.
Exhibit 99.1

Forward-Looking Statements
The
information
furnished
in
this
presentation
contains
“forward-
looking
statements”
within
the
meaning
of
the
Federal
Securities
laws.
Forward-looking
statements
include
projections,
estimates,
expectations,
forecasts,
plans
and
objectives,
and
are
based
on
assumptions,
estimates
and
risk
analysis
made
by
management
of
Dril-Quip
in
light
of
its
experience
and
perception
of
historical
trends,
current
conditions,
expected
future
developments
and
other
factors.
No
assurance
can
be
given
that
actual
future
results
will
not
differ
materially
from
those
contained
in
the
forward-looking
statements
in
this
presentation.
Although
Dril-Quip
believes
that
all
such
statements
contained
in
this
presentation
are
based
on
reasonable
assumptions,
there
are
numerous
variables
of
an
unpredictable
nature
or
outside
of
Dril-Quip’s
control
that
could
affect
Dril-Quip’s
future
results
and
the
value
of
its
shares.
Each
investor
must
assess
and
bear
the
risk
of
uncertainty
inherent
in
the
forward-looking
statements
contained
in
this
presentation.
Please
refer
to
Dril-Quip’s
filings
with
the
SEC
for
additional
discussion
of
risks
and
uncertainties
that
may
affect
Dril-
Quip’s
actual
future
results.
Dril-Quip
undertakes
no
obligation
to
update
the
forward-looking
statements
contained
herein.

•
Pure Play on Rapidly Growing Offshore Market
•
Significant Operating Leverage to Up-Cycle
•
Vertically Integrated, Low Cost Manufacturer
•
Available Capacity to Capitalize on the Market
•
Consistent Track Record of New Product Innovation
•
Highly Motivated, Experienced Management Team
Strong Growth Profile

Consistent Track Record of Growth
Active
Offshore
Mobile
Rig Count
Dril-Quip
Revenue
($mm)
Source: Offshore Rig Locator
0
100
200
300
400
500
600
700
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
$0
$50
$100
$150
$200
$250
$300
$350
Active Rigs
DRQ Revenue

Strong Global Presence
Dril-Quip manufacturing,
sales and service
Dril-Quip sales
and/or service
Dril-Quip sales
representatives
Worldwide offices located near key demand centers
World Headquarters
Houston, Texas
Eastern Hemisphere Headquarters
Aberdeen, Scotland
Asia-Pacific
Headquarters
Singapore
Brazil

Supplier to Key Offshore Operators

Proven Track Record of Growth
Revenue
($mm)
Backlog
($mm)
93
120
95
64
127
248
0
50
100
150
200
250
2000
2001
2002
2003
2004
2005
164
203
216
220
222
341
0
50
100
150
200
250
300
350
2000
2001
2002
2003
2004
2005

Net Income Margin
(2)
(%)
Notes:
(1)  Last twelve months as of 9/30/05
(2)  Represents Net Income divided by Revenue
Proven Track Record of Profitability
6.7
6.0
4.0
4.1
5.6
9.6
0
2
4
6
8
10
2000
2001
2002
2003
2004
2005
11.0
12.2
8.7
9.0
12.5
32.6
0
5
10
15
20
25
30
35
2000
2001
2002
2003
2004
2005
Net Income
($mm)
Net Income Margin *
(%)
* Represents Net Income divided by Revenue

Quarterly Track Record of Growth
Revenue
($mm)
Backlog
($mm)
202
234
248
290
274
0
50
100
150
200
250
300
2Q 05
3Q 05
4Q 05
1Q 06
2Q 06
80.6
95.3
94.9
98.2
108.5
0
25
50
75
100
125
150
2Q 05
3Q 05
4Q 05
1Q 06
2Q 06

Net Income Margin
(2)
(%)
Notes:
(1)  Last twelve months as of 9/30/05
(2)  Represents Net Income divided by Revenue
Quarterly Track Record of Profitability
8.3
10.3
12.4
17.6
19.6
0
5
10
15
20
25
2Q 05
3Q 05
4Q 05
1Q 06
2Q 06
6.7
9.8
11.7
17.3
21.3
0
5
10
15
20
25
2Q 05
3Q 05
4Q 05
1Q 06
2Q 06
Net Income
($mm)
Net Income Margin *
(%)
* Represents Net Income divided by Revenue

Revenues
$ 150.6
$ 206.7
Cost and Expenses:
Cost of sales                               
104.7
121.1
S, G & A expenses
19.0
20.4
Engineering expenses
10.7
9.7
134.4
151.2
Operating Income
$ 16.2
$ 55.5
Revenues
$ 150.6
$ 206.7
Cost and Expenses:
Cost of sales                               
104.7
121.1
S, G & A expenses
19.0
20.4
Engineering expenses
10.7
9.7
134.4
151.2
Operating Income
$ 16.2
$ 55.5
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Income
(Millions of USD)
(Millions of USD)
Six months ended June 30,
2005
2005
2006
2006
58.6%
69.5%
10.8%
26.9%

June 30,
June 30,
Assets
2005
2006
Current assets
$ 220
$ 367
Property, plant and equipment, net
114
124
Total assets
$ 334
$ 491
Liabilities and Stockholders’
Equity
Current liabilities
$ 64
$ 98
Long-term debt
36
3
Deferred taxes
7
5
Total liabilities
107
106
Stockholders’
equity
227
385
$ 334
$ 491
June 30,
June 30,
Assets
2005
2006
Current assets
$ 220
$ 367
Property, plant and equipment, net
114
124
Total assets
$ 334
$ 491
Liabilities and Stockholders’
Equity
Current liabilities
$ 64
$ 98
Long-term debt
36
3
Deferred taxes
7
5
Total liabilities
107
106
Stockholders’
equity
227
385
$ 334
$ 491
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets
(Millions of USD)
(Millions of USD)

Manufacturing Locations
Singapore (3.4 ac. / 56,140 sq.ft.)
Brazil (10.0 ac. / 35,400 sq.ft.)
Aberdeen (14 ac. / 192,000 sq.ft.)
Houston Eldridge
(218 ac. / 886,500 sq.ft.)
Houston Hempstead
(15 ac. / 175,000
sq.ft.)

Houston Eldridge Manufacturing Facility

Finishing
Operations
Houston
Finishing
Operations
Finishing
Operations
Finishing
Operations
Vertically Integrated Manufacturing
Purchase Raw
Materials
Forge
Heat Treat
Rough
Machine
Aberdeen
Singapore
Brazil

Forge / Heat Treat

Houston Finish Machine Shop

Machine Rebuild Photos
Before
After
Warner
&
Swasey
SC-28’s
Warner
&
Swasey
SC-28’s
Used machines rebuilt in-house to as new
condition = lower capitalization costs

Wellhead Machine #2

Manufacturing Capacity
Yearly
Avg
Machines
Number
Ratio
Yearly
Avg
Machinists
per
Machine
•
2006
Second
Quarter
average
machinists
per
machine
was 1.28
•
2006 Second Quarter revenue was $108 mm
88
151
1.72
0
50
100
150
200
250
300
350
400
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
194
249
1.28
1997
1998
1999
2000
2001
2002
2003
2004
2005
6/30/06
Yearly
Avg
Machinists

Product and Services Summary
100% Internally Developed Products; 16 New Products over 24 Years
Reconditioning
Rental Tools
Field Installation
Existing
Products
New
Products
Subsea
Equipment
Offshore
Rig
Equipment
Platform Wellheads
Platform Production
Trees
Subsea Wellheads
Mudline Suspension
Systems
Specialty Connectors
Tieback Connectors
Subsea Production Trees
Production Risers
Template Systems
Liner Hangers
Subsea Control Systems
Subsea Manifolds
Wellhead Connectors
Diverters
Drilling Risers
Completion Risers
Services
Surface
Equipment

Product Utilization / Installations
Specialty Connectors
Mudline Suspension
Surface Wellheads
Surface Trees
Subsea Wellheads
Wellhead Connectors
Subsea Trees
Completion Riser
Drilling Riser
Production Riser
Diverters
Tie-Back Connectors
Template Systems
Liner Hangers
Control Systems
Subsea Manifolds
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Platform
Jack-Up
FPSO
TLP
Spar
Drillship
Semi

New Products
•
Liner Hangers
•
Subsea
Control Systems
•
Subsea
Manifolds
Production
Exploration
Used In

Liner Hangers

Subsea Control Systems

Subsea Manifolds

Increased Market Opportunities
We
believe
our
new
product
line
expansions
will
increase
the
size
of
the
market
we
serve
Existing
and New
Products
Existing
Products
Market
Size
($mm)
Approximate
DRQ
Market
Share
Approximate
Total
Market
Size
Source:
Management
estimates

Global Supply and Demand
Global
oil
consumption
expected
to
remain
strong
with
tight
spare
capacity
World
Oil
Consumption
and
Spare
Capacity
Source:
Energy Information Administration
(%) Spare
Capacity
(mmbbl/d)
119.0
111.0
103.0
95.0
83.6
76.9
69.4
66.1
60.1
56.2
63.1
3.2
2.6
2.4
1.5
1.3
3.2
3.6
3.3
10.7
6.2
8.0
50
65
80
95
110
125
140
1975
1980
1985
1990
1995
2000
2005E
2010E
2015E
2020E
2025E
0.0
4.0
8.0
12.0
16.0
20.0
24.0
Global
Oil
Consumption
Spare
Capacity
Spare
Capacity/Consumption

Floating Production Units Forecast
0
10
20
30
40
50
60
2001
2002
2003
2004
2005
2006E
2007E
2008E
2009E
2010E
Worldwide Floating Production Units (New Installations)
Source:  Quest Offshore Resources, Inc. (August 2005)
Normalized Case
94 Units
191 Units

Subsea Tree Forecast
200
250
300
350
400
450
500
550
600
2001
2002
2003
2004
2005
2006E
2007E
2008E
2009E
2010E
Worldwide Subsea Trees (Well Completions)
Source:  Quest Offshore Resources, Inc. (August 2005)
Normalized Case
1,550 Wells
2,663 Wells

Growth Strategy
•
Increase market share –
existing and
new products
•
Continued introduction of new
products
•
Pursue large integrated projects
•
Expand into new geographic areas

Capitalizing on the Up-Market
Strong Growth Profile
•
Pure Play on Rapidly Growing Offshore Market
•
Significant Operating Leverage to Up-Cycle
•
Vertically Integrated, Low Cost Manufacturer
•
Available Capacity to Capitalize on the Market
•
Consistent Track Record of New Product Innovation
•
Highly Motivated, Experienced Management Team