Dril-Quip Inc. (DRQ) has awarded a five-year global frame agreement to BP International Limited, a subsidiary of BP plc (BP).
The pact between the two parties relates to the supply of subsea wellhead equipment and related services by BP. The contract states the terms and conditions for worldwide call-off orders placed by BP for Dril-Quip's Big Bore II-H series subsea wellhead systems. Orders already placed by BP this year will also be administered by the terms stipulated in this contract.
Under the contract, subsequent orders will be treated as part of Dril-Quip's backlog. BP holds an option on the basis of which the contract can be extended for five years.
Dril-Quip manufactures highly engineered offshore drilling and production equipment for deepwater severe-service applications and harsh environmental conditions. The company designs and manufactures subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors, and associated pipe, drilling and production riser systems, wellhead connectors and diverters, which are used in offshore rig equipment.
The company’s products are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. Dril-Quip also provides installation and reconditioning services and rents tools for use in the installation and retrieval of its products.
A sequential increase in Dril-Quip’s backlog and its debt-free balance sheet position it favorably. We also expect large orders in 2013 from the Gulf of Mexico and Brazil, with rising demand and activity levels in these regions. This gives it the financial flexibility to take advantage of growth opportunities while returning capital to shareholders.
Dril-Quip carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – Stone Energy Corp. (SGY) and Linn Energy LLC (LINE) – are good buying options for the short term.
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