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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): July 29, 2021

 

DRIL-QUIP, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware		001-13439		74-2162088
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

6401 N. Eldridge Parkway Houston, Texas		77041
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 939-7711

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $.01 par value per share		DRQ		New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

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Item 2.02    Results of Operations and Financial Condition.

On July 29, 2021, Dril-Quip, Inc. (“Dril-Quip”) reported second quarter 2021 earnings. For additional information regarding Dril-Quip’s second quarter 2021 earnings, please refer to Dril-Quip’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.

 

Item 7.01    Regulation FD Disclosure.

On July 29, 2021, Dril-Quip posted the Second Quarter 2021 Supplemental Earnings Information presentation (the “Presentation”) to its website at www.dril-quip.com. The Presentation is attached hereto as Exhibit 99.2.

The information in the Press Release and the Presentation is being furnished, not filed, pursuant to Items 2.02 and 7.01. Accordingly, the information in the Press Release and the Presentation will not be incorporated by reference into any registration statement filed by Dril-Quip under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

 

Item 9.01    Financial Statements and Exhibits.

(d)    Exhibits.

The exhibits listed below are being furnished pursuant to Items 2.02 and 7.01 of this Form 8-K:

 

Exhibit No.		Description
99.1		Press Release issued July 29, 2021.
99.2		Second Quarter 2021 Supplemental Earnings Information Presentation.
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

DRIL-QUIP, INC.
By:		/s/ Raj Kumar
		Raj Kumar
		Vice President and Chief Financial Officer

Date: July 29, 2021

 

Exhibit 99.1

 

DRIL-QUIP, INC. ANNOUNCES SECOND QUARTER 2021 RESULTS

 

HOUSTON, July 29, 2021 — Dril-Quip, Inc. (NYSE: DRQ), (the “Company” or “Dril-Quip”) today reported operational and financial results for the second quarter of 2021.  

Key highlights for the second quarter of 2021 included:

 

Blake DeBerry, Dril-Quip’s Chief Executive Officer, commented, “In the second quarter, we delivered product bookings of $50 million, which put us 11 percent ahead of our bookings year-to-date compared to the prior year. Excluding the large project booking in the first quarter of 2021, this also represents an increase of more than 30 percent sequentially to our base bookings. We also generated positive free cash flow of $8 million in the second quarter resulting in approximately $19 million of free cash flow through the first half of 2021, an improvement of roughly $45 million compared to the first half of 2020. These year-over-year improvements can be attributed to our employees’ hard work and ability to service our customers and provide the solutions they need as well as manage our working capital more efficiently.”

 

“The second quarter also marked significant progress toward our strategic growth pillars. First, we entered into a collaboration and supply agreement with an integrated industry peer to serve as a supplier of subsea wellheads, tubular goods, liner hangers and related tools and services. This agreement increases market access for Dril-Quip by participating in integrated projects and allows customer access to our best-in-class products within an integrated subsea offering. Second, we had several key milestones in our downhole tools business that we believe will result in sustainable improvement in revenue and profitability. These include an exclusive contract with a national oil company in Brazil to provide XPak^™ De liner hanger systems over the next three years, an award for a major offshore gas project in Saudi Arabia with a specialized customer driven solution, and increased participation in several peer-to-peer projects that are opening doors to new markets and customers. These wins are a direct result of our renewed and refocused strategy in the downhole business.”

 

“Finally, we built on previous success in the expansion of our ‘e-Series’ technologies product suite with installations of our DXe^™ wellhead connector in the North Sea. This high fatigue wellhead connector is uniquely suited for drillships operating in the shallow, harsh water environments

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common to the area. Furthermore, with a favorable judgment in our lawsuit with FMC Technologies, Inc., we saw increased interest and continued engagement with customers and peers for our VXTe^™ subsea tree technology. Many of these customers have been particularly interested in the VXTe^™ subsea trees ability to not only save them time and money on their wells, but also reduce their carbon footprint by an estimated 1,000 metric tons per well. With a VXTe^™ tree expected to be delivered later this year, we are optimistic that, depending on the customer’s schedule, the first opportunity for installation of this disruptive technology will take place no later than the first quarter of 2022.”  

 

“In addition to these strategic wins, we also experienced some challenges during the quarter that impacted our financial results. In connection with the lessee’s termination of our forge facility lease at the end of April, we had a negative impact on our revenue and gross margins during the second quarter. The monthly cost of maintaining the forge is negligible and we are exploring potential future arrangements. The second quarter also saw the global market for raw materials and freight prices increase. We have yet to experience a significant impact to our margins due to these increases and we continue to closely monitor the changes in our materials and logistics costs. Accordingly, we have notified our customers that a surcharge will be added to new orders to ensure that cost increases in longer lead time items will not negatively impact margins.”

 

“There are still concerns about the pace of global economic growth, and the corresponding recovery of oil and gas demand, resulting from ongoing challenges related to the COVID-19 pandemic, we are optimistic about the second half of 2021 leading into 2022. We are seeing encouraging signs from our customers as many begin to formulate their 2022 capital budgets in the third quarter and expect additional resources to be allocated toward increased offshore activity. These are positive indications for an increase in orders. We also anticipate that our wellhead supply collaboration could begin to yield benefits in late 2021 going into 2022 which would further enhance our product orders and backlog. As we look toward improvements in the macro environment, Dril-Quip will continue to prioritize delivering our customers technology that offers improved safety, reliability, and cost savings all while reducing their carbon footprint. As always, we will continue controlling costs through productivity improvements and managing our working capital to maximize our return on invested capital.”

 

In conjunction with today’s release, the Company posted a new investor presentation entitled “Second Quarter 2021 Supplemental Earnings Information” to its website, www.dril-quip.com, on the “Events & Presentations” page under the Investors tab. Investors should note that Dril-Quip announces material financial information in Securities and Exchange Commission (“SEC”) filings, press releases and public conference calls. Dril-Quip may use the Investors section of its website (www.dril-quip.com) to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Information on Dril-Quip’s website is not part of this release.

Operational and Financial Results

Revenue, Cost of Sales and Gross Operating Margin

Consolidated revenue for the second quarter of 2021 was $80.8 million, down $0.4 million from the first quarter of 2021 and $9.6 million lower compared to the second quarter of 2020. The decrease in revenue sequentially can be attributed to lower leasing revenue from the cancellation of the forge

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facility leasing agreement with AFGlobal Corporation (“AFGlobal”). The decrease year-over-year was driven by decreased new order volumes in mid-to-late 2020 and lower services revenue from a decline in offshore oil and gas activity. The decline in orders and activity can primarily be attributed to reduced demand for oil and gas and delays in customer drilling schedules as a result of a more gradual economic recovery from the global pandemic.

Cost of sales for the second quarter of 2021 was $61.5 million, an increase of $4.8 million sequentially and a decrease of $5.4 million compared to the prior year. Gross operating margin for the second quarter of 2021 was 23.8%, a decrease from 30.1% in the first quarter of 2021 and a decrease from 26.0% in the second quarter of 2020. The decrease in gross margin sequentially was driven primarily by unfavorable product mix due to higher contribution from lower margin fabrication joints, higher manufacturing overhead related to the transition of downhole tool manufacturing to a third party and higher leasing expense associated with the expensing of unbilled revenue related to the termination of our forge facility lease agreement with AFGlobal. The decline in gross margin year-over-year was primarily related to the aforementioned lease termination impact and unfavorable product mix. Adjusting for the impact of the forge lease termination, gross margins would have seen an improvement of 0.7% year-over-year.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the second quarter of 2021 were $29.6 million, mostly flat compared to the first quarter of 2021 and $6.3 million higher than the second quarter of 2020. The increase in SG&A year-over-year was primarily due to higher legal expenses related to the lawsuit with FMC Technologies, Inc., higher compensation expense accrual and fewer government subsidies related to the global pandemic, partially offset by lower SG&A expense from cost actions taken in 2020.

Net Loss, Adjusted EBITDA and Free Cash Flow

For the second quarter of 2021, the Company reported a net loss of $19.1 million, or $0.54 per share, compared to a net loss of $34.4 million, or $0.97 per share, for the first quarter of 2021 and a net loss of $14.1 million, or $0.40 per diluted share, for the second quarter of 2020. The sequential decrease in net loss was primarily driven by lower restructuring and other charges, partially offset by higher cost of sales. Net loss year-over-year was mostly flat due to a decrease in income tax provision in the second quarter of 2021.

Adjusted EBITDA totaled $2.6 million for the second quarter of 2021 compared to $8.0 million for the first quarter of 2021 and $6.0 million for the second quarter of 2020. The sequential decrease in adjusted EBITDA is attributed the impact of the forge facility lease cancellation and higher contribution from lower margin fabrication joint revenue. The decrease in adjusted EBITDA year-over-year can be attributed to the same factors as well as an increase in compensation accrual, partially offset by transformational cost actions taken in 2020.

Net cash provided by operations was $11.3 million and free cash flow was $8.2 million, or 10.2% of revenue, for the second quarter of 2021. The decrease in net cash provided by operations of $1.7 million compared to the first quarter of 2021 was primarily due to an increase in finished goods inventory, partially offset by successful negotiation of extended supplier payment terms. Capital

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expenditures in the second quarter of 2021 were approximately $3.5 million, the majority of which was related to machinery and equipment at our Houston manufacturing facility as well as rental tools for our downhole tools business.

Productivity Improvements and Liquidity

In the first quarter of 2021, the Company announced its plans to target productivity gains of approximately $10 million in annualized savings, of which approximately $5 million is expected to be realized in 2021. The majority of these planned gains relate to the further refinement of our manufacturing and supply chain operations as part of the Company’s LEAN journey. The Company executed an estimated $7.5 million of these annualized savings through the six months ended June 30, 2021.

Dril-Quip’s cash and cash equivalents as of June 30, 2021 was $370.5 million, which, together with amounts available under the asset-based lending (ABL) facility, resulted in approximately $395.6 million of available liquidity. The Company plans to use its strong liquidity position and debt-free balance sheet to ensure its ability invest in innovative technology, pursue strategic acquisitions and maintain the financial flexibility to respond quickly to its customer growing needs in anticipation of a subsea equipment market recovery and expansion in the coming years.

About Dril-Quip

Dril-Quip is a leading manufacturer of highly engineered drilling and production equipment for use onshore and offshore, which is particularly well suited for use in deep-water, harsh environments and severe service applications.

Forward-Looking Statements

Statements contained herein relating to future operations and financial results that are forward-looking statements, including those related to the effects of COVID-19 pandemic, market conditions, anticipated project bookings, expected timing of completing the strategic restructuring, anticipated timing of delivery of new orders, anticipated revenues, costs, cost synergies and savings, possible acquisitions, new product offerings and related revenues, share repurchases and expectations regarding operating results, are based upon certain assumptions and analyses made by the management of the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors. These statements are subject to risks beyond the Company’s control, including, but not limited to, the impact of the ongoing COVID-19 pandemic, the effects of actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors and suppliers, in response to the ongoing COVID-19 pandemic, the impact of actions taken by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations to adjust their production levels, the general volatility of oil and natural gas prices and cyclicality of the oil and gas industry, declines in investor and lender sentiment with respect to, and new capital investments in, the oil and gas industry, project terminations, suspensions or scope adjustments to contracts, uncertainties regarding the effects of new governmental regulations, the Company’s international operations, operating risks, the impact of our customers and the global energy sector shifting some of their asset allocation from fossil-fuel production to renewable energy resources, and other factors detailed in the Company’s public filings with the SEC.  Investors are

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cautioned that any such statements are not guarantees of future performance and actual outcomes may vary materially from those indicated.

Non-GAAP Financial Information

Adjusted Net Income (Loss), Adjusted Diluted EPS, Free Cash Flow and Adjusted EBITDA are non-GAAP measures.

Adjusted Net Income (Loss) and Adjusted Diluted EPS are defined as net income (loss) and earnings per share, respectively, excluding the impact of foreign currency gains or losses as well as other significant non-cash items and certain charges and credits.

Free Cash Flow is defined as net cash provided by operating activities less net cash used in the purchase of property, plant and equipment.

Adjusted EBITDA is defined as net income excluding income taxes, interest income and expense, depreciation and amortization expense, non-cash gains or losses from foreign currency exchange rate changes as well as other significant non-cash items and other adjustments for certain charges and credits.

The Company believes that these non-GAAP measures enable it to evaluate and compare more effectively the results of our operations period over period and identify operating trends by removing the effect of its capital structure from its operating structure.  In addition, the Company believes that these measures are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures.  Adjusted Net Income (Loss), Adjusted EBITDA and Free Cash Flow do not represent funds available for our discretionary use and are not intended to represent or to be used as a substitute for net income or net cash provided by operating activities, as measured under U.S. generally accepted accounting principles (“GAAP”).

See “Unaudited Non-GAAP Financial Measures” below for additional information concerning non-GAAP financial information, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements and should be read together with, and is not an alternative or substitute for, the Company’s financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures.

 

Investor Relations Contact

 

Blake Holcomb, Director of Investor Relations and Corporate Planning

(713) 351-4098

Blake_Holcomb@dril-quip.com

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Dril-Quip, Inc.

Comparative Condensed Consolidated Income Statement

(Unaudited)

 

 

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Dril-Quip, Inc.

Comparative Condensed Consolidated Balance Sheets

(Unaudited)

 

 

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Dril-Quip, Inc.

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) and Adjusted Diluted

Earnings (Loss) per Share and Adjusted Diluted Earnings (Loss) per Share

 

 

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Dril-Quip, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

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Dril-Quip, Inc.

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 

 

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Second QUARTER 2021 Supplemental Earnings Information dril-quip.com | NYSE: DRQ Exhibit 99.2 DRIL-QUIP

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, but are not limited to, the effects of the COVID-19 pandemic, and the effects of actions taken by third parties including, but not limited to, governmental authorities, customers, contractors and suppliers, in response to the ongoing COVID-19 pandemic, the impact of actions taken by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations to adjust their production levels, the general volatility of oil and natural gas prices and cyclicality of the oil and gas industry, declines in investor and lender sentiment with respect to, and new capital investments in, the oil and gas industry, project terminations, suspensions or scope adjustments to contracts, uncertainties regarding the effects of new governmental regulations, the Company’s international operations, operating risks, the impact of our customers and the global energy sector shifting some of their asset allocation from fossil-fuel production to renewable energy resources, goals, projections, estimates, expectations, market outlook, forecasts, plans and objectives, including revenue and new product revenue, capital expenditures and other projections, project bookings, bidding and service activity, acquisition opportunities, forecasted supply and demand, forecasted drilling activity and subsea investment, liquidity, cost savings, and share repurchases and are based on assumptions, estimates and risk analysis made by management of Dril-Quip, Inc. (“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 Securities and Exchange Commission (“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. Use of Non-GAAP Financial Measures Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Free Cash Flow are non-GAAP measures. Adjusted Net Income and Adjusted Diluted EPS are defined as net income (loss) and earnings per share, respectively, excluding the impact of foreign currency gains or losses as well as other significant non-cash items and certain charges and credits. Adjusted EBITDA is defined as net income excluding income taxes, interest income and expense, depreciation and amortization expense, non-cash gains or losses from foreign currency exchange rate changes as well as other significant non-cash items and items that can be considered non-recurring. Free Cash Flow is defined as net cash provided by operating activities less net cash used in the purchase of property, plant and equipment. We believe that these non-GAAP measures enable us to evaluate and compare more effectively the results of our operations period over period and identify operating trends by removing the effect of our capital structure from our operating structure and certain other items including those that affect the comparability of operating results. In addition, we believe that these measures are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures.  These measures do not represent funds available for our discretionary use and are not intended to represent or to be used as a substitute for net income or net cash provided by operating activities, as measured under U.S. generally accepted accounting principles (“GAAP”).  Non-GAAP financial information supplements should be read together with, and is not an alternative or substitute for, our financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure can be found in the appendix. Use of Website Investors should note that Dril-Quip announces material financial information in SEC filings, press releases and public conference calls. Dril-Quip may use the Investors section of its website (www.dril-quip.com) to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Information on Dril-Quip’s website is not part of this presentation. Cautionary Statement 1 DRIL-QUIP

2 Dril-Quip Investment Highlights Dril-Quip Leading Manufacturer of Highly Engineered Drilling & Production Equipment Technically Innovative, Environmentally Responsible Products & First-class Service Strong Financial Position Historically Superior Margins to Peers Results Driven Management Team DRIL-QUIP

Progress Toward United Nations Sustainable Development Goals 3 Community involvement and investment in STEM education through ASME INSPIRE STEM Readiness program 23% of recent new hires globally have been women and 16% of our executives and senior management positions are women Global footprint provides a platform to increase access to affordable, reliable energy & transition to cleaner sources Helping customers reduce their carbon footprint and minimize environmental impact through investing in technology and R&D

Products & Services 4 Product & Service Revenue Segments* 59% 13% Asia Pacific Western Hemisphere Eastern Hemisphere 65% 64% 16% 15% 25% 22% 20% 47% 4% Subsea Aftermarket* Surface Downhole Tools Offshore Rig 60% 3% 50% 29% 31% 31% 7% 15% 12% 1% 4% 3% 3% Q4 ’20 Q1 ’21 Q2 ’21 Q4 ’20 Q1 ’21 Q2 ’21 Geographic Revenue Segments *Aftermarket revenue includes Services and Leasing revenue from Subsea and Downhole Tools businesses

Global Market Environment 5 Sources: Rystad Energy & DRQ Internal Estimates Subsea Equipment Spend & Tree Awards Expected to Rise Through 2024 Subsea equipment spend and tree awards likely bottomed in 2020-21 Market for subsea tree awards expected to improve through 2022 and normalize Europe and South American markets expected to lead subsea equipment spend and tree awards through 2024 Pace of recovery supports flexible operating model and peer collaboration strategy Estimated Subsea Equipment Spend and Tree Awards 2023E $7.6 2022E 2019 2024E 2020 $7.0 2021E Subsea Tree Awards (Q2 ’21) Subsea Equipment Spend (Q2 ’21) $0 $1 $2 $3 $4 $5 $6 $7 $8 0 50 100 150 200 250 300 350 400 450 295 $6.8 134 $6.2 204 $6.1 326 $6.4 350 356 DRIL-QUIP

Commercial Update 6 Entered into collaboration and supply agreement with a major industry peer to supply wellheads, tubular goods and liner hangers Re-engaged with customers and prospective collaborators on VXTe tree technology following favorable trial outcome Backlog of $191 million as of 6/30/2021 after recording $50 million of product bookings in Q2 2021 2H 2021 bookings expected to outpace 1H 2021 boosted by strong Q4 orders Introduced 10% surcharge with customers in response to recent increases in materials and freight prices Q2 2021 YE 2019 YE 2018 YE 2020 Historical Backlog Trends ($M) Product Backlog Q2 2021 Q3 2020 Q4 2020 Q1 2021 $57 +36% Historical Booking Trends ($M) Product Bookings HXT order

Q2 2021 Highlights 7 Generated revenue of $80.8 million for the second quarter of 2021; Reported second quarter net loss of $19.1 million, or $0.54 per share, an improvement of $15.3 million, or $0.43 per share, from the first quarter of 2021; Recorded adjusted EBITDA of $2.6 million, or 3.2% of revenue, including a one-time $2.3 million negative impact related to termination of the forge facility lease; Second quarter net cash provided by operating activities of $11.3 million and free cash flow of $8.2 million, or 10.2% of revenue; Booked $50.4 million of new product orders during the second quarter of 2021; and Executed strategic collaboration agreement with a major oilfield service peer for the supply of subsea wellheads, tubular goods, liner hangers and related tools and services. Adjusted EBITDA and free cash flow are non-GAAP measures. See appendix for reconciliation to GAAP measures.

Financial Performance 8 (USD$ millions) Q2 ’20 Q2 ’21 Q1 ’21 Revenue +$0 -$9 Q2 Negatively Impacted by Forge Lease Termination and Product Mix Quarterly Comparisons Note: Sum of components may not foot due to rounding. Adjusted EBITDA is a non-GAAP measure. See appendix for reconciliation to GAAP measure. Revenue mostly flat sequentially driven slightly lower by a decrease in leasing revenue from AFGlobal forge lease cancellation Revenue declined year-over-year due to lower 2020 product orders from pandemic driven demand declines, partially offset by downhole tools growth Adjusted EBITDA was approximately $3 million; lower sequentially due to lease termination and unfavorable product revenue mix Year-over-year decremental margins of 35%; and 5% excluding AFGlobal lease cancellation revenue and adjusted EBITDA impacts Adj. EBITDA Q2 ’20 $3 Q1 ’21 Q2 ’21 $6 -$5 -$3

Improve Free Cash Flow Yield 9 Free Cash Flow of ~$19 million through Q2 2021 Improve Free Cash Flow Yield Inventory Reduction Plan • Identified approximately $3 million in component substitutions instead of new purchases Order-to-Cash Improvement • Trade accounts receivable down $25M in 2021 from improved collections Drive Productivity Initiatives through LEAN • Completed outsourcing of downhole tools product line manufacturing Free Cash Flow of ~$19 million through Q2 2021 DRIL-QUIP 9

2021 Strategic Growth Pillars 10 2021 Strategic Growth Pillars Peer-to-Peer Collaboration • Entered into collaboration and supply agreement with peer for subsea wellheads, tubular goods and liner hangers Downhole Tool Market Expansion • Several new tender submissions for XPak liner hanger in Latin America and other deepwater markets Expansion of Power of e-Series Technology • DXe wellhead connector gaining traction in North Sea harsh environment shallow water market DRIL-QUIP 10

Executing Downhole Tool Growth Strategy 11 Executing Downhole Tool Growth Strategy Global Deepwater • Actively bidding and participating in peer collaboration projects in the Caribbean and Norwegian markets Latin America • Signed a contract to deliver 18” x 22” liner hanger systems over the next three years in Brazil Middle East • First XPak expandable liner hanger run in United Arab Emirates • Awarded major offshore gas project in Saudi Arabia DRIL-QUIP 11

2021 Productivity Improvement Targets 12 Productivity initiatives driving approximately $5 million of realized savings in 2021 and $10 million annualized  Completed transition of downhole tools manufacturing outsourcing in early Q3 2021 Executed approximately $8 million in annualized savings from productivity gains through the second quarter of 2021 $10 2021E Executed and Targeted Cumulative Annualized 2021 Productivity Gains ($M) Productivity and Efficiency Gains Are Part of Day-to-Day Operating Mentality

On Track to Meet 2021 Targets 13 On Track to Meet 2021 Targets 2021 Revenue Slightly Down from 2020 2H 2021 Bookings Expected to exceed 1H 2021 on strong Q4 2021 Estimated Capex $12M to $15M 2021 Productivity Initiatives driving ~$5 million of savings, $10 million annualized Expecting to Exceed 2021 Free Cash Flow Target Margin of ~5% Execute on 2021 Strategic Growth Pillars DRIL-QUIP 13

dril-quip.com | NYSE: DRQ APPENDIX APPENDIX dril-quip.com | NYSE: DRQ

Capital Expenditures 15 FY 2019 $1 FY 2020 $1 Q1 2021 Q2 2021 $12 $12 $3 $4 Capital expenditures in 2021 are expected to be $12 to $15 million driven by manufacturing equipment upgrades and downhole tools growth Note: Sum of components may not foot due to rounding. Rental Tools Facilities Mach. & Equip. Other $ Millions

Market Performance 16 Source: FactSet, Market data as of 7/28/2021 Balance Sheet Strength and Backlog Supporting Share Price Relative to OSX Market Performance UPDATE Balance Sheet Strength and Backlog Supporting Share Price Relative to OSX Source: FactSet, Market data as of 7/28/2021 MARKET INFORMATION Ticker NYSE: DRQ Share Price (at close: 4/27/21) $30.05 52-Week Range $22.25 - $40.62 Performance: DRQ OSX SPX Since Q4 Filing (2/26/21) -12% -9% 10% Year-to-Date 1% 15% 11% [BAR CHART] DRIL-QUIP 16

Income Statement 17 Income Statement Dril-Quip, Inc. Comparative Condensed Consolidated Income Statement (Unaudited) June 30, 2021 March 31, 2021 June 30, 2020 Revenues: Products 55,860 $ 55,583 $ 63,133 $ Services 17,536 17,667 20,750 Leasing 7,401 7,989 6,563 Total revenues 80,797 81,239 90,446 Costs and expenses: Cost of sales 61,539 56,787 66,937 Selling, general and administrative 29,593 29,558 23,331 Engineering and product development 3,722 4,037 5,364 Restructuring and other charges 1,000 25,020 1,587 (Gain) loss on sale of assets 82 (3,955) (85) Foreign currency transaction (gains) and losses (475) 1,374 817 Total costs and expenses 95,461 112,821 97,951 Operating loss (14,664) (31,582) (7,505) Interest income 63 49 653 Interest expense (59) (439) (209) Income tax provision 4,407 2,386 7,081 Net loss (19,067) $ (34,358) $ (14,142) $ Loss per share Basic (0.54) $ (0.97) $ (0.40) $ Diluted (0.54) $ (0.97) $ (0.40) $ Depreciation and amortization 7,343 $ 7,416 $ 7,940 $ Capital expenditures 3,524 $ 2,513 $ 4,131 $ Weighted Average Shares Outstanding Basic 35,387 35,385 35,023 Diluted 35,387 35,385 35,023 (In thousands, except per share data) Three months ended DRIL-QUIP 17

Balance Sheet 18 Balance Sheet Dril-Quip, Inc. Comparative Condensed Consolidated Balance Sheets (Unaudited) June 30, 2021December 31, 2020Assets: Cash and cash equivalents 370,481 $ 345,955 $ Other current assets 478,805 517,238 PP&E, net 229,247 234,823 Other assets 46,176 53,156 Total assets 1,124,709 $ 1,151,172 $ Liabilities and Equity: Current liabilities 106,535 $ 85,512 $ Deferred Income taxes 6,694 6,779 Other long-term liabilities 16,156 17,353 Total liabilities 129,385 109,644 Total stockholders equity 995,324 1,041,528 Total liabilities and equity 1,124,709 $ 1,151,172 $ (In thousands) DRIL-QUIP 18

Non-GAAP Financial Measures 19 Non-GAAP Financial Measures Dril-Quip, Inc. Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Diluted Earnings per Share and Adjusted Diluted Earnings per Share Adjusted Net Income and EPS: Three months ended June 30, 2021 March 31, 2021 June 30, 2020 Effect on net income (after-tax) Impact on diluted earnings per share Effect on net income (after-tax) Impact on diluted earnings per share Effect on net income (after-tax) Impact on diluted earnings per share Net loss (19,067) $ (0.54) $ (34,358) $ (0.97) $ (14,142) $ (0.40) $ Adjustments (after tax): Reverse the effect of foreign currency (375) (0.01) 1,085 0.03 646 0.02 Restructuring costs, including severance 790 0.02 19,766 0.56 1,254 0.04 (Gain) loss on sale of assets 65 - (3,124) (0.09) (67) - Adjusted net loss (18,587) $ (0.53) $ (16,631) $ (0.47) $ (12,309) $ (0.34) (In thousands, except per share amounts) DRIL-QUIP 19

Non-GAAP Financial Measures 20 Non-GAAP Financial Measures Dril-Quip, Inc. Reconciliation of Net Income (Loss) to Adjusted EBITDA (In thousands) Adjusted EBITDA: June 30, 2021 March 31, 2021 June 30, 2020 Net loss (19,067) $ (34,358) $ (14,142) $ Add: Interest (income) expense, net (4) 390 (444) Income tax provision 4,407 2,386 7,081 Depreciation and amortization expense 7,343 7,416 7,940 Restructuring costs, including severance 7,250 29,820 1,587 (Gain) loss on sale of assets 82 (3,955) (85) Foreign currency transaction (gains) and losses (475) 1,374 817 Stock compensation expense 3,079 3,186 3,282 Brazilian amnesty settlement - 1,787 - Adjusted EBITDA 2,615 $ 8,046 $ 6,036 DRIL-QUIP 20

Non-GAAP Financial Measures 21 Non-GAAP Financial Measures Dril-Quip, Inc. Reconciliation of Net Cash Provided by Operation Activities to Free Cash Flow Free Cash Flow: Three months ended June 30, 2021, March 31, 2021 June 30, 2020 Net cash provided by operation activities $ 11,343 $ 13,072 $ 3,046 Less: Purchase of property, plant and equipment (3,112) (2,513) (4,131) Free cash flow $ 8,231 $ 10,559 $ (1,085) DRIL-QUIP 21

Financial Metric Definitions 22 Market Capitalization = Share Price x Total Shares Outstanding Enterprise Value = Market Capitalization + Debt – Cash and Cash Equivalents Non-cash Working Capital = (Current Assets – Cash) – Current Liabilities Book Value / Share = Total Shareholders’ Equity / Total Shares Outstanding Cash / Share = Cash & Cash Equivalents / Total Shares Outstanding Non-cash Working Capital (WC) / Share = Noncash Working Capital / Total Shares Outstanding Total Debt / Capitalization = Total Debt (Short-term + Long-term) / (Total Debt + Total Shareholders’ Equity)