U.S. equipment supplier
) wholly owned subsidiary - Dril-Quip do Brasil LTDA - has clinched
a $650 million contract awarded by Brazil's state owned energy
Petroleo Brasileiro S.A.
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The four-year contract requires Dril-Quip to supply subsea wellhead
systems and associated tools. These systems will be used by
Petrobras in the drilling of deepwater wells offshore Brazil.
Dril-Quip expects to start product delivery under the contract by
the second half of 2013. Per the deal, the offshore drilling and
production equipment maker will record these deliveries as purchase
orders in its backlog. So far, no order has been logged with the
The customary terms and conditions for such agreements including
termination, extension, product inspection, local content
requirements and price adjustment provisions are also applicable to
the pact between Dril-Quip and Petrobras.
This is a much awaited order for Dril-Quip, as it trails the
three-year, $180 million contract with Petrobras that concluded in
the second quarter of 2012.
The planned investment of Petrobras in the country's offshore
market over the next five years will also likely prove beneficial
for Dril-Quip, which is well positioned to take advantage of the
project. Dril-Quip's recent capacity additions in Brazil and
Singapore along with the growth in demand for offshore equipments
will further aid its progress.
Dril-Quip enjoys a strong market share, with many of its
established products owning the first or second position in their
respective categories. The company expects new orders from the
growing markets of Brazil, GoM and Mexico that will further
increase the revenues going forward.
Dril-Quip holds a Zacks #3 Rank, which translates into a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation.