About Patterson-UTI Energy

Dril-Quip, Inc. (Dril-Quip), is a leading developer of innovative technologies for the energy industry, designing and manufacturing best-in-class products for traditional oil and gas, and certain energy transition applications. The company designs, manufactures, sells and services highly engineered drilling and production equipment for both offshore and onshore applications. The company's principal products consist of subsea and surface wellheads, specialty connectors and associated pipes, subsea production systems, mudline hanger systems, production riser systems, dry tree systems, subsea manifolds, line hangers and expandable liner systems, multi-frac well connections, conventional wellhead, thermal wellhead, completion packers and safety and kelly valves. Dril-Quip's products are used by major integrated, large independent and foreign national oil and gas companies and drilling contractors throughout the world. Dril-Quip also provides technical advisory assistance on an as-requested basis during installation of its products, as well as rework and reconditioning services for customer-owned Dril-Quip products. In addition, Dril-Quip's customers may rent or purchase running tools from the company for use in the installation and retrieval of its products. Dril-Quip has developed its broad line of subsea equipment, surface equipment and offshore rig equipment primarily through its internal product research and development efforts. On July 31, 2023, the company acquired 100% of B.C. LTD (doing business as Great North Wellhead and Frac), Great North. Segments The company operates through three segments: Subsea Products, Subsea Services, and Well Construction. Subsea Products business manufactures highly engineered, field-proven products with a wide array of deepwater drilling equipment and technology that meets the requirements for harsh subsea environments. Subsea Services business provides high-level aftermarket support and technical services with field technicians that support the full installation and lifecycle management of regulatory and industry standards, as well as offering industry training programs. Well Construction business provides products and services utilized in the construction of the wellbore such as completions, casing hardware and liner hanger systems. The Well Construction business also includes all of Great North's operations as of the acquisition date. These products and services are used on both land and offshore markets. Additionally, Corporate includes the expenses and assets of the company's corporate office functions, legal and other administrative expenses that are managed at a consolidated level. Dril-Quip markets its products through its offices and sales representatives located in the major international energy markets throughout the world. Products and Services Dril-Quip's revenues are generated from three sources: products, services and leasing. Product revenues are derived from the sale of drilling and production equipment. Service revenues are earned when the company provides technical advisory assistance, equipment installation and monitoring, rework, reconditioning and repair services. Leasing revenues are derived from rental tools used during installation and retrieval of the company's products. The company has substantial international operations, with approximately 74.9% of its revenues derived from foreign sales in 2023. Substantially all of the company's domestic revenue relates to operations in the U. S. Gulf of Mexico. Domestic revenue approximated 25.1% of the company's total revenues in 2023. Revenue is based on the location where services are provided and products are sold. Product contracts are negotiated and sold separately from service contracts. In addition, service contracts are not included in the product contracts or related sales orders and are not offered to the customer as a condition of the sale of the company's products. The demand for products and services is generally based on worldwide economic conditions in the oil and gas industry and is not based on a specific relationship between the two types of contracts. Substantially all of the company's sales are made on a purchase order basis. Purchase orders are subject to change or termination at the option of the customer. In case of a change or termination of over time contracts, the customer is required to pay the company for work performed and other costs necessarily incurred as a result of the change or termination. Products Dril-Quip designs, manufactures, fabricates, inspects, assembles, tests and markets subsea equipment, downhole tools, surface equipment and rig equipment. The company's products are used primarily for exploration and production of oil and gas from offshore drilling rigs, such as floating rigs and jack-up rigs, and for drilling and production of oil and gas wells on offshore platforms, tension leg platforms (TLPs), Spars and moored vessels such as floating production, storage and offloading monohull moored vessels (FPSOs). TLPs are floating production platforms that are connected to the ocean floor via vertical mooring tethers. A Spar is a floating cylindrical structure approximately six or seven times longer than its diameter and is anchored in place. The downhole tool products are used in the drilling and production for oil and gas both onshore and offshore. Subsea Equipment - Subsea equipment is used in the drilling and production of offshore oil and gas wells, as well as injecting CO2 into offshore reservoirs around the world. Included in the subsea equipment product line are subsea wellheads systems, mudline hanger systems, specialty connectors and associated pipe, production riser systems, subsea production trees, subsea manifolds. Subsea wellheads are pressure-containing vessels that are sometimes referred to as a wellhead housing and are made from forged and machined steel. A casing hanger, also made of steel, lands inside the wellhead housing and suspends casing (pipe) downhole. As drilling depth increases, successively smaller diameter casing strings are installed, each suspended by an independent casing hanger. Subsea wellheads systems are utilized when drilling from floating drilling rigs, either semi-submersible or drillship types, or TLPs and Spars. Mudline hanger systems are used in jack-up drilling operations to support the weight of the various casing strings at the ocean floor while drilling a well. They also provide a method to disconnect the casing strings in an orderly manner at the ocean floor after the well has been drilled, and subsequently reconnect utilizing metal-to-metal sealing technology to enable production of the well by either tying it back vertically to a subsequently installed platform or by installing a shallow water subsea tree. Large diameter weld-on specialty connectors (threaded or stab type) are used primarily in offshore wells drilled from floating drilling rigs, jack-up rigs, fixed platforms, TLPs and Spars. Specialty connectors join lengths of conductor or large diameter (16-inch or greater) casing. Specialty connectors provide a more rapid connection than other methods of connecting lengths of pipe. Connectors may be sold individually or as an assembly after being welded to sections of Company or customer supplied pipe. Dril-Quip's weld-on specialty connectors are designed to prevent cross threading and provide a quick, convenient method of joining casing joints with structural integrity compatible with casing strength. Production riser systems are generally designed and manufactured to customer specifications. Production risers provide a vertical conduit from the subsea wellhead up to a TLP, Spar or FPSO floating at the surface. A subsea production tree is an assembly composed of flow and pressure control valves, a wellhead connector, control equipment and various other components such as pressure/temperature sensors, chemical injection valves and flowline connection systems. Subsea trees are installed on a subsea wellhead or a mudline hanger system and used to control the flow of oil and gas from a producing well or control flow of CO2 injection into an offshore reservoir. The company's subsea production trees are generally custom designed and manufactured to customer specifications. Surface Equipment - Surface equipment is principally used for flow control on offshore production platforms, offshore CO2 injection installations, TLPs and Spars. Surface equipment includes platform wellheads, platform production trees and riser tensioners. Dril-Quip's development of platform wellheads and platform production trees was facilitated by adaptation of its existing subsea wellhead and tree technology to surface wellheads and trees. Platform wellheads are pressure-containing forged and machined metal housings in which casing hangers are landed and sealed at the platform deck to suspend casings. The company emphasizes the use of metal-to-metal sealing wellhead systems with operational time-saving features which can be used in high pressure, high temperature and corrosive drilling and production applications. Rig Equipment - Rig equipment includes drilling riser systems, wellhead connectors, diverters, safety valves and cement manifolds. The drilling riser system consists of lengths of riser pipe and associated riser connectors that secure one to another; the telescopic joint, which connects the entire drilling riser system to the diverter at top of the riser at the rig and provides a means to compensate for vertical motion of the rig relative to the ocean floor; and the wellhead connector, which provides a means for remote connection and disconnection of the blowout preventer stack to or from the wellhead. The Kelly Valve is located in the drill string below the kelly, the uppermost component of the drill string, and is designed to be closed under pressure to remove the kelly. Cement manifolds are used to control the flow of cement and other fluids during the cementing operations of the well installation. Wellhead connectors are used on production riser systems and drilling riser systems. They are also used on both TLPs and Spars, which are installed in deepwater applications. The principal markets for offshore rig equipment are new rigs, rig upgrades, TLPs and Spars. Drilling risers, wellhead connectors and diverters are generally designed and manufactured to customer specifications. Certain of the company's products are used in potentially hazardous drilling, completion and production applications that can cause personal injury, product liability and environmental claims. Well Construction - Well construction primarily comprised of liner hangers, production packers, safety valves and specialty downhole tools. A liner hanger is used to hang-off and seal casing into a previously installed casing string in the well bore and can provide a means of tying back the liner for production to surface. Dril-Quip offers conventional and expandable state-of-the-art liner hanger system and has installed its liner hangers in a number of difficult well applications such as High Pressure High Temperature (HPHT) and geothermal applications, resulting in improved industry recognition and market opportunities. In 2023, the Company acquired Great North and its product solutions, which includes pressure control and completion solutions, including customized and highly engineered wellhead products for use in heavy oil and thermal production locations. Services The company provides services to customers, including technical advisory assistance, equipment installation and monitoring, rework, reconditioning, storage, maintenance and repair services on its customer-owned products. These services are provided from the company's worldwide locations and represented approximately 24.9% of revenues in 2023. Technical Advisory Assistance and Reconditioning. Dril-Quip generally does not install products for its customers, but it does provide technical advisory assistance to the customer, if requested, in the installation and/or commissioning of its products. The customer is not obligated to utilize these services and may use its own personnel or a third party to perform these services. Technical advisory assistance services performed by the company are negotiated and sold separately from the Company's products. These services are not a prerequisite to the sale of the company's products as its products are fully functional on a stand-alone basis. The company's technicians provide assistance in the onsite installation of the company's products and are available on a 24-hour call out from the company's worldwide facilities. Leasing The company leases running and installation tools for use in installation or workover of its products. These tools are required to install, test and retrieve the company's products that are purchased by customers. Rental or purchase of running tools is not a condition of the sale of the company's products and is contracted for separately from product sales and other services offered by the company. In 2023, the company acquired Great North and its leasing solutions, which include the Multi-Well Frac Connector, Missile, Gyro Dart Launcher, and Conveyor Frac Ball Launcher. Rentals are provided from the company's worldwide locations and represented approximately 11.2% of revenues in 2023. Customers The company's principal customers are major integrated, large independent and foreign national oil and gas companies. Drilling contractors and engineering and construction companies also represent a portion of the company's customer base. The company's customers are generally oil and gas companies that are well-known participants in exploration and production. In 2023, the company's top 15 customers represented approximately 59% of total revenues, and Chevron Corporation and its affiliated companies (Chevron) accounted for approximately 11% of total revenues. Marketing and Sales Dril-Quip has a multifaceted approach to marketing and sales to effectively promote its products and services globally. Utilizing digital marketing channels and its direct sales personnel across diverse domestic and international locations, the Company strives for direct and personalized engagement with clients. In certain foreign markets the company utilizes independent sales agents or representatives to enhance its marketing and sales efforts. Some of the locations in which Dril-Quip has sales agents or representatives are Trinidad, Indonesia, Malaysia, Kuwait, Vietnam, Saudi Arabia and the United Arab Emirates. Dril-Quip also has integrated digital and web-based strategies into its marketing initiatives, recognizing the evolving landscape of the sales cycle. Dril-Quip's official website serves as a central hub, offering comprehensive information about products and services, complemented by a strategic presence on social media platforms. The company enhances its visibility and industry awareness by participating in virtual and industry conferences and trade shows and utilizes digital channels for targeted marketing and advertising. This digital integration complements traditional sales efforts, for a holistic approach to international market promotion of the company's products and services. The company's customers generally order products on a purchase order basis. Orders, other than those considered to be long-term projects, are typically filled within twelve months after receipt, depending on the type of product and whether it is sold out of inventory or requires some customization. Contracts for certain of the company's larger, more complex products, such as subsea production trees can take a year or more to complete. Increasingly, customers enter into long-term contracts (generally three years or more) with the company covering the purchase of goods and services. For large drilling and production system orders, project management teams coordinate customer needs with the company's engineering, manufacturing and service organizations, as well as with subcontractors and vendors. A portion of the company's business consists of designing, manufacturing and selling equipment, as well as offering technical advisory assistance during installation of the equipment, for major projects pursuant to competitive bids. Trademarks Dril-Quip has numerous U.S. registered trademarks, including Dril-Quip, Quik-Thread, Quik-Stab, Multi-Thread, MS-15, SS-15, SS-10, SU-90, DX and TIW. Competition The company competes principally with the petroleum production equipment segments of Baker Hughes; Schlumberger, Ltd.; TechnipFMC plc; and Aker Solutions. Regulations The company's operations are also governed by laws and regulations related to workplace safety and worker health, such as the Occupational Safety and Health Act and regulations promulgated thereunder. History Dril-Quip, Inc. was founded in 1981. The company, a Delaware corporation, was incorporated in 1997.