10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-13439

DRIL-QUIP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	74-2162088
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6401 N. ELDRIDGE PARKWAY

HOUSTON, TEXAS

77041

(Address of principal executive offices)

(Zip Code)

(713) 939-7711

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

As of May 2, 2014, the number of shares outstanding of the registrant’s common stock, par value $.01 per share, was 40,834,224.

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2014			December 31, 2013
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	420,938		$	384,356
Trade receivables, net		266,086			279,253
Inventories, net		397,356			368,354
Deferred income taxes		25,702			24,951
Prepaids and other current assets		28,322			21,899
Total current assets		1,138,404			1,078,813
Property, plant and equipment, net		311,473			304,806
Other assets		10,172			10,993
Total assets	$	1,460,049		$	1,394,612
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	53,597		$	38,801
Accrued income taxes		15,185			13,628
Customer prepayments		52,870			45,025
Accrued compensation		17,288			21,556
Other accrued liabilities		17,748			23,780
Total current liabilities		156,688			142,790
Deferred income taxes		9,656			9,804
Total liabilities		166,344			152,594
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued)		—			—
Common stock:
50,000,000 shares authorized at $0.01 par value, 40,829,349 and 40,822,627 shares issued and outstanding at March 31, 2014 and December 31, 2013		407			407
Additional paid-in capital		195,305			191,965
Retained earnings		1,112,434			1,069,816
Accumulated other comprehensive losses		(14,441	)		(20,170	)
Total stockholders’ equity		1,293,705			1,242,018
Total liabilities and stockholders’ equity	$	1,460,049		$	1,394,612

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three months ended March 31,
	2014			2013
	(In thousands, except per share data)
Revenues:
Products	$	172,001		$	160,485
Services		32,072			32,670
Total revenues		204,073			193,155
Cost and expenses:
Cost of sales:
Products		91,331			96,673
Services		19,456			19,655
Total cost of sales		110,787			116,328
Selling, general and administrative		23,935			15,629
Engineering and product development		10,784			9,021
Total costs and expenses		145,506			140,978
Operating income		58,567			52,177
Interest income		83			116
Interest expense		(7	)		(14	)
Income before income taxes		58,643			52,279
Income tax provision		16,025			12,437
Net income	$	42,618		$	39,842
Earnings per common share:
Basic	$	1.05		$	0.98
Diluted	$	1.04		$	0.98
Weighted average common shares outstanding:
Basic		40,678			40,529
Diluted		40,887			40,713

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three months ended March 31,
	2014		2013
	(In thousands)
Net income	$	42,618	$	39,842
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		5,729		(14,623	)
Total comprehensive income	$	48,347	$	25,219

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

	Three months ended March 31,
	2014			2013
	(In thousands)
Operating activities
Net income	$	42,618		$	39,842
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		7,680			7,001
Stock-based compensation expense		2,826			2,091
Deferred income taxes		(869	)		(1,142	)
Changes in operating assets and liabilities:
Trade receivables, net		14,680			46,162
Inventories, net		(26,333	)		(11,683	)
Prepaids and other assets		(5,096	)		434
Excess tax benefits of stock options and awards		(49	)		(606	)
Accounts payable and accrued expenses		13,146			(7,116	)
Net cash provided by operating activities		48,603			74,983
Investing activities
Purchase of property, plant and equipment		(13,220	)		(12,070	)
Proceeds from sale of equipment		356			166
Net cash used in investing activities		(12,864	)		(11,904	)
Financing activities
Proceeds from exercise of stock options		463			3,067
Excess tax benefits of stock options and awards		49			606
Net cash provided by financing activities		512			3,673
Effect of exchange rate changes on cash activities		331			(4,969	)
Increase in cash and cash equivalents		36,582			61,783
Cash and cash equivalents at beginning of period		384,356			257,191
Cash and cash equivalents at end of period	$	420,938		$	318,974

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DRIL-QUIP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Principles of Consolidation

Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environment and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’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 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 the Company’s products.

The Company’s operations are organized into three geographic segments—Western Hemisphere (including North and South America; headquartered in Houston, Texas), Eastern Hemisphere (including Europe and Africa; headquartered in Aberdeen, Scotland) and Asia-Pacific (including the Pacific Rim, Southeast Asia, Australia, India and the Middle East; headquartered in Singapore). Each of these segments sells similar products and services and the Company has major manufacturing facilities in all three of its headquarter locations as well as in Macae, Brazil.

The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position as of March 31, 2014 and the results of operations, comprehensive income and cash flows for the three-month periods ended March 31, 2014 and 2013. Although management believes the unaudited interim related disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations, comprehensive income and the cash flows for the three-month period ended March 31, 2014 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

2. Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

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• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. At March 31, 2014 and December 31, 2013, receivables included $60.0 million and $52.9 million of unbilled receivables, respectively. For the quarter ended March 31, 2014, there were 15 projects representing approximately 12% of the Company’s total revenue and approximately 14% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 14 such projects during the first quarter of 2013, which represented approximately 19% of the Company’s total revenues and approximately 22% of its product revenues.

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory services. The customer may use a third party or their own personnel.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature.

Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method.

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In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the number of common shares outstanding at March 31 of each year to the weighted average number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share:

	Three months ended March 31,
	2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,678		40,529
Dilutive effect of common stock options and awards		209		184
Weighted average diluted common shares outstanding—diluted		40,887		40,713

3. New Accounting Standards

None.

4. Stock-Based Compensation and Stock Awards

During the three months ended March 31, 2014 and 2013, the Company recognized approximately $2.8 million and $2.1 million, respectively, of stock-based compensation expense, which is included in the selling, general and administrative expense line of the Condensed Consolidated Statements of Income. No stock-based compensation expense was capitalized during the three months ended March 31, 2014 or 2013. There were no stock options or awards granted in the first quarter of 2014. Except for a de minimis amount, there were no stock options or awards granted in the first quarter of 2013.

5. Inventories

Inventories consist of the following:

	March 31, 2014			December 31, 2013
	(In thousands)
Raw materials	$	91,514		$	85,670
Work in progress		120,426			119,929
Finished goods		219,653			195,971
		431,593			401,570
Less: allowance for obsolete and excess inventory		(34,237	)		(33,216	)
Total inventory	$	397,356		$	368,354

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6. Geographic Areas

	Three months ended March 31,
	2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	94,389		$	99,729
Services		16,900			15,629
Intercompany		10,292			12,387
Total	$	121,581		$	127,745
Eastern Hemisphere
Products	$	53,923		$	37,833
Services		11,477			12,167
Intercompany		174			155
Total	$	65,574		$	50,155
Asia-Pacific
Products	$	23,689		$	22,923
Services		3,695			4,874
Intercompany		1,368			131
Total	$	28,752		$	27,928
Summary
Products	$	172,001		$	160,485
Services		32,072			32,670
Intercompany		11,834			12,673
Eliminations		(11,834	)		(12,673	)
Total	$	204,073		$	193,155
Income before income taxes:
Western Hemisphere	$	36,160		$	24,946
Eastern Hemisphere		15,347			17,008
Asia-Pacific		5,455			9,691
Eliminations		1,681			634
Total	$	58,643		$	52,279
	March 31, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	220,490		$	216,104
Eastern Hemisphere		46,973			43,430
Asia-Pacific		57,109			59,192
Eliminations		(2,927	)		(2,927	)
	$	321,645		$	315,799
Total Assets:
Western Hemisphere	$	851,096		$	803,069
Eastern Hemisphere		333,830			316,473
Asia-Pacific		308,960			292,600
Eliminations		(33,837	)		(17,530	)
	$	1,460,049		$	1,394,612

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7. Commitments and Contingencies

Deepwater Horizon Incident

On April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig known as the Deepwater Horizon that was operated by BP Exploration & Production, Inc. (“BP”) sank after an explosion and fire that began on April 20, 2010. Pursuant to a contract that the Company entered into with an affiliate of BP, it supplied to BP a wellhead and certain other equipment that were in use on the Deepwater Horizon at the time of the incident. The Company was named, along with other unaffiliated defendants, in both class action and other lawsuits arising from the Deepwater Horizon incident. These lawsuits were consolidated in the multi-district proceeding In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (“MDL Proceeding”). In 2012, the judge presiding over various lawsuits and proceedings dismissed all claims asserted against the Company in those proceedings with prejudice. On April 9, 2012, the judge issued an order granting a final judgment in favor of the Company with respect to the court’s prior order that granted the Company’s Motion for Summary Judgment.

One of the lawsuits against the Company consolidated in the MDL Proceeding was a personal injury lawsuit initially filed in a Texas state court. The plaintiff has filed a motion to remand the lawsuit back to the Texas state court. If the lawsuit is remanded to the Texas state court, the Company intends to vigorously defend that lawsuit and does not believe it will have a material adverse impact on its results of operations. Accordingly, no liability has been accrued in conjunction with this matter.

Brazilian Tax Issue

From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws.

In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $12.2 million in March 2010 and $3.9 million in December 2010. Approximately $7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a prepaid tax) that can be used to offset future state taxes on sales to customers in the State of Rio de Janeiro once certified by the tax authorities under a process that is currently ongoing. When the credits are certified, the Company will have a five-year period in which to utilize them. In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with additional assessments totaling approximately $13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (“Santo Credits”) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to this assessment on the grounds that it would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. The Company believes that these credits are valid and that success in the matter is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter.

Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007.

General

The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and dependency on the condition of the oil and gas industry. Additionally, products of the Company are used in potentially hazardous drilling, completion, and production applications that can cause personal injury, product liability, and environmental claims. Although exposure to such risk has not resulted in any significant problems in the past, there can be no assurance that ongoing and future developments will not adversely impact the Company.

The Company is also involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of such legal action, in the opinion of management, the ultimate liability with respect thereto will not have a material adverse effect on the Company’s operations, financial position or cash flows.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors that have affected aspects of the Company’s financial position, results of operations, comprehensive income and cash flows during the periods included in the accompanying unaudited condensed consolidated financial statements. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements presented elsewhere herein as well as the discussion under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Overview and Industry Outlook

Dril-Quip designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environment and severe service applications. The Company designs and manufactures subsea equipment, surface equipment and offshore rig equipment for use by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip also provides technical advisory services 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 customers may rent or purchase running tools from the Company for use in the installation and retrieval of the Company’s products.

Oil and Gas Prices

Both the market for offshore drilling and production equipment and services and the Company’s business are substantially dependent on the condition of the oil and gas industry and, in particular, the willingness of oil and gas companies to make capital expenditures on exploration, drilling and production operations offshore. Oil and gas prices and the level of offshore drilling have historically been characterized by significant volatility.

According to the Energy Information Administration (“EIA”) of the U.S. Department of Energy, average Brent Crude oil and natural gas (Henry Hub) closing prices are listed below for the periods covered by this report:

	Three months ended March 31,
	2014		2013
Crude oil ($/Bbl)	$	108.14	$	112.47
Natural gas ($/Mcf)	$	5.34	$	3.60

Brent Crude oil prices ranged between $105.73 per barrel and $111.26 per barrel with an average price of $108.14 for the first quarter of 2014. Brent Crude oil prices ranged between $106.41 per barrel and $118.90 per barrel with an average price of $112.47 for the first quarter of 2013. Brent crude oil prices ended the first quarter of 2014 at $105.95 per barrel. At March 31, 2014, the Henry Hub natural gas price was $4.62 per Mcf. The Henry Hub natural gas prices ranged from $4.07 and $8.40 per Mcf for the quarter ended March 31, 2014 as compared to a low of $3.18 and a high of $4.21 per Mcf for the quarter ended March 31, 2013. On April 21, 2014 the Henry Hub natural gas price closed at $4.91 per Mcf.

According to the April 2014 release of the Short-Term Energy Outlook published by the EIA, Brent Crude oil prices are projected to average $104.88 per barrel in 2014 and $100.92 per barrel in 2015. On April 21, 2014, the Brent Crude oil price was $109.69 per barrel. In its April 2014 Oil Market Report, the International Energy Agency forecast for the growth of global world demand for oil was trimmed by 1.3 million barrels per day in 2014 due to downward adjustments to the projection of Russian demand. In April 2014, the EIA projected Henry Hub natural gas prices to average $4.58 per Mcf in 2014 and $4.23 per Mcf in 2015.

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Rig Count

Detailed below is the average contracted rig count for the Company’s geographic regions for the three months ended March 31, 2014 and 2013. The rig count data includes floating rigs (semi-submersibles and drillships) and jack-up rigs. The Company has included only these types of rigs as they are the primary end users of the Company’s products.

	Three months ended March 31,
	2014				2013
	Floating Rigs		Jack-up Rigs		Floating Rigs		Jack-up Rigs
Western Hemisphere		125		98		131		85
Eastern Hemisphere		99		93		90		88
Asia-Pacific		54		262		48		235
Total		278		453		269		408

Source: ODS—Petrodata RigBase—March 31, 2014 and 2013

The table above represents rigs under contract and includes rigs currently drilling as well as rigs committed, but not yet drilling. According to ODS-Petrodata RigBase, as of March 31, 2014, there were 72 rigs under contract (44 floating rigs and 28 jack-up rigs) in the U.S. Gulf of Mexico, 63 of which were actively drilling (36 floating rigs and 27 jack-up rigs). At March 31, 2013, there were 73 rigs under contract in the U.S. Gulf of Mexico (38 floating rigs and 35 jack-up rigs), of which 70 were actively drilling (36 floating rigs and 34 jack-up rigs).

The Company believes that the number of rigs (semi-submersibles, drillships and jack-up rigs) under construction impacts its revenues because in certain cases, its customers order some of the Company’s products during the construction of such rigs. As a result, an increase in rig construction activity tends to favorably impact the Company’s backlog while a decrease in rig construction activity tends to negatively impact the Company’s backlog. According to ODS-Petrodata, at the end of March 2014 and 2013, there were 241 and 195 rigs, respectively, under construction and the expected delivery dates for the rigs under construction on March 31, 2014 are as follows:

	Floating Rigs		Jack-Up Rigs		Total
2014		27		36		63
2015		27		63		90
2016		22		35		57
2017		11		6		17
After 2017 or unspecified delivery date		14		—		14
		101		140		241

Regulation

The demand for the Company’s products and services is also affected by laws and regulations relating to the oil and gas industry in general, including those specifically directed to offshore operations. The adoption of new laws and regulations, or changes to existing laws or regulations that curtail exploration and development drilling for oil and gas for economic or other policy reasons could adversely affect the Company’s operations by limiting demand for its products.

Business Environment

Oil and gas prices and the level of offshore drilling and production activity have been characterized by significant volatility in recent years. Worldwide military, political, economic and other events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future. In 2013, Brent Crude oil prices ranged between $96.84 per barrel and $118.90 per barrel with an average price of $108.56 per barrel and ended the year at $109.95 per barrel. For the first quarter of 2014 the price of Brent Crude oil ranged between $105.73 per barrel and $111.26 per barrel and ended the quarter at $105.95 per barrel. The Company expects continued volatility in both crude oil and natural gas prices, as well as in the level of drilling and production related activities. Even during periods of high prices for oil and natural gas, companies exploring for oil and gas may cancel or curtail programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons. In addition, a significant and prolonged decline in hydrocarbon prices would likely have a material adverse effect on the Company’s results of operations.

The Company believes that its backlog should help mitigate the impact of negative market conditions; however, a prolonged decline in commodity prices, an extended continuation of the downturn in the global economy or future restrictions or declines in offshore oil and gas exploration and production could have a negative impact on the Company and/or its backlog. The Company’s backlog at March 31, 2014 was approximately $1.35 billion compared to approximately $1.02 billion at March 31, 2013 and $1.18 billion at December 31, 2013. In August 2012, the Company’s Brazilian subsidiary, Dril-Quip do Brasil LTDA, was awarded a four-

11

year contract by Petroleo Brasileiro S.A. (“Petrobras”), Brazil’s national oil company. At exchange rates in effect at the signing date (2.04 Brazilian real to 1.00 U.S. dollar), the contract is valued at $650 million, net of Brazilian taxes, if all the equipment under the contract is ordered. Amounts will be included in the Company’s backlog as purchase orders under this contract are received. As of March 31, 2014, the Company’s backlog included approximately $138 million of purchase orders under the new Petrobras contract. Revenues of approximately $20 million have been recognized on this contract through March 31, 2014. The Company has not recognized revenue of approximately $10 million for certain items of equipment that were completed but not accepted for delivery by Petrobras. Petrobras has asserted that such equipment does not satisfy certain contractual requirements. If the Company is unable to timely resolve these objections, or if Petrobras refuses to accept similar items of completed equipment in the future, the Company’s results of operations may be adversely affected.

The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and investments in foreign countries. These risks include nationalization, expropriation, war, acts of terrorism and civil disturbance, restrictive action by local governments, limitation on repatriation of earnings, change in foreign tax laws and change in currency exchange rates, any of which could have an adverse effect on either the Company’s ability to manufacture its products in its facilities abroad or the demand in certain regions for the Company’s products or both. To date, the Company has not experienced any significant problems in foreign countries arising from local government actions or political instability, but there is no assurance that such problems will not arise in the future. Interruption of the Company’s international operations could have a material adverse effect on its results of operations.

Revenues. Dril-Quip’s revenues are generated from two sources: products and services. Product revenues are derived from the sale of offshore drilling and production equipment. Service revenues are earned when the Company provides technical advisory assistance for installation of the Company’s products, reconditioning services and rental of running tools for installation and retrieval of the Company’s products. For the three months ended March 31, 2014 and 2013, the Company derived 84% and 83%, respectively, of its revenues from the sale of its products and 16% and 17%, respectively, of its revenues from services. Service revenues generally correlate to revenues from product sales because increased product sales typically generate increased demand for technical advisory services during installation and rental of running tools. The Company has substantial international operations, with approximately 63% and 74% of its revenues derived from foreign sales for the three months ended March 31, 2014 and 2013, respectively. Substantially all of the Company’s domestic revenue relates to operations in the U. S. Gulf of Mexico. Domestic revenue approximated 37% and 26%, respectively, of the Company’s total revenues for the three months ended March 31, 2014 and 2013.

Product contracts are negotiated and sold separately from service contracts. In addition, service contracts are not typically 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 world-wide economic conditions in the offshore 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 and/or termination at the option of the customer. In case of a change or termination, the customer is required to pay the Company for work performed and other costs necessarily incurred as a result of the change or termination.

Generally, the Company attempts to raise its prices as its costs increase. However, the actual pricing of the Company’s products and services is impacted by a number of factors, including competitive pricing pressure, the level of utilized capacity in the oil service sector, maintenance of market share, the introduction of new products and general market conditions.

The Company accounts for larger and more complex projects that have relatively longer manufacturing time frames on a percentage-of-completion basis. For the first three months of 2014, 15 projects representing approximately 12% of the Company’s total revenue and approximately 14% of its product revenue were accounted for using percentage-of-completion accounting, compared to 14 projects representing approximately 19% of the Company’s total revenue and 22% of its product revenue for the first three months of 2013. This percentage may fluctuate in the future. Revenues accounted for in this manner are generally recognized based upon a calculation of the percentage complete, which is used to determine the revenue earned and the appropriate portion of total estimated cost of sales. Accordingly, price and cost estimates are reviewed periodically as the work progresses, and adjustments proportionate to the percent complete are reflected in the period when such estimates are revised. Losses, if any, are recorded in full in the period they become known. Amounts received from customers in excess of revenues recognized are classified as a current liability.

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The following table sets forth, for the periods indicated, a breakdown of the Company’s U.S. Gulf of Mexico products and services revenues:

	Three months ended March 31,
	2014		2013
	(In millions)
Revenues:
Products
Subsea equipment	$	52.4	$	38.4
Surface equipment		2.3		—
Offshore rig equipment		9.7		0.5
Total products		64.4		38.9
Services		11.7		11.1
Total U.S. Gulf of Mexico revenues	$	76.1	$	50.0

Subsea equipment revenues rose $14.0 million to $52.4 million from $38.4 million and offshore rig equipment revenues increased $9.2 million to $9.7 million from $0.5 million for the three months ended March 31, 2014 and 2013, respectively. These increases are largely due to the increases in demand, evidenced by the increase in backlog, and the increase in the number of rigs under construction as of March 31, 2014 compared to March 31, 2013. For the three months ended March 31, 2014 and 2013, the Company’s U.S. Gulf of Mexico service revenues as a percentage of worldwide revenues was 5.7% for both periods.

Cost of Sales. The principal elements of cost of sales are labor, raw materials and manufacturing overhead. Cost of sales as a percentage of revenues is influenced by the product mix sold in any particular period, costs from projects accounted for under the percentage-of-completion method and market conditions. The Company’s costs related to its foreign operations do not significantly differ from its domestic costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include the costs associated with sales and marketing, general corporate overhead, compensation expense, stock-based compensation expense, legal expenses, foreign currency transaction gains and losses and other related administrative functions.

Engineering and Product Development Expenses. Engineering and product development expenses consist of new product development and testing, as well as application engineering related to customized products.

Income Tax Provision. The Company’s overall effective income tax rate has historically been lower than the statutory rate primarily due to foreign income tax rate differentials, research and development credits and deductions related to domestic manufacturing activities.

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Results of Operations

The following table sets forth, for the periods indicated, certain condensed consolidated statements of income data expressed as a percentage of revenues:

	Three months ended March 31,
	2014			2013
Revenues:
Products		84.3	%		83.1	%
Services		15.7			16.9
Total revenues		100.0			100.0
Cost of sales:
Products		44.8			50.0
Services		9.5			10.2
Total cost of sales		54.3			60.2
Selling, general and administrative		11.6			8.2
Engineering and product development		5.3			4.7
Operating income		28.8			26.9
Interest income		—			0.1
Income before income taxes		28.8			27.0
Income tax provision		7.9			6.4
Net income		20.9	%		20.6	%

The following table sets forth, for the periods indicated, a breakdown of our product and service revenues:

	Three months ended March 31,
	2014		2013
	(In millions)
Revenues:
Products
Subsea equipment	$	152.5	$	139.1
Surface equipment		7.8		6.6
Offshore rig equipment		11.7		14.8
Total products		172.0		160.5
Services		32.1		32.7
Total revenues	$	204.1	$	193.2

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013.

Revenues. Revenues increased by $10.9 million, or approximately 5.6%, to $204.1 million in the three months ended March 31, 2014 from $193.2 million in the three months ended March 31, 2013. Product revenues increased by approximately $11.5 million for the three months ended March 31, 2014 compared to the same period in 2013 as a result of increased revenues of $13.4 million in subsea equipment due to increases in demand and in the number of rigs under construction and $1.2 million in surface equipment, partially offset by a $3.1 million decrease in offshore rig equipment. Product revenues increased in the Eastern Hemisphere by $16.1 million and in Asia-Pacific by $700,000, partially offset by a $5.3 million decrease in the Western Hemisphere. In any given time period, the revenues recognized between the various product lines and geographic areas will vary depending upon the timing of shipments to customers, completion status of the projects accounted for under the percentage-of-completion accounting method, market conditions and customer demand at that time. Service revenues decreased by approximately $600,000.

Cost of Sales. Cost of sales decreased by $5.5 million, or approximately 4.7%, to $110.8 million for the three months ended March 31, 2014 from $116.3 million for the same period in 2013. As a percentage of revenues, cost of sales decreased approximately 5.9% to 54.3% from 60.2% in the three months ended March 31, 2014 as compared to the same period in 2013. The reduction in cost of sales as a percentage of revenues occurred as a result of pricing increases, improvements in product mix and decreases in other production related expenses.

Selling, General and Administrative Expenses. For the three months ended March 31, 2014, selling, general and administrative expenses increased by approximately $8.3 million, or 53.2%, to $23.9 million from $15.6 million in the 2013 period. The Company experienced a pre-tax foreign currency transaction loss of $911,000 in the first quarter of 2014 compared to a gain of $5.6 million in the first quarter of 2013. The pre-tax foreign currency transaction gain experienced in the first quarter of 2013 was largely due to the

14

exchange rate fluctuations between the British pound sterling and the U.S. dollar. Stock award expense totaled $2.8 million for the first quarter of 2014 as compared to $2.1 million in 2013. Payroll and related expenses increased $0.9 million for the three months ended March 31, 2014 as compared to the same period in 2013. Selling, general and administrative expenses as a percentage of revenues increased to 11.6% in 2014 from 8.2% in March 2013.

Engineering and Product Development Expenses. For the three-month period ended March 31, 2014, engineering and product development expenses totaled $10.8 million compared to $9.0 million for the same period in 2013, an increase of $1.8 million or 20.0%. Payroll and related expenses increased $1.7 million for the three months ended March 31, 2014 as compared to the same period in 2013. Engineering and product development expenses as a percentage of revenues increased to 5.3% in 2014 from 4.7% in 2013.

Income tax provision. Income tax expense for the three months ended March 31, 2014 was $16.0 million on income before taxes of $58.6 million, resulting in an effective income tax rate of approximately 27.3%. Income tax expense for the three months ended March 31, 2013 was $12.4 million on income before taxes of $52.3 million, resulting in an effective income tax rate of approximately 23.8%. The increase in the effective income tax rate percentage partially reflects the $1.2 million Research and Development tax credit from the “American Taxpayer Relief Act of 2012” recognized in the first quarter of 2013, and the changes in taxable income among the Company’s three geographic areas, which have different income tax rates.

Net Income. Net income was approximately $42.6 million for the three months ended March 31, 2014 and $39.8 million for the same period in 2013 for the reasons set forth above.

Liquidity and Capital Resources

Cash flows provided by (used in) type of activity were as follows:

	Three months ended March 31,
	2014			2013
	(In thousands)
Operating activities	$	48,603		$	74,983
Investing activities		(12,864	)		(11,904	)
Financing activities		512			3,673
		36,251			66,752
Effect of exchange rate changes on cash activities		331			(4,969	)
Increase in cash and cash equivalents	$	36,582		$	61,783

Statements of cash flows for entities with international operations that are local currency functional exclude the effects of the changes in foreign currency exchange rates that occur during any given period, as these are non-cash changes. As a result, changes reflected in certain accounts on the Condensed Consolidated Statements of Cash Flows may not reflect the changes in corresponding accounts on the Condensed Consolidated Balance Sheets.

The primary liquidity needs of the Company are (i) to fund capital expenditures to improve and expand facilities and manufacture additional running tools and (ii) to fund working capital. The Company’s principal sources of funds have been cash flows from operations.

Net cash provided from operating activities decreased $26.4 million for the first quarter of 2014 compared to the same period in 2013, primarily due to a decrease in operating assets and liabilities of $30.8 million in 2014 slightly offset by an increase of $2.8 million in net income.

The change in operating assets and liabilities for the first three months of 2014 primarily reflected a decrease in trade receivables of $14.7 million and an increase in inventory of $26.3 million. Trade receivables decreased due to strong collection efforts offset by an increase in unbilled receivables of $7.1 million. Inventory increased due to higher balances in raw material and finished goods to accommodate the higher backlog requirements related to long-term projects. Accounts payable and accrued expenses increased by approximately $13.1 million due to an increase in customer prepayments of $7.8 million.

The change in operating assets and liabilities for the first three months of 2013 primarily reflected a decrease in trade receivables of $46.2 million and an increase in inventory of $11.7 million. Trade receivables decreased due to strong collection efforts offset by a decrease in unbilled receivables of $7.8 million. Inventory increased due to higher balances in work in progress to accommodate the increased backlog. Accounts payable and accrued expenses increased by approximately $7.1 million related primarily to increases in inventory, partially offset by a decrease in customer prepayments of $1.8 million.

Capital expenditures by the Company were $13.2 million and $12.1 million in the first three months of 2014 and 2013, respectively. Capital expenditures in 2014 and 2013 included expanding manufacturing facilities and increased expenditures on machinery and equipment and running tools. The capital expenditures for the first quarter of 2014 were primarily $1.3 million for

15

facilities, $10.6 million for machinery and equipment and other expenditures of $1.3 million. The capital expenditures for the first quarter of 2013 were primarily $2.7 million for facilities, $5.8 million for machinery and equipment, $2.9 million for running tools and other expenditures of $700,000.

The exercise of stock options generated cash to the Company of $463,000 in the first quarter of 2014 as compared to $3.1 million in the same period of 2013.

On June 19, 2012, the Company announced that its Board of Directors authorized a stock repurchase plan under which the Company can repurchase up to $100 million of its common stock. Under this plan, the Company repurchased and cancelled 85,840 shares at a total cost of $10.0 million during the fourth quarter of 2013. No other repurchases have been made pursuant to the plan. The repurchase program has no expiration date.

Off-Balance Sheet Arrangements

The Company has no derivative instruments and no off-balance sheet hedging or financing arrangements, contracts or operations.

Critical Accounting Policies

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of its critical accounting policies. During the three months ended March 31, 2014, there were no material changes in our judgments and assumptions associated with the development of our critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is currently exposed to certain market risks related to interest rate changes on its short-term investments and fluctuations in foreign exchange rates. The Company does not engage in any material hedging transactions, forward contracts or currency trading which could mitigate the market risks inherent in such transactions. There have been no material changes in market risks for the Company from December 31, 2013.

Foreign Exchange Rate Risk

Through its subsidiaries, the Company conducts a portion of its business in currencies other than the United States dollar, principally the British pound sterling and, to a lesser extent, the Brazilian real. The Company experienced a foreign currency pre-tax loss of approximately $911,000 during the three-month period ended March 31, 2014 and a pre-tax gain of $5.6 million in the same quarter of 2013. Historically, the Company’s foreign currency gains and losses have not been significant. However, when significant disparities between the British pound sterling and the U.S. dollar or the Brazilian real and the U.S. dollar occur, there can be no assurance that currency fluctuations will not have a significant impact on the Company in the future.

Item 4. Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2014 to provide reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

There has been no change in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of the Company’s legal proceedings, see “Commitments and Contingencies,” Note 7 to the Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements contained in all parts of this document that are not historical facts are forward-looking statements that involve risks and uncertainties that are beyond the control of Dril-Quip, Inc. (the “Company” or “Dril-Quip”). You can identify the Company’s forward-looking statements by the words “anticipate,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions, or by the Company’s discussion of strategies or trends. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct. These forward-looking statements include the following types of information and statements as they relate to the Company:

• future operating results and cash flow;

• scheduled, budgeted and other future capital expenditures;

• working capital requirements;

• the availability of expected sources of liquidity;

• the introduction into the market of the Company’s future products;

• the market for the Company’s existing and future products;

• the Company’s ability to develop new applications for its technologies;

• the exploration, development and production activities of the Company’s customers;

• compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings;

• effects of pending legal proceedings;

• changes in customers’ future product and service requirements that may not be cost effective or within the Company’s capabilities; and

• future operations, financial results, business plans and cash needs.

These statements are based on assumptions and analyses in light of the Company’s experience and perception of historical trends, current conditions, expected future developments and other factors the Company believes were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under “Item 1A. Risk Factors” in Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and the following:

• the volatility of oil and natural gas prices;

• the cyclical nature of the oil and gas industry;

• uncertainties associated with the United States and worldwide economies;

• uncertainties regarding political tensions in the Middle East, Africa and elsewhere;

• current and potential governmental regulatory actions in the United States and regulatory actions and political unrest in other countries;

• uncertainties regarding future oil and gas exploration and production activities in the U.S. Gulf of Mexico and elsewhere, including new regulations, customs requirements and product testing requirements;

17

• operating interruptions (including explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks);

• project terminations, suspensions or scope adjustments to contracts reflected in the Company’s backlog;

• the Company’s reliance on product development;

• technological developments;

• the Company’s reliance on third-party technologies;

• the Company’s dependence on key employees and skilled machinists, fabricators and technical personnel;

• the Company’s reliance on sources of raw materials;

• impact of environmental matters, including future environmental regulations;

• competitive products and pricing pressures;

• fluctuations in foreign currency;

• the Company’s reliance on significant customers;

• creditworthiness of the Company’s customers;

• fixed-price contracts;

• changes in general economic, market or business conditions;

• access to capital markets;

• negative outcome of litigation, threatened litigation or government proceedings;

• terrorist threats or acts, war and civil disturbances; and

• the interpretation of foreign tax laws with respect to our foreign subsidiaries.

Many of such factors are beyond the Company’s ability to control or predict. Any of the factors, or a combination of these factors, could materially affect the Company’s future results of operations and the ultimate accuracy of the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement.

Item 6. Exhibits.

(a) Exhibits

The following exhibits are filed herewith.

Exhibit No.	Description
*3.1	—	Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-33447)).
*3.2	—	Certificate of Designations of Series A Junior Participating Preferred Stock of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s report on Form 8-K dated November 25, 2008).
*3.3	—	Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s report on Form 8-K filed January 17, 2012).
*4.1	—	Form of certificate representing Common Stock (incorporated herein by reference to Exhibit 4.2 the Company’s Registration Statement on Form S-1 (Registration No. 333-33447)).

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Exhibit No.	Description
*4.2	—	Rights Agreement dated as of November 24, 2008 between Dril-Quip, Inc. and Mellon Investor Services LLC, as Rights Agent (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 25, 2008).
31.1	—	Rule 13a-14(a)/15d-14(a) Certification of Blake T. DeBerry.
31.2	—	Rule 13a-14(a)/15d-14(a) Certification of Jerry M. Brooks.
32.1	—	Section 1350 Certification of Blake T. DeBerry.
32.2	—	Section 1350 Certification of Jerry M. Brooks.
101.INS	—	XBRL Instance Document
101.SCH	—	XBRL Schema Document
101.CAL	—	XBRL Calculation Document
101.DEF	—	XBRL Definition Linkbase Document
101.LAB	—	XBRL Label Linkbase Document
101.PRE	—	XBRL Presentation Linkbase Document

* Incorporated herein by reference as indicated.

19

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 thereunto duly authorized.

DRIL-QUIP, INC.
By:	/S/ JERRY M. BROOKS
	Jerry M. Brooks,
	Vice President—Finance and Chief Financial Officer (Principal Accounting Officer and Duly Authorized Signatory)

Date: May 8, 2014

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EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Blake T. DeBerry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dril-Quip, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, comprehensive income and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2014

/s/ Blake T. DeBerry

Blake T. DeBerry

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Jerry M. Brooks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dril-Quip, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, comprehensive income and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2014

/s/ Jerry M. Brooks

Jerry M. Brooks

Vice President—Finance and

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dril-Quip, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Blake T. DeBerry, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Blake T. DeBerry

Blake T. DeBerry

President and Chief Executive Officer

May 8, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dril-Quip, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Jerry M. Brooks, Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jerry M. Brooks

Jerry M. Brooks

Vice President—Finance and

Chief Financial Officer

May 8, 2014

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New Accounting Standards

3 Months Ended

Mar. 31, 2014

Accounting Changes And Error Corrections [Abstract]

New Accounting Standards

3. New Accounting Standards

None.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. At March 31, 2014 and December 31, 2013, receivables included $60.0 million and $52.9 million of unbilled receivables, respectively. For the quarter ended March 31, 2014, there were 15 projects representing approximately 12% of the Company’s total revenue and approximately 14% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 14 such projects during the first quarter of 2013, which represented approximately 19% of the Company’s total revenues and approximately 22% of its product revenues.

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory services. The customer may use a third party or their own personnel.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature.

Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method.

In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the number of common shares outstanding at March 31 of each year to the weighted average number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share:

	Three months ended March 31,
	2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,678		40,529
Dilutive effect of common stock options and awards		209		184
Weighted average diluted common shares outstanding—diluted		40,887		40,713

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 420,938	$ 384,356
Trade receivables, net	266,086	279,253
Inventories, net	397,356	368,354
Deferred income taxes	25,702	24,951
Prepaids and other current assets	28,322	21,899
Total current assets	1,138,404	1,078,813
Property, plant and equipment, net	311,473	304,806
Other assets	10,172	10,993
Total assets	1,460,049	1,394,612
Current liabilities:
Accounts payable	53,597	38,801
Accrued income taxes	15,185	13,628
Customer prepayments	52,870	45,025
Accrued compensation	17,288	21,556
Other accrued liabilities	17,748	23,780
Total current liabilities	156,688	142,790
Deferred income taxes	9,656	9,804
Total liabilities	166,344	152,594
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued)
Common stock: 50,000,000 shares authorized at $0.01 par value, 40,829,349 and 40,822,627 shares issued and outstanding at March 31, 2014 and December 31, 2013	407	407
Additional paid-in capital	195,305	191,965
Retained earnings	1,112,434	1,069,816
Accumulated other comprehensive losses	(14,441)	(20,170)
Total stockholders' equity	1,293,705	1,242,018
Total liabilities and stockholders' equity	$ 1,460,049	$ 1,394,612

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Operating activities
Net income	$ 42,618	$ 39,842
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	7,680	7,001
Stock-based compensation expense	2,826	2,091
Deferred income taxes	(869)	(1,142)
Changes in operating assets and liabilities:
Trade receivables, net	14,680	46,162
Inventories, net	(26,333)	(11,683)
Prepaids and other assets	(5,096)	434
Excess tax benefits of stock options and awards	(49)	(606)
Accounts payable and accrued expenses	13,146	(7,116)
Net cash provided by operating activities	48,603	74,983
Investing activities
Purchase of property, plant and equipment	(13,220)	(12,070)
Proceeds from sale of equipment	356	166
Net cash used in investing activities	(12,864)	(11,904)
Financing activities
Proceeds from exercise of stock options	463	3,067
Excess tax benefits of stock options and awards	49	606
Net cash provided by financing activities	512	3,673
Effect of exchange rate changes on cash activities	331	(4,969)
Increase in cash and cash equivalents	36,582	61,783
Cash and cash equivalents at beginning of period	384,356	257,191
Cash and cash equivalents at end of period	$ 420,938	$ 318,974

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Inventories - Schedule of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 91,514	$ 85,670
Work in progress	120,426	119,929
Finished goods	219,653	195,971
Inventory, gross, Total	431,593	401,570
Less: allowance for obsolete and excess inventory	(34,237)	(33,216)
Total inventory	$ 397,356	$ 368,354

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Commitments and Contingencies - Additional Information (Detail) (Brazil [Member], USD $) In Millions, unless otherwise specified	1 Months Ended		3 Months Ended
	Dec. 31, 2010	Mar. 31, 2010	Mar. 31, 2014
Brazil [Member]
Commitments And Contingencies [Line Items]
Tax assessment settled with payments	$ 3.9	$ 12.2
Amount of interest, penalties and monetary restatement fees on tax assessments	7.8
Tax credits once certified, period to utilize them			5 years
Value of assessments served on Brazilian subsidiary	$ 13.0

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Organization and Principles of Consolidation

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Organization and Principles of Consolidation

1. Organization and Principles of Consolidation

Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environment and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’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 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 the Company’s products.

The Company’s operations are organized into three geographic segments—Western Hemisphere (including North and South America; headquartered in Houston, Texas), Eastern Hemisphere (including Europe and Africa; headquartered in Aberdeen, Scotland) and Asia-Pacific (including the Pacific Rim, Southeast Asia, Australia, India and the Middle East; headquartered in Singapore). Each of these segments sells similar products and services and the Company has major manufacturing facilities in all three of its headquarter locations as well as in Macae, Brazil.

The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position as of March 31, 2014 and the results of operations, comprehensive income and cash flows for the three-month periods ended March 31, 2014 and 2013. Although management believes the unaudited interim related disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations, comprehensive income and the cash flows for the three-month period ended March 31, 2014 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	40,829,349	40,822,627
Common stock, shares outstanding	40,829,349	40,822,627

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Geographic Areas (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting

	Three months ended March 31,
	2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	94,389		$	99,729
Services		16,900			15,629
Intercompany		10,292			12,387
Total	$	121,581		$	127,745
Eastern Hemisphere
Products	$	53,923		$	37,833
Services		11,477			12,167
Intercompany		174			155
Total	$	65,574		$	50,155
Asia-Pacific
Products	$	23,689		$	22,923
Services		3,695			4,874
Intercompany		1,368			131
Total	$	28,752		$	27,928
Summary
Products	$	172,001		$	160,485
Services		32,072			32,670
Intercompany		11,834			12,673
Eliminations		(11,834	)		(12,673	)
Total	$	204,073		$	193,155
Income before income taxes:
Western Hemisphere	$	36,160		$	24,946
Eastern Hemisphere		15,347			17,008
Asia-Pacific		5,455			9,691
Eliminations		1,681			634
Total	$	58,643		$	52,279
	March 31, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	220,490		$	216,104
Eastern Hemisphere		46,973			43,430
Asia-Pacific		57,109			59,192
Eliminations		(2,927	)		(2,927	)
	$	321,645		$	315,799
Total Assets:
Western Hemisphere	$	851,096		$	803,069
Eastern Hemisphere		333,830			316,473
Asia-Pacific		308,960			292,600
Eliminations		(33,837	)		(17,530	)
	$	1,460,049		$	1,394,612

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 02, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	DRQ
Entity Registrant Name	DRIL-QUIP INC
Entity Central Index Key	0001042893
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		40,834,224

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Organization and Principles of Consolidation - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2014 Segment
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of geographic segments	3

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues:
Products	$ 172,001	$ 160,485
Services	32,072	32,670
Total revenues	204,073	193,155
Cost and expenses:
Products	91,331	96,673
Services	19,456	19,655
Total cost of sales	110,787	116,328
Selling, general and administrative	23,935	15,629
Engineering and product development	10,784	9,021
Total costs and expenses	145,506	140,978
Operating income	58,567	52,177
Interest income	83	116
Interest expense	(7)	(14)
Income before income taxes	58,643	52,279
Income tax provision	16,025	12,437
Net income	$ 42,618	$ 39,842
Earnings per common share:
Basic	$ 1.05	$ 0.98
Diluted	$ 1.04	$ 0.98
Weighted average common shares outstanding:
Basic	40,678	40,529
Diluted	40,887	40,713

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Geographic Areas

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Geographic Areas

6. Geographic Areas

	Three months ended March 31,
	2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	94,389		$	99,729
Services		16,900			15,629
Intercompany		10,292			12,387
Total	$	121,581		$	127,745
Eastern Hemisphere
Products	$	53,923		$	37,833
Services		11,477			12,167
Intercompany		174			155
Total	$	65,574		$	50,155
Asia-Pacific
Products	$	23,689		$	22,923
Services		3,695			4,874
Intercompany		1,368			131
Total	$	28,752		$	27,928
Summary
Products	$	172,001		$	160,485
Services		32,072			32,670
Intercompany		11,834			12,673
Eliminations		(11,834	)		(12,673	)
Total	$	204,073		$	193,155
Income before income taxes:
Western Hemisphere	$	36,160		$	24,946
Eastern Hemisphere		15,347			17,008
Asia-Pacific		5,455			9,691
Eliminations		1,681			634
Total	$	58,643		$	52,279
	March 31, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	220,490		$	216,104
Eastern Hemisphere		46,973			43,430
Asia-Pacific		57,109			59,192
Eliminations		(2,927	)		(2,927	)
	$	321,645		$	315,799
Total Assets:
Western Hemisphere	$	851,096		$	803,069
Eastern Hemisphere		333,830			316,473
Asia-Pacific		308,960			292,600
Eliminations		(33,837	)		(17,530	)
	$	1,460,049		$	1,394,612

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Inventories

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories consist of the following:

	March 31, 2014			December 31, 2013
	(In thousands)
Raw materials	$	91,514		$	85,670
Work in progress		120,426			119,929
Finished goods		219,653			195,971
		431,593			401,570
Less: allowance for obsolete and excess inventory		(34,237	)		(33,216	)
Total inventory	$	397,356		$	368,354

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Geographic Areas - Schedule of Segment Reporting (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Products	$ 172,001	$ 160,485
Services	32,072	32,670
Intercompany	11,834	12,673
Eliminations	(11,834)	(12,673)
Total revenues	204,073	193,155
Total long-lived assets	321,645		315,799
Income before income taxes	58,643	52,279
Total assets	1,460,049		1,394,612
Eliminations [Member]
Segment Reporting Information [Line Items]
Income before income taxes	1,681	634
Total long-lived assets eliminations	(2,927)		(2,927)
Total assets eliminations	(33,837)		(17,530)
Western Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	94,389	99,729
Services	16,900	15,629
Intercompany	10,292	12,387
Total revenues	121,581	127,745
Total long-lived assets	220,490		216,104
Income before income taxes	36,160	24,946
Total assets	851,096		803,069
Eastern Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	53,923	37,833
Services	11,477	12,167
Intercompany	174	155
Total revenues	65,574	50,155
Total long-lived assets	46,973		43,430
Income before income taxes	15,347	17,008
Total assets	333,830		316,473
Asia-Pacific [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	23,689	22,923
Services	3,695	4,874
Intercompany	1,368	131
Total revenues	28,752	27,928
Total long-lived assets	57,109		59,192
Income before income taxes	5,455	9,691
Total assets	$ 308,960		$ 292,600

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Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Source Project Method	Mar. 31, 2013 Project	Dec. 31, 2013
Accounting Policies [Abstract]
Number of product revenue sources	2
Unbilled receivables	$ 60.0		$ 52.9
Number of projects	15	14
Percentage of total revenues	12.00%	19.00%
Percentage of product revenues	14.00%	22.00%
Number of service revenue sources	3

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Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Schedule of Earnings Per Share

The following table reconciles the number of common shares outstanding at March 31 of each year to the weighted average number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share:

	Three months ended March 31,
	2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,678		40,529
Dilutive effect of common stock options and awards		209		184
Weighted average diluted common shares outstanding—diluted		40,887		40,713

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Deepwater Horizon Incident

On April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig known as the Deepwater Horizon that was operated by BP Exploration & Production, Inc. (“BP”) sank after an explosion and fire that began on April 20, 2010. Pursuant to a contract that the Company entered into with an affiliate of BP, it supplied to BP a wellhead and certain other equipment that were in use on the Deepwater Horizon at the time of the incident. The Company was named, along with other unaffiliated defendants, in both class action and other lawsuits arising from the Deepwater Horizon incident. These lawsuits were consolidated in the multi-district proceeding In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (“MDL Proceeding”). In 2012, the judge presiding over various lawsuits and proceedings dismissed all claims asserted against the Company in those proceedings with prejudice. On April 9, 2012, the judge issued an order granting a final judgment in favor of the Company with respect to the court’s prior order that granted the Company’s Motion for Summary Judgment.

One of the lawsuits against the Company consolidated in the MDL Proceeding was a personal injury lawsuit initially filed in a Texas state court. The plaintiff has filed a motion to remand the lawsuit back to the Texas state court. If the lawsuit is remanded to the Texas state court, the Company intends to vigorously defend that lawsuit and does not believe it will have a material adverse impact on its results of operations. Accordingly, no liability has been accrued in conjunction with this matter.

Brazilian Tax Issue

From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws.

In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $12.2 million in March 2010 and $3.9 million in December 2010. Approximately $7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a prepaid tax) that can be used to offset future state taxes on sales to customers in the State of Rio de Janeiro once certified by the tax authorities under a process that is currently ongoing. When the credits are certified, the Company will have a five-year period in which to utilize them. In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with additional assessments totaling approximately $13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (“Santo Credits”) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to this assessment on the grounds that it would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. The Company believes that these credits are valid and that success in the matter is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter.

Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007.

General

The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and dependency on the condition of the oil and gas industry. Additionally, products of the Company are used in potentially hazardous drilling, completion, and production applications that can cause personal injury, product liability, and environmental claims. Although exposure to such risk has not resulted in any significant problems in the past, there can be no assurance that ongoing and future developments will not adversely impact the Company.

The Company is also involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of such legal action, in the opinion of management, the ultimate liability with respect thereto will not have a material adverse effect on the Company’s operations, financial position or cash flows.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

Revenues Recognized Under Percentage-of-Completion Method

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. At March 31, 2014 and December 31, 2013, receivables included $60.0 million and $52.9 million of unbilled receivables, respectively. For the quarter ended March 31, 2014, there were 15 projects representing approximately 12% of the Company’s total revenue and approximately 14% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 14 such projects during the first quarter of 2013, which represented approximately 19% of the Company’s total revenues and approximately 22% of its product revenues.

Revenues Not Recognized Under Percentage-of-Completion Method

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service Revenue

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory services. The customer may use a third party or their own personnel.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature.

Earnings Per Share

Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method.

In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the number of common shares outstanding at March 31 of each year to the weighted average number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share:

	Three months ended March 31,
	2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,678		40,529
Dilutive effect of common stock options and awards		209		184
Weighted average diluted common shares outstanding—diluted		40,887		40,713

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Inventories (Tables)

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following:

	March 31, 2014			December 31, 2013
	(In thousands)
Raw materials	$	91,514		$	85,670
Work in progress		120,426			119,929
Finished goods		219,653			195,971
		431,593			401,570
Less: allowance for obsolete and excess inventory		(34,237	)		(33,216	)
Total inventory	$	397,356		$	368,354

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Stock-Based Compensation and Stock Awards - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-based compensation expense	$ 2,826,000	$ 2,091,000
Capitalized expense	$ 0	$ 0
Stock options or stock awards granted	0	0

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 42,618	$ 39,842
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	5,729	(14,623)
Total comprehensive income	$ 48,347	$ 25,219

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Stock-Based Compensation and Stock Awards

3 Months Ended

Mar. 31, 2014

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation and Stock Awards

4. Stock-Based Compensation and Stock Awards

During the three months ended March 31, 2014 and 2013, the Company recognized approximately $2.8 million and $2.1 million, respectively, of stock-based compensation expense, which is included in the selling, general and administrative expense line of the Condensed Consolidated Statements of Income. No stock-based compensation expense was capitalized during the three months ended March 31, 2014 or 2013. There were no stock options or awards granted in the first quarter of 2014. Except for a de minimis amount, there were no stock options or awards granted in the first quarter of 2013.

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Significant Accounting Policies - Schedule of Earnings Per Share (Detail) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Weighted average basic common shares outstanding-basic	40,678	40,529
Dilutive effect of common stock options and awards	209	184
Weighted average diluted common shares outstanding-diluted	40,887	40,713