Dresser-Rand Group, Inc. (DRC)

Dresser Rand makes pumps, compressors and other rotating machinery for oil, gas, refining, petrochemical and process industries. As of 13 Jun 08, the company has a market cap of $3.5 billion, trades at 15.4 times analysts’ 2009 estimates, has 370 million in debt, 260 million in cash and an estimated 5-year growth rate of 29%. The company doesn’t pay a dividend.

According to the latest earnings transcript the company has a $2.1 billion order backlog. They also have a $150 million buyback authorized; that would be over 4% of the float if exercised at Friday’s closing price.

During the earnings call, the company stated that the refinery business is good. Despite US refineries scaling back expansion plans, they are upgrading to handle heavier or high sulfur crude oil. And, overseas refinery equipment orders are strong. “So, maybe there is a bit of a slowdown in the U.S. refining, but I can tell you that on a worldwide basis, there is a heck of a lot of activity.” according to Mark E. Baldwin, Executive Vice President and Chief Financial Officer. Strong worldwide refinery business is consistent with statements made during Graham Corp's conference call as well.

President and CEO Vincent Volpe stated, “We continue to believe that our 2008 operating income will be in the range of $285 million to $315 million.”

Mr. Volpe made an interesting comment concerning R&D efforts to improve the ability of pumps to handle mixed gas and liquid flows. “So, I would say that we are ahead of the game, not behind the game and we're ahead of it with what I believe is leapfrog technology, which we've patented.” I’m not sure exactly how much that benefits oil extraction, but at $130+ a barrel, anything that makes extracting crude more efficient would certainly be appealing.

In summary, very reasonable PE, strong order backlog and a customer base covering the upstream and downstream of the oil and gas industry.