You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. 
Text: I'll begin with a high-level review of our 2020 results and highlight the many accomplishments that we were able to deliver during the year.
These accomplishments were achieved despite the tremendous challenges presented by the global pandemic.
I will then provide some closing comments and open the call to questions.
The pandemic brought immense challenges to our industry customers and our employees and their family.
Whether their jobs were performed in our manufacturing facilities, on a rig servicing our customers, or working remotely, all of our employees adjusted their lives for the good of the organization and in service to our customers.
I am grateful for all their contributions.
Although our 2020 results were challenged by the pandemic and associated oil and gas demand destruction, it was not a year without significant progress and accomplishments for Dril-Quip.
The transformation and productivity journey we started in 2019 positioned us well for this challenging environment.
We were able to conclude 2020 with $365 million of revenue and $32 million of adjusted EBITDA.
Although a decrease from our 2019 results, we successfully responded to the challenging environment by mitigating the impact of the pandemic as seen in our operating and financial results and continued delivering products and services to our customers.
We also celebrated many accomplishments in our research and development efforts during 2020.
In May, we were presented with our fifth spotlight on new technology award by the Offshore Technology Conference for our VXTe Subsea Tree System.
The VXTe system is a disruptive technology in the subsea production system space.
VXTe provides significant cost and time savings for our customers, which improves their IRR by reducing capital and time to first oil, with the added benefit of reducing their carbon footprint.
The VXTe offers the operator the ability to drill the well to completion and land the tubing hanger in the wellhead as part of their normal drilling operations without regard to its orientation.
This eliminates the traditional development well scenario, whereby the operator will cease drilling operations, pull the BOP stack and run the horizontal tree or tubing spool and then rerun the BOP stack to drill the well to completion.
We estimate that this, combined with our other e-Series technology products, will save operators approximately $5 million per well and five days of rig time.
We have seen incredibly positive response from our customers about the potential to improve their operations with this technology.
Our R&D and manufacturing teams worked hard through the pandemic to complete all qualification tests and maintain the production schedule of the first VXTe tree.
With the tree now in final assembly, we expect to make delivery in the first quarter and hopefully, installing the first VXTe this year.
While we are aware that consolidation is needed in our sector, we also know the difficulties in quickly executing that strategy.
Accordingly, we embarked on a strategy of consolidation through collaboration.
In 2020, we entered into a strategic collaboration agreement with Proserv for the manufacture and supply of subsea control systems.
This nonexclusive collaboration achieved two main priorities.
First, it allowed us to offer our customers the latest subsea controls technology without having to make the significant research and development investment of $8 million to $10 million per year over the next three years, as well as eliminated the associated operating costs of maintaining that product line.
Second, this win-win scenario allows us to bundle our award-winning subsea trees with Proserv's state-of-the-art control systems and offer our customers significant value.
The collaboration with Proserv was part of a larger strategy to continue down our transformation path to align our business with market activity.
Allowing us to refocus our engineering and manufacturing resources toward solutions that set us apart from our peers and offer the highest return on invested capital.
This strategy led us to the difficult decision to transition and consolidate our subsea tree manufacturing from Aberdeen to Houston as we saw the subsea tree market decline from close to 300 subsea trees to a little over 100 tree awards in 2020.
Aberdeen is a critical location for our operations, and therefore, we still have a significant presence there.
This includes sales, project management, fabrication, final assembly and aftermarket operations serving our customers.
In total, the productivity initiatives executed in 2020 reduced our costs by approximately $20 million on an annualized basis and helps us to continue on maintaining profitability and a strong balance sheet.
As we view the market today, it seems probable that a longer, more gradual post-pandemic recovery is likely.
This means it could take several years to return to 2019 activity levels.
The recovery is also likely to vary by geography and customer profile.
Low-cost areas of offshore development, like the Caribbean, or with the support from subsidies and parts of the North Sea, are expected to see activity levels remain steady.
The same can be said for national oil companies that typically drill for domestic energy consumption.
In contrast, the most recent developments in the U.S. regulatory environment through executive order has created uncertainty around future projects in the U.S. Gulf of Mexico.
Overall, our outlook on the market takes into account multiple factors, including demand recovery, supply control from OPEC, and increased emphasis by government regulators on transitioning toward less consumption of fossil fuels in favor of alternative energy sources.
The energy transition is a process we believe should be guided by market forces and approached rationally with regulatory consistency.
We recognize the transition is under way, but will take time and resources to accomplish.
Furthermore, we believe hydrocarbons will continue to play an important role in this transition, continuing to provide affordable, reliable and often cleaner energy to help lift developing nations out of poverty, while developed nations move more toward alternative energy sources.
Dril-Quip has a role to play in both parts of the transition solution.
As part of our commitment to this transition, we have always prioritized helping our customers efficiently produce hydrocarbons and our latest e-Series suite of products continues that legacy.
Many of our customers have made pledges to reduce emissions or become carbon neutral in the coming years.
A large part of these commitments, in some cases, as high as 70% reduction in carbon emissions, will come from the vendors who supply these companies.
Dril-Quip's innovative line of products are green by design, offering significant reductions in material or equipment that must be installed.
This design methodology, which has always been part of Dril-Quip's DNA, eliminated the carbon associated with manufacturing equipment as well as reducing the offshore installation days.
These products are thoroughly tested to improve reliability, which leads to better well integrity and fewer workovers.
For example, the combination of our e-Series technologies can help reduce roughly 40 tons of steel from traditional operations.
The elimination of this component alone reduces carbon emissions by approximately 70 tons as the process needed to produce the steel is no longer required.
We look forward to continuing to lead in the technologies and products that help our customers achieve their operational objectives.
However, as we make the energy transition together, we do not lose sight of the very important role the industry currently plays today in providing reliable, affordable energy, and we take great pride in being part of that solution as well.
I'm going to walk through Q4 performance and also provide a review for the full year of 2020.
We executed well, given the challenges we saw in the overall market.
Revenue for the fourth quarter fell slightly from the prior quarter to $87 million.
This decline was mainly due to lower manufacturing production hours related to increasing levels of quarantines from rising COVID-19 cases, seen mainly in the U.S. Adjusted EBITDA for the fourth quarter was $9 million, a decrease of $1 million from the prior quarter.
The same factors impacting our revenue fell through to the bottom line.
We also saw regional government subsidies implemented as a result of the pandemic being reduced during the quarter.
For the full year 2020, our revenues were $365 million, a decrease of $50 million versus 2019.
This was driven by the impacts of the pandemic on overall oil and gas demand.
Adjusted EBITDA for the full year 2020 was $32 million, a decrease of $22 million from the previous year.
We were successful in addressing this market decline by swiftly taking steps to reduce costs and optimize our global footprint.
As a result of this execution, we saw our margin profile improve significantly in the second half of 2020 as we realize the benefit of these cost actions.
We met our $20 million cost reduction target in 2020.
These are always difficult decisions, but were necessary in this environment.
We expect these cost reductions to be sustainable going forward.
While most of our regions saw headwinds to product and leasing revenues during the year, our service revenue saw an increase year-over-year.
This was primarily due to an increase in installations from orders booked in previous years, coupled with the growth in our downhole tools business.
Our downhole tools business was able to outpace the market by gaining share in key markets in the Middle East and Latin America as a result of service quality and execution.
I'll now move on to margins.
Gross margins were under pressure.
But given the environment, it held up falling by only 3%.
Our decision to take actions early in the year helped to support margins as the year progressed.
We saw EBITDA margins improve 3% from the first half to the second half 2020 after normalizing for mix and the impact of disruptions related to COVID-19.
Moving to SG&A expenses.
For the fourth quarter of 2020, SG&A was $26 million, an increase of $5 million compared to the third quarter.
This increase was mainly due to short-term legal expenses.
We expect these legal expenses to continue into the first half of 2021, mostly in connection with the trial currently scheduled for April.
For the full year 2020, SG&A expenses decreased by $8 million to $90 million after excluding these short-term legal expenses.
These improvements in SG&A stem from our 2020 cost out initiatives.
On the engineering R&D side, we saw a modest increase in 2020 to $19 million as we work to bring the VXTe to market.
Now looking at bookings for the year.
Product bookings were negatively impacted by the difficult market conditions in 2020.
After approximately $388 million in bookings during 2019, the uncertainty surrounding the pandemic and its impact on commodity prices led to customers holding off or delaying decisions to book orders for their upcoming projects.
We saw smaller orders with less predictable timing.
We now see one or two orders being the difference between a $40 million or a $60 million bookings quarter.
We expect the effects of the pandemic to persist into the first half of 2021, but are cautiously optimistic that things will gradually recover as the year progresses.
We believe there is some upside if operators see increased stability in prices and confidence in the global economic recovery returns with the recent rollout of COVID-19 vaccines.
We expect the road to recovery to be more gradual.
We are taking actions related to our productivity initiatives driven by our LEAN management philosophy and are targeting a $10 million cost improvement on an annualized basis.
These savings will come primarily from changes in our manufacturing and supply chain functions, including an increase in outsourcing for our downhole tools business.
The timing of these productivity actions will take place over the course of the year and is expected to deliver roughly $5 million of realized benefit in 2021.
Moving on to capital expenditure or capex.
In the fourth quarter of 2020, our capex totaled just under $2 million.
And for the full year, it was around $12 million.
This represents a minimum maintenance level of capex that we have seen over the past two years.
We are, however, anticipating an increase in capex to range in between $15 million to $17 million in 2021.
The increase is partly related to growth in our downhole tools business.
We are also investing in manufacturing safety and equipment and our information technology infrastructure.
We will monitor conditions to adjust our capex if necessary, but we believe these investments will support growth and improve our long-term efficiency and profitability.
Now let me turn to the balance sheet.
We continue to maintain a strong balance sheet and remain focused on protecting our cash position with no debt.
At year-end, we had cash on hand of $346 million and a further $40 million of availability in our ABL facility.
This results in approximately $386 million of available liquidity.
Our balance sheet and liquidity position are critical for us.
It gives our customers confidence in our ability to execute on our commitments and provides financial flexibility.
Moving on to free cash flow.
Free cash flow for the fourth quarter was a negative $18 million.
For the full year, it was negative $33 million.
Both the quarter and full year free cash flow was slowed by several headwinds, many of which were related to the pandemic.
Firstly, we saw a number of large customers whole payments that were due at year-end until early in January.
While we are accustomed to disturb our balance sheet management by our customers, this amount was beyond our normal experience.
Secondly, we saw inventory build in 2020, driven by customers requesting delays in shipments and our need to continue to procure materials for upcoming projects.
We also strategically added inventory for our expanding downhole tools business and subsea trees for stocking programs.
Both these factors led to an increase in inventory.
These working capital increases were partially offset by a federal tax refund.
We believe we have laid the foundation for a strong recovery.
We executed in improving billing turnaround and worked to improve our collection efforts and expand payment terms with vendors.
We expect we will see benefits of these efforts more clearly in 2021.
Free cash flow is a primary focus for us as a management team.
We have tied all annual incentives for our entire leadership team to free cash flow.
We are focused on all aspects of working capital.
We have dedicated a cross-functional team working on inventory reduction in a more gradual recovery environment.
Our auditor cash teams are gaining traction on reducing time to bill.
And we are continuing to leverage our supply base by moving to a more vendor-managed inventory program.
In the current environment and given the initiatives I just mentioned, we expect to be able to generate 5% free cash flow yield.
The bottom line is that free cash flow is a key metric for the management team.
Prior to turning the call back over to Blake for closing comments, I will give some color on what we expect to see in 2021.
Based on the current view and the conversations with customers, we expect 2021 bookings to be around $200 million for the year.
At these product booking levels and with the anticipated growth in our downhole tools business, we expect to see revenue to come in flat to slightly down from 2020.
We are forecasting 40% decremental margins for any given decline in revenue as we hold costs critical to address a recovery.
As I mentioned earlier, we are forecasting a free cash flow yield around 5% in 2021.
We are well positioned to achieve this goal and have aligned management objectives and incentives toward meeting this target.
To sum up, while we see near-term headwinds from the hangover of the pandemic, we see a gradual recovery in sight.
We have a proven track record of executing and meet these near-term challenges head on as we prepare for the recovery and focus on our strategic initiatives.
We have a strong financial position and a strong management team to execute in this market environment.
As we enter 2021, we believe there are signs to be optimistic that a recovery, even a more gradual one, is beginning to take form.
We have established several strategic initiatives, which will position Dril-Quip to thrive in the years ahead.
First, we are continuing to progress our consolidation through collaboration strategy through peer-to-peer collaborations that help to expand market access for our technology.
We see these collaborations through several lenses.
With respect to VXTe, we believe via conversations and significant pull from both customers and peers in the market that VXTe monetization remains a midterm opportunity via Dril-Quip providing the IP kit to our peers for delivery to end customers.
With wellheads, as a best-in-class wellhead provider, we believe both our superior technology and qualification lend themselves to partnering with multiple peers in integrated offerings.
Finally, with our connectors, we believe that real opportunity exists to partner with pipe providers around the world to build out better supply chains to improve delivery to our customers.
The common theme of these strategies is to expand share while reducing overall industry capacity.
Second, we have a downhole tool business that we believe has not fulfilled its potential.
We would expect to have a business here that has a market share similar to our wellhead franchises in most markets.
Quite frankly, we've struggled over the last few years with that business.
But we've laid the foundation in 2020 for significant growth in 2021.
We have a new leader.
We've shuttered underperforming bases.
We place smart bets with stock and added business development resources in key regions.
Further, we are only beginning to capitalize on our technology as outlined via our XPak DE technology.
Finally, as I'm sure you followed, we've moved from an organization of transformation to an organization that demands real annual productivity improvements.
These productivity initiatives span our organization and will make us nimble in difficult times while allowing us to scale up when the market returns.
Productivity and LEAN are now the way we do business and will serve us well in good and bad times.
As we look to the market increasingly focused on energy transition, we are continuing to be green by design, delivering lower carbon options for our customers, continuing to drive R&D that reduces the carbon footprint for our customers and following our customers in their transition.
While we are in the early stages of our R&D, rest assured that you can expect us to bring the same level of innovation to energy transition that we have to our customers over the last several decades.
In conclusion, the culmination of all these efforts leads to increasing market share by using technology and execution as a differentiator.
We will be keenly focused on free cash flow generation in a competitive free cash flow yield to attract investment and ultimately benefit our shareholders.
As Raj indicated, we are continuing several key working capital reduction initiatives in 2021.
We take these commitments seriously and have tied our annual performance compensation toward meeting these goals.
I look forward to providing further updates on the progress we are making across all our strategic areas in the coming quarters and sharing the benefits of success with our employees, customers and shareholders.

user
anticipate that orders could continue to be lumpy and remain in a $40 to $60 million range per quarter for 2021.

assistant