Drilling Tools International (‘DTI’), which has its head office in the Westchase area of Houston, is being taken public by ROC Energy Acquisition Corp, a Dallas-based SPAC. The transaction values the business at $319 million.
DTI manages and maintains over 65,000 rental tools and drilling equipment across 22 service and distribution centers in North America and Europe. Its main machine and repair center is in Broussard, Louisiana.
The business was founded in 1984 as Directional Rentals. In 2012, Hicks Equity Partners, also based in Dallas, acquired the business. Since then, the business has made 7 acquisitions and revenue has grown to an expected $164 million in 2023.
Adjusted EBITDA for 2023 is forecast to be $58 million (35%). That’s a misleading metric for any rental business that has high capex needs. Free cash flow, defined as EBITDA less capex is forecast to be $19 or 11%.
The transaction will leave DTI with no debt and $217 million of cash on the balance sheet to fund future acquisitions.
Wayne Prejean has been the CEO at DTI since 2013. He has a long career in directional drilling companies. In 1999, he founded Wildcat Services before selling it to National Oilwell Varco in 2004. Mr. Prejean stayed with NOV after the sale.
David Johnson joined as CFO, also in 2013. He has been the CFO at a number of drilling companies prior to that.
ROC went public in December 2021 in a $150 million IPO. Its original intention was to focus on non-operated oil and gas properties (i.e. where the E&P company owns the well but does not manage the operations of the well).
ROC may have had to pivot after Granite Ridge Resources, a business that owns non-operated assets, was taken public in October 2022 by a rival SPAC chaired by Paul Ryan, the former speaker of the House of Representatives. Since going public, Granite’s stock is down 30%
The transaction is expected to close in the second quarter of 2023.