Drilling Tools International Corporation · NASDAQ:DTI
Drilling Tools International — ROC Energy Acquisition — SPAC Merger (April 2023)
45 slides from Drilling Tools International's SPAC merger presentation, Apr 18, 2023
Slide 1: Analyst & Investor Day April 18, 2023
Analyst & Investor Day April 18, 2023
Slide 2: Disclaimer
Disclaimer: This confidential presentation (the “Presentation”) is being delivered to you by ROC Energy Acquisition Corp. (“SPAC”) in con ne ction with its potential business combination with Drilling Tools International Holdings, Inc. (“Drilling Tools”) and the offering of the securities of the pos
Slide 3: No Offer or Solicitation
No Offer or Solicitation: This Presentation and any oral statements made in connection with this Presentation are is not intended to and shall not cons ti tute ( i ) a solicitation of a proxy, vote, consent, approval or authorization with respect to any securities or in respect of the proposed busin
Slide 4: Non-GAAP Financial Measures
Non - GAAP Financial Measures: This Presentation includes certain financial measures not presented in accordance with generally accepted accounting principl es (“GAAP”), including, but not limited to, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA before capital ex
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Slide 6: Table of Contents
Table of Contents 5 Transaction Summary 6 Business Overview 9 Financial Overview and Growth Opportunities 32 Valuation 36 Question & Answer Session 40 Appendix 41
Slide 7: Transaction Overview
(DRILLING TOOLS’ INTERNATIONAL Transaction Overview
Slide 8: DTI's Key Attributes
7 DTI’s Key Attributes Long - tenured company with proven ability to generate profits through cycles and experienced management team Established Company Serves blue - chip customer base through international operating footprint and large fleet of tools and facilities Excellent Customer Service Propr
Slide 9: Transaction Summary: Sources and Uses, Pro Forma Valuation
Common equity holders are rolling 100% of their shares as part of the Transaction Note: Due to rounding numbers presented herein may not sum precisely to the totals provided. 8 Transaction Summary ($Millions, except where otherwise noted) Estimated Sources and Uses Pro Forma Valuation Sources Rollov
Slide 10: Business Overview
INTERNATIONAL RILLING TOOLS* nv) Business Overview
Slide 11: Significant Industry Tailwinds & Supportive Macro Backdrop
1) Baker Hughes; 2) Energy Information Association; 3) Spears Directional Drilling Market Report – Q3 2022. Only includes numbe r of feet drilled through reservoir rock, excludes vertical part of well; 4) Rystad 10 A combination of elevated commodity prices, increased rig count and capital spending
Slide 12: Reiterating 2023 Financial Outlook
1) Reflects financial outlook communicated on February 14, 2023. 11 Reiterating 2023 Financial Outlook Maintaining outlook for robust growth and profitability in 2023 Metric Guidance Status Revenue ($ million) $163.8 Adjusted EBITDA ($ million) $58.0 Adjusted EBITDA Margin 35.4% Free Cash Flow ($ mi
Slide 13: DTI is a Leading Rental Provider of Mission Critical Drilling Tools
1) Includes four international stocking points. See page 18 for additional detail. 12 DTI is a Leading Rental Provider of Mission Critical Drilling Tools A platform developed and designed to keep up with the ever - changing requirement of our customers 65,000+ DTI manages & maintains a fleet of over
Slide 14: The Rental Tool Business & DTI's Value Proposition
Why do E&P operators and some service providers prefer to rent rather than buy? 13 The Rental Tool Business & DTI’s Value Proposition Topic DTI’s Value - Additive Solutions Outsources Logistics, Inspection, Storage and Maintenance Customers lack the willingness, resources and/or experience to track,
Slide 15: Expansive Offering to Supply Drilling Tools Required in a Typical Job
14 Expansive Offering to Supply Drilling Tools Required in a Typical Job Blow Out Preventer Drill Pipe Hevi - Wate Drill Pipe Crossover Subs Spiral Drill Collar Drill - N - Ream TM RotoSteer TM Stabilizer Bit Sub Represents Key DTI Rental Product Diverse and extensive inventory of tools to address t
Slide 16: A Market Leader in Downhole Tools for the Oil & Gas Industry
Source: Company financials and management estimates. 1) Net of eliminations. 15 Leading provider of downhole drilling equipment rentals to North American onshore and offshore markets, as well as select int ern ational locations, with a highly competitive suite of differentiated products serving blue
Slide 17: DTI Has a Long History of Success
16 How Did We Get There? DTI Has a Long History of Success 1984 Founded as Directional Rentals Primarily rented stabilizers and sub - assemblies to offshore directional drillers in the Gulf of Mexico (“GoM”) 2009 Opened Houston, TX and Casper, WY offices Mike Domino joined the management team 2013 A
Slide 18: Our Proven Track-Record in Executing & Integrating M&A
17 Our Proven Track - Record in Executing & Integrating M&A Management boasts a proven track record in strategic acquisitions highlighted by the integration of 4 businesses since 2012 Select Acquisitions Target Year Acquired Description 2013 2014 2018 2018 Purchased their entire North American fleet
Slide 19: Scale Matters: Operations Across All Major Operating Basins
18 Scale Matters: Operations Across All Major Operating Basins in North America DTI Corporate Headquarters DTI Service Centers (DTR, DNR, & DIS): 9 Drill - N - Ream TM : 2 Premium Tools Division (PTD): 2 18 service centers, shops, distribution and repair centers located strategically across North Am
Slide 20: Strong Permian Presence in both Midland and Delaware Basins
19 1) Includes aggregate square footage from five buildings. 2) Downhole machining solutions. Strong Permian Presence in both Midland and Delaware Basins DTI has an extensive footprint within the Permian Basin, providing numerous services to clients operating in one of the most pro lific oil and gas
Slide 21: Modernized Manufacturing and Repair Facility
20 Machine and repair equipment ensures product quality, increases product life and improves fleet utilization Facility equipment includes hollow spindle lathes, CNC mills, racking systems, manual lathes and in - house drill collar spiraling equipment Machine shop reworks drill collars and hevi - wa
Slide 22: DTI's COMPASS Order Management System
21 DTI’s proprietary customer order management system provides valuable information to the company for use in making data - based cap ital allocation and pricing decisions DTI’s COMPASS Order Management System = Key Differentiator Unique, Proprietary Software and Support System Full Catalog of Tools
Slide 23: ESG + Safety Are Integral to Our Success
ESG + Safety Are Integral to Our Success 22 1) Total Recordable Incident Rate. 2) We expect that following the business combination, a majority of our directors will be independent as per the applicable list ing rules. The wellbeing of employees, customers, and suppliers is rooted in DTI’s operation
Slide 24: Overview of DTI's Core Product and Service Offering
Source: Company financials and management estimates. 1) Net of eliminations. 23 Overview of DTI’s Core Product and Service Offering ($Millions) Product / Service Offering Other Products and Services (1) Premium Tools Wellbore Optimization Tools Directional Tools Rental 2020A – 2023E Revenue Profile
Slide 25: Overview of Directional Tool Rentals
24 Overview of Directional Tool Rentals Key Equipment Stabilizers Reduces drill string vibration and torque… Drill Collars Adds weight to the BHA to increase rate of penetration (“ROP”) and reduce vibration… Subs and Other Equipment Variety of subs, crossovers and handling tools used in the drill st
Slide 26: Overview of Wellbore Optimization Tools
1) DTI distributes the DNR pursuant to a distribution agreement with Superior Drilling Products, Inc., the owner of the relevant pa tent. 25 Overview of Wellbore Optimization Tools Products Offered Drill - N - Ream TM (“DNR”) WellBore Conditioning Tool (1) Patented technology allows the tool to main
Slide 27: Overview of Premium Tools
26 DTI offers a wide array of premium tubulars for drilling, workover and completion operations, API blowout preventers and pres sur e control accessories as well as a comprehensive suite of related handling tools Overview of Premium Tools Key Equipment Tubulars Drill Pipe – 2 ଼ Τ to 5 ଵ ଶ Τ inch
Slide 28: Other Products and Services
27 Other Products and Services Products Offered Internal Support Services and Emerging Products Downhole Inspection Solutions Independent inspection services equipment of all DTI divisions and select external customers Critical to efficient operations Services across North America including network
Slide 29: Blue-Chip Customer Base Across E&Ps & OFS Companies
Blue - Chip Customer Base Across E&Ps & OFS Companies 28 2022 Revenue by Customer (%) Select DTI Customers DTI has established an exceptional customer base that includes blue - chip E&P operators and many of the largest oilfield services companies First - call supplier for leading oilfield service p
Slide 30: DTI Sales Team Covers Global Markets
29 DTI Sales Team Covers Global Markets 1) January 1, 2022 through December 31, 2022, expected. DTI Sales Organization Coverage Aberdeen Latin America Middle East Abu Dhabi Colombia Dubai Mexico Oman Trinidad International Europe Western Canada California Bakersfield Calgary Nisku Louisiana Texas/Ne
Slide 31: Significant Upside Through Continued Consolidation
30 Significant Upside Through Continued Consolidation DTI believes that its established M&A framework and robust M&A pipeline will allow it to rapidly consolidate the oilfield ser vic e rental tool industry Overview of DTI’s M&A Framework DTI’s 300+ MSAs, many of which are with leading service compa
Slide 32: Experience Matters! The DTI Leadership Team
31 Experience Matters! – The DTI Leadership Team Experienced, talented, and committed management team with history of success Wayne Prejean President & Chief Executive Officer Mike Domino President, Directional Tool Rentals Division David Johnson Chief Financial Officer Jim Rowell VP, Premium Tools
Slide 33: Financial Overview and Growth Opportunities
32 Financial Overview and Growth Opportunities
Slide 34: Attractive Financial Profile
33 Attractive Financial Profile Revenue Free Cash Flow (2) Commentary Adjusted EBITDA Growth Rate 14% 67% 26% % Margin (1) 20% 32% 35% Strong and Increasing Revenue Profile Accelerating EBITDA and Margin Profile Translating to Record Free Cash Flow Generation ($Millions) Generated positive Adjusted
Slide 35: Strong Growth Driven by all DTI Products
34 Strong Growth Driven by all DTI Products… Revenue Growth by Product Source: Company financials and management estimates. Note: Due to rounding numbers presented herein may not sum precisely to the totals provided. CAGR ’20A – ’23E Total: 34% 41% 53% 18% 35% ($Millions) $41.2 $47.6 $78.0 $100.7 $1
Slide 36: Driving Consistently Attractive Margins
35 …Driving Consistently Attractive Margins Source: Company financials and management estimates. 1) Includes full burden of corporate expenses. 2) Excludes corporate expense burden. Consolidated EBITDA Margin (1) Product - Level EBITDA Margin (2) Other Products & Services Premium Tools Wellbore Opti
Slide 37: Valuation
(DRILLING TOOLS’ INTERNATIONAL Valuation
Slide 38: Transaction Summary: Sources and Uses, Pro Forma Valuation
Common equity holders are rolling 100% of their shares as part of the Transaction Note: Due to rounding numbers presented herein may not sum precisely to the totals provided. 38 Transaction Summary ($Millions, except where otherwise noted) Estimated Sources and Uses Pro Forma Valuation Sources Rollo
Slide 39: A Differentiated Pro Forma Balance Sheet
37 A Differentiated Pro Forma Balance Sheet Upon close, DTI expects to have zero debt, significant cash, and a streamlined warrant - less capital structure x Expected zero debt x Expected significant cash x No warrant overhang x Streamlined capital structure x Dry powder to execute further M&A x Sig
Slide 40: Peer Valuation and Operating Metrics
Peer Valuation and Operating Metrics 39 Source: Bloomberg, Capital IQ and company filings. Market data as of April 12, 2023. 1) EBITDA includes full burden of corporate expenses. Pro forma for illustrative transaction found on page 38. 2) Pro forma for FlexSteel acquisition announced on January 3, 2
Slide 41: Question & Answer Session
(DRILLING TOOLS’ INTERNATIONAL Question & Answer Session
Slide 42: Appendix
INTERNATIONAL RILLING TOOLS* «D Appendix
Slide 43: Reconciliation of Adjusted EBITDA
42 Reconciliation of Adjusted EBITDA Source: Company financials and management estimates. DTI is a December year - end company. Note: Due to rounding numbers presented herein may not sum precisely to the totals provided. ($ in thousands) 2020A 2021A 2022A 2023E Net income $(18,525) $2,101 $21,080
Slide 44: Risk Factors Summary
Risk Factors Summary Certain factors may have a material adverse effect on our business, financial condition and results of operations. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or th at we currently believe
Slide 45: Risks Relating to Legal and Regulatory Matters
Risks Relating to Legal and Regulatory Matters • We could be adversely affected if we fail to comply with any of the numerous existing or future federal, state, local and for eig n laws, regulations and policies that govern environmental protection, manufacturing and other matters applicable to our