Drilling Tools International Targets Global Growth, Debt Reduction Through Rentals and M&A

Drilling Tools International is pursuing a growth strategy centered on rental tools, international expansion and acquisitions while emphasizing free cash flow and debt reduction, Vice President of Corporate Development Jameson Parker said during an investor presentation. Parker described the company’s operating model as the “three Rs”: rental, repair and recovery. The company rents downhole drilling tools, repairs them for reuse and collects recovery payments when tools are lost in a well or damaged beyond repair. He said those recovery payments fund maintenance capital expenditures, a feature he characterized as distinct from many other public oilfield-services businesses. The company provides downhole tools used in land and offshore drilling, including drill pipe, heavyweight pipe, bottom-hole assembly equipment, directional drilling accessories, reamers and stabilizers. Parker said Drilling Tools International’s core revenue is tied to drilling accessories and directional drilling work, making its business closely correlated with rig counts. About half of the company’s customers are exploration and production operators, while the other half are other oilfield-services companies, according to Parker. He said customers typically choose to rent tools rather than own them because they need a wide variety of equipment configurations, including different hole sizes, geometries and connection types. “It is simply not efficient for them to own and maintain their own fleet,” Parker said, comparing the rental decision to travelers using hotels rather than maintaining their own lodging. Drilling Tools International maintains and repairs equipment at centralized field locations that function largely as machine shops, he said. The company has more than 65,000 tools in inventory and uses its COMPASS software platform to track each tool throughout its lifecycle, including inspections, certifications, repairs, utilization and customer rental activity. Parker highlighted several technology offerings acquired or developed through acquisitions, including the Drill-N-Ream tool from Superior Drilling Products and the ClearPath stabilization product suite acquired through European Drilling Projects. He said ClearPath tools have gained adoption among operators in the Gulf of America and the Norwegian North Sea. The products are designed to support managed-pressure drilling applications in deepwater environments, where controlling equivalent circulating density can be important because of thin fracture gradients. The company also manufactures most of its capital equipment internally, Parker said, citing facilities in Broussard, Louisiana; Vernal, Utah; and Canada. He said the manufacturing footprint supports the company’s fleet needs and higher-specification work.