Drilling Tools International Corp

Unless the context otherwise requires, all references in this section to the “Company,” “DTIC,” “we,” “us,” or “our” refer to the business of Drilling Tools International Corporation and its consolidated subsidiaries following the consummation of the Merger (defined below), and to Drilling Tools International Holdings, Inc. and its consolidated subsidiaries prior to the consummation of the Merger.

Our Company

On June 20, 2023, a merger transaction between Drilling Tools International Holdings, Inc. ("DTIH"), ROC Energy Acquisition Corp ("ROC"), and ROC Merger Sub, Inc., a directly, wholly owned subsidiary of ROC, was completed (the "Merger”). In connection with the closing of the Merger, ROC changed its name to Drilling Tools International Corporation ("DTIC"). The common stock of DTIC ("Common Stock" or the "DTIC Common Stock") commenced trading on the Nasdaq Stock Market LLC ("Nasdaq") under the symbol "DTI" on June 21, 2023.

Drilling Tools International Corporation is a global oilfield services company that designs, engineers, manufactures and provides a differentiated, rental-focused offering of tools for use in onshore and offshore horizontal and directional drilling operations, as well as other cutting-edge solutions across the well life cycle.

Drilling and producing oil and gas is a complex endeavor that requires tools of various shapes and sizes. Many of our customers rent these tools, as opposed to owning them, because of the many factors that affect which tools are needed for a specific task. Such factors include different formations, drilling methodologies, drilling engineer preferences, drilling depth and hole size. We believe that we are successful because we meet our customers’ wide demands by operating from multiple locations with over 65,000 tools in our fleet.

We are led by an accomplished management team that has significant experience in the oil and gas industry and has worked together for much of the last decade. Since 2012, we have grown the business and strengthened our standing in the industry. Specifically, we have:

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Grown our revenue by 357%, from $35 million in 2012 to $160 million in 2025;

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Substantially increased our market share within North American land drilling, in which we are the market leader, based on the percentage of active projects to which we supply tools, and regularly have active tool rentals on more than 50% of working locations;

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Expanded our footprint from 3 to 15 service and support centers in North America, allowing us to serve all major oil and gas producing basins in North America land and offshore;

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Established 11 additional International service and support centers across Europe, Middle East, and Asia-Pacific;

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Acquired multiple international businesses, further expanding our presence in the Eastern Hemisphere;

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Become the market leader in Gulf of Mexico ("GOM") deepwater drilling operation tool rentals, based on the percentage of active projects to which we supply tools, growing from serving only a single GOM project in 2012;

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Upgraded our customer base from one comprised primarily of independent directional service providers to one comprised of major diversified oilfield service companies ("OSCs") and global exploration and production ("E&P") operators;

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Built a large sales and marketing organization focused on team selling; and

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Secured distribution rights for emerging technologies that fulfill the growing demand for longer horizontal drilling.

Operating Activities

Our operating activities are divided into two geographic segments:

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Western Hemisphere — our Western Hemisphere segment focuses on providing a comprehensive range of downhole drilling tools and services primarily for onshore and offshore operations across North America and Latin America. This segment offers a rental-focused portfolio that includes directional drilling tools, stabilizers, drill collars (steel and non-magnetic), hole openers, roller reamers, and sub-assemblies, all designed to optimize wellbore performance and enhance drilling efficiency. These tools are engineered to meet API specifications and are backed by robust QA/QC processes, ensuring durability and reliability in challenging drilling environments. Strategically located service centers across the U.S. and Canada enable rapid deployment and maintenance, while engineering support and inspection services further strengthen operational performance.

Overall, our Western Hemisphere segment plays a critical role in our business by combining innovative technology with responsive customer service to meet the evolving demands of the oil and gas industry.

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Eastern Hemisphere — our Eastern Hemisphere segment represents the company’s strategic expansion into Europe, the Middle East, and Asia-Pacific, focusing on delivering advanced drilling solutions for both land and offshore markets. This segment offers a broad portfolio of downhole tools and services across the well life cycle, including directional drilling tools, stabilizers, drill collars (steel and non-magnetic), hole openers, roller reamers, and wellbore optimization technologies. Following a series of acquisitions in 2024 and into 2025—including Deep Casing Tools, European Drilling Projects, and Titan Tools—we strengthened our capabilities in plug and abandonment, slot recovery, and completion enhancement technologies, positioning ourselves as a leader in innovation and reliability. Operations are supported by 11 international service centers strategically located across the EMEA and APAC regions, ensuring rapid deployment and localized customer support. The segment emphasizes engineering excellence, product development, and IP-driven innovation, enabling operators to meet complex drilling challenges.

Our Industry

The Role of Rental Tool Companies in the Production of Oil and Gas

Wellbore construction is a critical stage in the production of oil and gas. Wellbore construction is comprised of drilling the wellbore, logging the target producing formation to determine if commercial amounts of hydrocarbons exist, installing casing, cementing casing and performing completion procedures to prepare the well for production. Even after wellbore construction is complete, production products and services are needed over the well’s full life cycle.

Oil and gas companies typically hire a drilling contractor with an appropriate drilling rig to begin wellbore construction. However, drilling contractors generally do not have all the necessary tools to complete the project, and instead focus their business on the rig and its main components and rarely rent tools on behalf of oil and gas operators. Instead, oil and gas companies prefer to procure the products and services involved in drilling and subsequent procedures on a temporary basis from entities operating in the oil field services ("OFS") industry. This enables them to obtain the best quality, service, and pricing value directly from the service and equipment suppliers. As a result, upon completion of the well, the oil and gas operator does not hold assets that it no longer needs.

The tools provided by rental tool companies vary from select bottom hole assembly components, drill string tools, pressure control devices and a wide variety of specialty items. Rental tool companies purchase assets and rent them to their oil and gas operator customers, who in turn use these tools to complete their respective projects. Rental tool companies typically charge daily rental fees, but fees also can be structured as hourly, footage, weekly, or monthly charges. Rental tool companies also bill customers for repair charges if tools are damaged beyond normal wear and tear. In addition, if the tools are lost in the well, or damaged beyond repair, the customer is charged a replacement fee. Rental tool companies’ ability to charge such fees are particularly important in light of the acceleration of drilling rates, as such acceleration continues the trend of customers consistently damaging tools (although recovery events have decreased year over year). We believe that this commercial arrangement has been standard practice in the industry for over 70 years. Given the cyclical nature of the oil and gas industry, commercial terms will be more favorable to rental tool companies when oil and gas industry activity is higher.

Oil and Gas Drilling Activity

Rental tool companies’ financial and operating results are tied to the level of oil and gas drilling activity in their respective regions of operation, which, in our case, spans across both the Eastern and Western Hemispheres. Historically, the level of activity was measured by the number of active drilling rigs. For the years ended December 31, 2025 and 2024, the monthly average Western Hemisphere rig count was 867 and 940 rigs, respectively, or a decrease of 8%. Additionally, for the years ended December 31, 2025 and 2024, the monthly average Eastern Hemisphere rig count was 896 and 961 rigs, respectively, or a decrease of 7%

Drilling rigs now operate faster and drill longer laterals, resulting in more efficient production than ever before. Accordingly, we believe that well count and feet drilled are additional indicators of the level of oil and gas drilling activity.

Our Strategy

We intend to (i) maximize the profitability of our core rental tool business, (ii) commercialize new high-value rental tools that make the drilling process more efficient (iii) extend our reach into other segments of a well’s lifecycle, such as completion and production and (iv) expand geographically.

To achieve this, we have implemented a multi-pronged growth strategy focused on increasing sales to E&P operators, maximizing rental tool fleet uptime, and expanding our international footprint. E&P operators now account for over 45% of our revenue, up from less than 10% in 2014, and we aim to grow this further through persistent selling, superior customer service, and differentiated tools. Our COMPASS system optimizes inventory and tool transfers to ensure high utilization, while in-house machining and robotics minimize downtime. At the same time, we continue to professionalize our operations with auditable processes, safety compliance, and quality standards that set us apart from competitors.

To strengthen our market position, we are pursuing accretive acquisitions in the downhole rental tool sector, leveraging our industry relationships and reputation to secure attractive deals. We also differentiate through partnerships with leading tool producers, such as our exclusive agreement for the RotoSteer system, which has shown strong adoption since its 2023 launch. Looking ahead, we plan to expand internationally while maintaining North American leadership. These initiatives position us to deliver sustainable growth and deepen customer relationships across the global oilfield services market.

Our Competitive Strengths

Our company’s competitive strengths stem from an experienced management team, a large and diverse rental tool fleet, and strong customer relationships. Led by Chief Executive Officer ("CEO"), Wayne Prejean, who brings decades of oil and gas expertise, our leadership team has transformed the business from a small entrepreneurial operation into a professional organization serving major OSCs and E&P operators across 15 North American locations and 11 international service and support centers. We maintain over 340 Master Service Agreements with leading customers, supported by rigorous safety and quality standards, industry certifications, and a robust quality assurance program—requirements that many smaller competitors cannot meet.

We differentiate ourselves through scale, technology, and customer service. Our extensive rental tool fleet, concentrated in key regions like the Permian Basin, meets the diverse needs of customers across multiple geographies, creating high barriers to entry for new competitors. Our proprietary COMPASS system streamlines ordering, provides transparency, and optimizes fleet utilization, while our wide distribution network and 24/7 facilities ensure rapid turnaround and minimal downtime. Combined with a specialized salesforce that builds deep relationships at both corporate and field levels, these capabilities position us as a trusted partner and a leading provider in the downhole rental tool industry.

Customers

Our customer base is comprised of: (i) diversified OSCs, which account for approximately 48% of 2025 revenue, including but not limited to Baker Hughes Company, Halliburton Company, Phoenix Energy, and SLB (formerly Schlumberger); (ii) E&P operators, which account for approximately 48% of 2025 revenue, included but not limited to Chevron, BPX Energy, EOG Resources Inc., Occidental Petroleum Corporation, Pioneer Energy Services Corp.; and (iii) oil and gas equipment manufacturers, which account for approximately 4% of 2025 revenue, including but not limited to Liberty Lift Solutions and National Oilwell Varco.

Conducting business with top tier customers requires world-class service quality, safety and auditable work processes. These operating requirements are contained in MSAs with our clients. Obtaining MSAs can be difficult and time-consuming. We believe this creates a barrier to entry for smaller, less competent providers and provides us an industry advantage.

Employees and Employee Safety

We have 432 employees and contractors, all of whom were full-time. Our workforce includes 40 sales professionals who are divided between city-sales and field-sales teams. Keeping our workforce safe and healthy is a key priority, and management is committed to ensuring our employees return home safely after each shift. In 2018, we implemented “Safety Now,” a rigorous safety program that is part of DTI’s Safe, Inspired, Productive incentive program (“SIP”). SIP has helped reduce our total recordable incident rate from 2.3 in 2018 to 0.81 in 2025, which is lower than the industry average. The success of SIP is necessary for us to do business with many of our customers, including Baker Hughes Company, EOG Resources Inc., Occidental Petroleum Corporation and SLB.

Properties

We operate from 15 locations in North America and maintain 11 international service and support centers in Europe, Middle East, and Asia-Pacific as shown below:

Government Regulation and Environmental, Health and Safety Measures

Our business is significantly affected by federal, state and local laws and other regulations. These regulations primarily impact the operation of our facilities. The laws and regulations relate to worker safety standards, the protection of the environment, and waste management, with respect to both fluids and solids.

Our internal environmental group monitors our compliance with applicable laws and regulations. We also engage third parties to review our compliance with such.

We cannot predict the level of enforcement of existing laws and regulations or how such laws and regulations may be interpreted by enforcement agencies or court rulings in the future. We also cannot predict whether additional laws and regulations will be adopted, including changes in regulatory oversight, increase of federal, state or local taxes, increase of inspection costs, or the effect such changes may have on us, our business or our financial condition.

Competition

We believe that there are a limited number of competitors in the oil and gas drilling rental tools industry. It is our view that we enjoy a competitive advantage with respect to these competitors due to our large relevant tool inventory, strong management team and significant scale.

Corporate Information

Our operations date to the founding of Directional Rentals, Inc. in 1984. Its name was changed to “Drilling Tools International, Inc.” in 2014, and it is a wholly owned subsidiary of DTIH. As a result of the Merger, DTIH became a wholly owned subsidiary of ROC who then changed its name to “Drilling Tools International Corporation”. Our website address is www.drillingtools.com. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC and is expressly not incorporated by reference into this document. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Alternatively, you may access these reports at the SEC’s website at www.sec.gov.