Drilling Tools International (DTI), which builds and rents out drilling equipment for oil and gas companies, has agreed to combine with special purpose acquisition company (SPAC) ROC Energy Acquisition Corp, the companies told Reuters.
The merger values DTI at $319 million, with the deal providing the company with $217 million of capital, much of which is from the proceeds of the blank check firm’s initial public offering (IPO) in December 2021.
DTI is majority owned by Hicks Equity Partners, the buyout arm of the family office of Thomas O. Hicks, the Dallas-based investor whose has previously co-owned sports teams including the Texas Rangers baseball franchise and English soccer team Liverpool FC.
Houston-based DTI counts energy producers Chevron Corp, ConocoPhillips and Occidental Petroleum Corp, as well as large services players such as Baker Hughes Co and SLB, among its customers.
The tie-up marks a rare deal in the business of oilfield services, which for years has been grappling with cost cuts from customers, commodity price fluctuations, and high debt levels.
More recently, though, higher crude prices have provided a tailwind for oilfield services companies as energy producers seek to drill more. Supply chain problems and labor shortages have also allowed services firms to raise rates.
Daniel Kimes, chief executive of ROC, said the positive market dynamics and DTI’s experienced management team drew the special purpose acquisition company (SPAC) to the deal.
“This is a really sophisticated business generating real returns for investors,” he said in an interview.
Going public through a SPAC merger was “more efficient” than listing through a traditional IPO, DTI Chief Executive Wayne Prejean told Reuters.
A SPAC deal typically helps companies bypass the lengthy IPO regulatory process and is beneficial for energy companies whose listing plans can be derailed by commodity price fluctuations as well as negative stock market conditions.
DTI, which primarily operates in North America, plans to use the newly raised capital to expand in the Middle East and Europe, Prejean added.
“We’re coming out of the gate debt-free and ready to run,” said Prejean.
Source: Reuters.com