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Drilling Tools International Corporation designs and manufactures tools used to drill horizontal and directional oil and gas wells on land and offshore. Customers rent rather than buy because the tools they need change with the rock formation, drilling method and well dimensions. Oilfield service companies such as Halliburton and SLB, and oil and gas producers such as Chevron and EOG Resources, account for almost all revenue, with the two groups contributing roughly equally.
Customers generally pay rental fees based on how long they use the tools. Rentals generate most revenue; the company also charges for repairs beyond normal wear and for tools lost downhole or damaged beyond repair. Selling and manufacturing tools for customers provides a smaller revenue stream.
The business depends on customers’ drilling activity and spending, which are influenced by oil and gas prices and access to capital. It also relies on a relatively small group of customers. A priority-supply agreement with one of its largest customers requires periodic renewal, making that relationship particularly important.
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Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
DTI depends on drilling activity and tool demand from operators and service companies, so watch SLB, a named customer missing from this list.
KLX Energy Services competes with DTI to rent drilling tools to U.S. onshore oil and gas operators, including for horizontal and directional wells. Its directional-drilling and rental-tool business shows demand in the same customer market DTI serves.
Halliburton is a DTI customer that supplies drilling and well-placement services to oil and gas producers, tying its workload to DTI's tool demand. Watch its Drilling and Evaluation business for spending on the well-construction programs both serve.
Patterson-UTI supplies rigs, directional-drilling services and drill bits to oil and gas producers for the well-development programs that generate DTI's tool rentals. Its U.S. drilling-services activity is a useful check on demand for DTI's horizontal- and directional-drilling tools.
Baker Hughes buys DTI tools for its oilfield operations, while selling drilling and well-construction services to operators exposed to the same drilling cycle. Its oilfield drilling and fluids business is more relevant to DTI's tool demand than its industrial businesses.
Weatherford competes with DTI for oil and gas operators' spending on drilling and well-construction equipment and services in onshore and offshore markets. Its Drilling and Evaluation and Well Construction and Completions businesses are the parts to watch for this overlap.
Innovex competes with DTI in selling and renting engineered well tools directly to oil and gas operators and oilfield service companies. Its tool-rental revenue gives a closer comparison with DTI's rental-focused business than its product sales do.
NOV is a named equipment-manufacturer customer of DTI and sells drilling technology, rentals and consumables to service companies, contractors and energy producers. Watch rentals and consumables in its Energy Products and Services business for demand tied to the drilling activity that also supports DTI.
Forum Energy Technologies sells drilling and well-construction consumables to operators and service companies that also use DTI's rental tools, exposing both to the same activity spending. Its drilling and well-construction consumable sales offer a check on customers' demand for equipment used as wells are drilled.
EOG Resources is a DTI customer whose oil and gas development programs require drilling tools; EOG earns its revenue by producing and selling oil, natural gas liquids and gas. Watch its horizontal-well development plans for the tool demand those programs can bring to DTI.
Occidental is a DTI customer developing oil and gas fields, with substantial Permian Basin operations where DTI concentrates its tool fleet. Its Permian development plans are worth watching for demand near that fleet, rather than relying only on its oil and gas sales volumes.
Cactus and DTI both depend on new U.S. unconventional wells: operators buy Cactus wellheads and rent DTI tools to drill those wells. Watch Cactus's wellhead product sales rather than its mainly completion-driven rentals, since each new well requires a wellhead.
Halliburton Company earningsHAL
Halliburton’s report will show whether well-construction work in its Drilling and Evaluation business is supporting its demand for Drilling Tools International’s tools.
Read activity and revenue in Halliburton’s Drilling and Evaluation business alongside Drilling Tools International’s tool-rental revenue. Strength there would point to more work on the well-construction programs Halliburton serves, supporting demand through this customer channel; weakness would put that source of demand under pressure, though it would not by itself establish a decline in DTI’s overall rental demand.
EIA Crude Oil Stocks Change (Oct/16)
For DTI, weekly US crude-oil and gasoline stock counts signal whether oil supply is tightening or loosening, which can shift oil prices and the drilling activity that drives daily fees for its rented downhole tools.
Read falling crude and fuel stocks as a possible sign of tighter supply and firmer oil prices, which may support customer drilling and DTI tool rentals; rising stocks may point to softer prices and weaker rental demand.
Innovex International, Inc. earningsINVX
Innovex International’s report will show whether the market for engineered well-tool rentals is growing or whether it is competing more successfully with Drilling Tools International for that business.
Focus on Innovex’s tool-rental revenue and compare its direction with Drilling Tools International’s rental revenue. Growth at both companies would point to demand across their shared rental market; Innovex growth while DTI declines could mean the competitor is winning more business, not that the whole market is strengthening; declines at both would point more toward weaker shared demand.
Drilling Tools International Corporation earningsThis company
Drilling Tools International earns most of its revenue from tool rentals, and this report will show whether customer demand and rental pricing are supporting that business.
Read tool-rental revenue alongside segment EBITDA, a measure of segment performance before interest, taxes and certain other items. If both hold steady or grow, customer demand, market share and rental pricing are supporting the business; if both fall, demand or pricing is providing less support for the costs of running it.
Occidental Petroleum Corporation earningsOXY
Occidental’s report will show whether its Permian development plans continue to support demand for Drilling Tools International’s tool rentals near the company’s concentrated fleet.
Read Occidental’s Permian development plans alongside Drilling Tools International’s Western Hemisphere tool-rental revenue. Plans that hold or expand would suggest this customer could continue to support drilling demand near DTI’s concentrated fleet; cuts would put local rental demand under pressure, though plans are not the same as actual tool orders.
