Mr. Green brings over 30 years of specialized energy capital markets expertise, including his prior role as Managing Director and Head of Energy, Power & Infrastructure Capital Markets at Piper Sandler Co., where he led equity and debt capital markets activities across the energy sector, including oilfield services and equipment companies. Earlier in his career, Mr. Green held senior investment banking positions at Simmons & Company International and Merrill Lynch as well as roles at The First Boston Corpor ...

Company Performance - Drilling Tools International Corp. (DTI) has returned 16.9% year-to-date, outperforming the Oils-Energy sector average return of 9.4% [4] - The Zacks Consensus Estimate for DTI's full-year earnings has increased by 36.4% over the past quarter, indicating improving analyst sentiment [3] Industry Context - DTI is part of the Oil and Gas - Field Services industry, which has seen an average gain of 15.9% year-to-date, positioning DTI above its peers in this group [5] - The Oils-Energy group, which includes 237 companies, ranks 7 in the Zacks Sector Rank, reflecting a strong performance relative to other sectors [2] Comparative Analysis - Another stock in the Oils-Energy sector, FuelCell Energy (FCEL), has also outperformed the sector with a year-to-date return of 12.7% [4] - FuelCell Energy's consensus EPS estimate has risen by 29.1% over the past three months, and it holds a Zacks Rank of 2 (Buy) [5]

Industry Overview - The Oil/Energy sector faced significant challenges in 2025, with oil prices remaining under pressure and the sector lagging behind the broader market, which saw the S&P 500 increase by approximately 20% [1][3] - Crude oil prices fell below $60 per barrel, representing a decline of about 20% for the year, driven by oversupply concerns and a lack of strong upward momentum [3] Market Sentiment - Negative sentiment in the energy sector led to many equities falling out of favor, despite some companies performing well [5] - Stocks trading at least 35% below their highs can attract investor interest, particularly when the declines are driven by macroeconomic factors rather than company-specific issues [6][7] Investment Opportunities - Historical patterns suggest that periods of deep pessimism can create opportunities for contrarian investors looking ahead to potential recoveries in 2026 [1][5] - Companies like Drilling Tools International (DTI), KLX Energy Services Holdings (KLXE), and W&T Offshore (WTI) are highlighted as potential investment opportunities due to their strong fundamentals despite significant stock price declines [2][9][14] Company Highlights - **Drilling Tools International (DTI)**: Specializes in downhole tools and has a projected earnings growth of 650% for 2026, with its stock trading 38% below its 2025 highs [8][11] - **KLX Energy Services Holdings (KLXE)**: Provides a range of services to onshore oil and gas producers and is positioned for a 14.5% earnings growth in 2026, with shares nearly 80% off their peak [12][14] - **W&T Offshore (WTI)**: An independent oil and natural gas producer with a strong cash flow and a drilling success rate near 90%, its stock remains over 35% below its October peak [15][17]

Industry Overview - Oil prices are under pressure due to changing government regulations, OPEC+ supply decisions, and global conflicts, leading to the largest yearly drop since the pandemic [1] - Major oil exporters are increasing production faster than expected, while the U.S. is achieving record output levels, reducing expectations for tight oil markets next year [1] - Current lower prices are creating a price floor, encouraging consumption, and steady demand trends remain strong [1] - OPEC+ is cautious about adding more supply, indicating potential stabilization in the oil market [1][4] Demand and Supply Dynamics - U.S. oil consumption is stable, and refining margins remain healthy, suggesting that the overall demand for oil has not crashed [3] - As winter approaches, natural seasonal dynamics may support a gradual price recovery [3] - If OPEC+ maintains its cautious approach and monitors global conflicts, high inventory pressures may ease as winter progresses [4] Investment Opportunities - Quality value names like Drilling Tools International (DTI), Baytex Energy (BTE), and W&T Offshore (WTI) are highlighted as appealing investments due to strong fundamentals and discounted stock prices [2][6] - Smaller energy stocks trading under $5, often referred to as "penny stocks," may offer opportunities with relatively low risk of major losses [4][6] Company Profiles Drilling Tools International (DTI) - DTI specializes in downhole tools and has a fleet of over 65,000 tools, supporting well construction across major U.S. basins [7] - The company has expanded its portfolio from 2 to 16 patented products and participates in approximately 60% of North American drilling rigs [9] - DTI's share price is just over $2, with a 120% increase in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [10] Baytex Energy (BTE) - Baytex is a Canadian oil-weighted exploration and production company with diversified assets across Canada and the U.S., focusing on high-return Canadian assets [11][12] - The company emphasizes disciplined capital management and plans to accelerate shareholder returns following a significant asset sale [12] - Baytex shares trade at $3.22, with a 64% increase in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [13] W&T Offshore (WTI) - WTI is an independent oil and natural gas producer with a strong presence in the Gulf of America, holding interests in 50 offshore fields [14] - The company has a drilling success rate near 90% and has generated positive cash flow for over 28 consecutive quarters [15] - WTI shares trade for less than $2, with a projected 32.6% growth in 2025 revenues according to the Zacks Consensus Estimate [16]

Core Insights - Petrus Resources reported a 7% increase in production and a 17% increase in cash flow compared to the previous year, despite facing significant commodity price challenges [2] - The company effectively managed oil and gas price volatility through hedging strategies and optimizing its product mix, allowing it to maintain strong financial performance [2] - The average WTI oil price for the quarter was USD 65 per barrel, reflecting a 14% decrease year-over-year, while the AECO spot natural gas price fell to an all-time low of $0.25 per Mcf, down 8% overall for the quarter [2] Production and Financial Performance - Production increased by 7% year-over-year, indicating successful operational strategies [2] - Cash flow rose by 17%, showcasing the company's ability to generate revenue despite adverse market conditions [2] - Realized oil prices decreased by only 10%, while realized gas prices increased by 15% compared to the previous year, demonstrating effective pricing strategies [3]

Revenue Performance - Tool rental revenues accounted for 82% of total revenues for both the three and nine months ended September 30, 2025, while product sales contributed 18%[187] - Total revenue for the three months ended September 30, 2025, was $38.8 million, a decrease of $1.3 million or 3% compared to the same period in 2024[197] - Eastern Hemisphere revenue increased by $1.8 million or 41% to $6.2 million for the three months ended September 30, 2025, driven by recent acquisitions[200] - Western Hemisphere revenue for the nine months ended September 30, 2025, was $113.7 million, an increase of $1.1 million or 1% compared to the same period in 2024[205] - Eastern Hemisphere revenue for the nine months ended September 30, 2025, was $17.4 million, a significant increase of $7.5 million or 76% compared to the same period in 2024[206] Income and Expenses - Net income for the three months ended September 30, 2025, was a loss of $0.9 million, a decrease of $1.8 million or 204% compared to a profit of $0.9 million in 2024[197] - Depreciation and amortization expense increased by $0.6 million or 10% to $6.8 million for the three months ended September 30, 2025, due to increased asset balances from acquisitions[201] - Interest expense for the three months ended September 30, 2025, was $1.3 million, an increase of $0.3 million or 29% compared to the same period in 2024[203] - Corporate and other expenses decreased by $1.1 million or 10% to $10.6 million for the nine months ended September 30, 2025, due to reallocation of expenses[207] - Depreciation and amortization expenses increased by $3.2 million, or 18%, to $20.4 million for the nine months ended September 30, 2025, compared to the same period in 2024[208] - Interest expense, net rose by $2.0 million, or 96%, to $3.9 million for the nine months ended September 30, 2025, primarily due to interest on a term loan and credit facility[209] - Other operating and non-operating expenses decreased by $0.8 million, or 15%, to $4.4 million for the nine months ended September 30, 2025, mainly due to lower transaction fees[210] - Adjusted EBITDA for the nine months ended September 30, 2025, was $29.2 million, a decrease from $30.9 million in the same period of 2024[215] Cash Flow and Financial Position - Cash provided by operating activities was $14.6 million for the nine months ended September 30, 2025, compared to $9.7 million in 2024[222] - Net cash used in investing activities was $12.7 million for the nine months ended September 30, 2025, including $5.6 million for the acquisition of Titan[223] - Net cash used in financing activities was $3.7 million for the nine months ended September 30, 2025, resulting from net debt decreases and treasury stock purchases[225] - As of September 30, 2025, the company had $4.4 million in cash and cash equivalents, sufficient for at least the next 12 months[216] - The company expects federal net operating loss carryforwards to significantly reduce cash tax payments over the next several years[220] Cybersecurity Measures - The company has not entered into any hedging arrangements to manage foreign currency risk, which may affect future results[232] - The company has implemented a suite of controls including technology hardware and software solutions to address cybersecurity risks[237] - Regular testing of system resiliency includes penetration and disaster recovery testing[237] - The company conducts regular training sessions on cybersecurity risks and mitigation strategies[237] - An incident response plan and team have been established to manage cybersecurity incidents[237] - There is no assurance that current efforts will fully mitigate cybersecurity risks[237] - Mitigation efforts do not guarantee that no cybersecurity incidents will occur[237]

Financial Data and Key Metrics Changes - Total consolidated revenue for Q3 2025 was $38.8 million, with tool rental revenue at $31.9 million and product sales revenue at $7 million [9][10] - Net loss attributable to common stockholders was $903,000, or a loss of $0.03 per share, while adjusted net income was $751,000, or adjusted diluted EPS of $0.02 per share [9][10] - Adjusted EBITDA for Q3 was $9.1 million, and adjusted free cash flow was $5.6 million [9][10] - Cash position increased by $3.2 million, and $5.6 million in debt was paid down [5][11] Business Line Data and Key Metrics Changes - The Eastern Hemisphere operations grew revenue by 41% year over year, contributing approximately 15% of total revenue in Q3 [6][11] - Tool rental revenue showed resilience, with product sales primarily from drill pipe recovery holding up well [21][24] Market Data and Key Metrics Changes - The rig count in North America declined by about 5%, but the company managed to maintain activity levels through successful RFQs and tenders [21][23] - The Eastern Hemisphere segment helped offset activity declines in North America, with positive indications of rig count increases in Saudi Arabia and UAE [12][28] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions and enhancing operational efficiency through the OneDTI program [15][16] - Strategic relocation of the U.S. drilling repair facility to Houston is expected to deliver cost savings and efficiency benefits [15] - The company is actively looking for M&A opportunities to enhance its competitive position and expand its geographic reach [17][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the remainder of 2025 and into 2026, citing the ability to adapt to market changes and maintain financial strength [16][18] - The company anticipates continued demand for complex well-bore solutions, which will strengthen its market position [17][18] Other Important Information - Capital expenditures for Q3 were $3.5 million, with maintenance CapEx approximately 10% of total revenue [9][10] - The company maintains its 2025 full-year guidance ranges, expecting revenue between $145 million and $165 million [12][13] Q&A Session Summary Question: How has utilization been in the U.S. versus Eastern Hemisphere? - Management noted that despite a 5% decline in rig count, they maintained reasonable activity levels through successful business retention and RFQs [21][23] Question: What are the expectations for the seasonal slowdown in Q4? - Management indicated that the seasonal slowdown does not appear to be accelerating, with a flat to slightly down trend expected [26][27] Question: Can you provide insights on the Eastern Hemisphere's performance? - Management highlighted optimism in the Middle East, particularly in Saudi Arabia and UAE, with expectations for increased rig activity [28][29] Question: How does the company plan to utilize its healthy balance sheet? - Management stated that they will focus on debt reduction, stock buybacks, and selective CapEx purchases while remaining focused on M&A opportunities [30][31]

Financial Performance & Outlook - DTI's Q3 2025 revenue reached $38.8 million, reflecting a broad scope and scale[13] - Q3 2025 Adjusted Free Cash Flow was $5.6 million, demonstrating resilience in a lower rig count environment[13] - The company anticipates revenue between $145 million and $165 million for FY 2025[94] - Adjusted EBITDA for FY 2025 is projected to be between $32 million and $42 million, with an Adjusted Free Cash Flow between $14 million and $19 million[94] Geographic Expansion - Western Hemisphere accounted for 85% of Q3 2025 revenue, supported by 15 service and support facilities[13] - Eastern Hemisphere contributed 15% to Q3 2025 revenue, facilitated by 11 service and support facilities[13] - The company expects to double revenue contribution from the Eastern Hemisphere in FY 2025[95] Customer Base & Tool Rental - E&P Operators make up 47% of DTI's customers, Oilfield Service Companies account for 48%, and Other customers represent 5%[24] Strategic Acquisitions & Synergies - DTI achieved 100% of the $45 million in previously announced SDPI synergies by August 2025[56]

Core Insights - Drilling Tools International Corp. (DTI) reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of a loss of $0.01 per share, but down from $0.14 per share a year ago, representing an earnings surprise of +300.00% [1] - The company posted revenues of $38.82 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 9.44%, although this is a decrease from $40.09 million in the same quarter last year [2] - DTI shares have declined approximately 36.7% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Earnings Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is -$0.04 on revenues of $33.27 million, and for the current fiscal year, it is -$0.05 on revenues of $151.04 million [7] Industry Context - The Oil and Gas - Field Services industry, to which DTI belongs, is currently ranked in the bottom 31% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] Competitor Insights - ProFrac Holding Corp. (ACDC), another company in the same industry, is expected to report a quarterly loss of $0.43 per share, reflecting a year-over-year change of -230.8%, with revenues anticipated to be $405.43 million, down 29.5% from the previous year [9][10]

Financial Performance - Total consolidated revenue for Q3 2025 was $38.8 million, with Tool Rental revenue at $31.9 million and Product Sales revenue at $7.0 million[3]. - Net loss attributable to common stockholders for Q3 2025 was $903,000, equating to a loss of $0.03 per diluted share[3]. - Adjusted EBITDA for Q3 2025 was $9.1 million, with Adjusted Free Cash Flow of $5.6 million[3]. - Total revenue for the nine months ended September 30, 2025, was $121.1 million, compared to $114.6 million for the same period in 2024[16]. - The company reported a net loss of $4.98 million for the nine months ended September 30, 2025, compared to a net income of $4.36 million for the same period in 2024[16]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $29,202 million, a decrease of 5.7% from $30,983 million in 2024[30]. - For the three months ended September 30, 2025, the net loss was $904,000 compared to a net income of $867,000 in the same period of 2024[33]. - Adjusted net income for the three months ended September 30, 2025, was $751,000, down from $4,630,000 in 2024, reflecting a decrease of approximately 84.8%[35]. Guidance and Projections - The company maintained its full year 2025 revenue guidance range of $145 million to $165 million, with Adjusted EBITDA guidance of $32 million to $42 million[7]. - Estimated adjusted EBITDA for the twelve months ending December 31, 2025, is projected to be between $32,000,000 and $42,000,000, with a revenue forecast of $145,000,000 to $165,000,000[37]. - The adjusted EBITDA margin for the estimated period is expected to range from 22% to 25%[37]. - The company anticipates adjusted free cash flow for the twelve months ending December 31, 2025, to be between $14,000,000 and $19,000,000, with a margin of 10% to 12%[38]. Cash Flow and Debt Management - DTI paid down $5.6 million in debt and increased its cash position by $3.2 million during the quarter[4]. - Cash at the end of the period was $4,373 million, down from $11,961 million at the end of the previous period, reflecting a decrease of 63.5%[20]. - The company reported a net cash flow from operating activities of $14,588 million for the nine months ended September 30, 2025, compared to $9,723 million in 2024, an increase of 50.5%[20]. Expenses and Liabilities - Selling, general, and administrative expenses for Q3 2025 were $20.4 million, slightly up from $19.9 million in Q3 2024[14]. - Total current liabilities increased to $31,756 million as of September 30, 2025, compared to $30,963 million at December 31, 2024, an increase of 2.6%[18]. - The total liabilities increased to $106,277 million as of September 30, 2025, up from $102,472 million at December 31, 2024, an increase of 3.9%[18]. - The company reported a depreciation and amortization expense of $20,386 million for the nine months ended September 30, 2025, compared to $17,232 million in 2024, an increase of 12.5%[30]. Strategic Initiatives - DTI's proactive strategy included strategic pricing adjustments to offset pricing pressure and stimulate higher activity levels[4]. - Transaction expenses for the nine months ended September 30, 2025, were $1,118,000, down from $4,766,000 in 2024, indicating a reduction of approximately 76.6%[35]. - Capital expenditures for the nine months ended September 30, 2025, were $(16,136,000), compared to $(19,678,000) in 2024, showing a decrease of 12.9%[35]. Stock and Shareholder Information - The basic weighted-average common shares outstanding increased to 35,516,692 for the nine months ended September 30, 2025, from 30,893,602 in 2024, reflecting an increase of approximately 15.5%[35]. - The company purchased treasury stock at a cost of $1,152 million during the nine months ended September 30, 2025[20]. Segment Performance - The Eastern Hemisphere segment saw a 41% revenue growth quarter over quarter, contributing approximately 15% of total revenue in the current quarter[5]. - The company incurred a goodwill impairment charge of $1,901 million during the nine months ended September 30, 2025[30]. - The company reported a goodwill impairment of $1,901,000 for the nine months ended September 30, 2025, with no such impairment reported in 2024[35].