Drilling Tools International, a Leading Oilfield Services Company, to List on Nasdaq through Business Combination with ROC Energy Acquisition Corp.

• Drilling Tools International Holdings, Inc. ("DTI" or the "Company") has entered into a definitive business combination agreement with ROC Energy Acquisition Corp. ("ROC") (Nasdaq: ROC). Upon closing, the combined company (the "Combined Company") will be listed on the Nasdaq under the new ticker "DTI".
• Headquartered in Houston, Texas, with roots dating back to 1984, DTI manufactures and provides a differentiated, rental-focused offering of tools used for horizontal and directional drilling. DTI has been majority owned by an affiliate of Hicks Equity Partners LLC and led for almost 10 years by CEO Wayne Prejean and an experienced management team.
• DTI expects to achieve strong EBITDA margins of over 30% in 2022 and 2023 with consistent free cash flow generation, supported by its leading scale, market position and blue-chip customer base.
• The transaction implies an enterprise value of approximately $319 million, which equates to 5.5x projected 2023 adjusted EBITDA of $58 million and 7.8x estimated 2022 adjusted EBITDA of $41 million; an attractive entry valuation multiple for investors.
• The transaction is expected to provide net cash proceeds of up to approximately $217 million, including approximately $209 million of cash from ROC's trust account, before the impact of potential redemptions therefrom, and $45 million of cash from a common stock PIPE, which is expected to include meaningful participation by Fifth Partners, an affiliate of ROC's sponsor.
• Hicks Equity Partners and other existing DTI shareholders will reinvest over 95% of their equity holdings into the Combined Company to maximize cash on balance sheet.
• DTI's streamlined capital structure positions it to lead consolidation of the small-cap oilfield services market. DTI expects to benefit from a zero-debt balance sheet and a robust cash position, with common equity only and no warrants. The transaction is expected to close in the second quarter of 2023.
• DTI has a proven acquisition history and a strong pipeline of acquisition targets, which it expects to further pursue with the proceeds raised from this transaction.

HOUSTON and DALLAS, Feb. 14, 2023 /PRNewswire/ -- Drilling Tools International Holdings, Inc. ("DTI" or the "Company"), a leading oilfield services company that rents downhole drilling tools used in horizontal and directional drilling, and ROC Energy Acquisition Corp. ("ROC") (Nasdaq: ROC), a publicly traded special purpose acquisition company, today announced a definitive agreement for a business combination that will result in DTI becoming a U.S. publicly listed company. Upon closing of the transaction, the combined company (the "Combined Company") is expected to be listed under the new ticker symbol "DTI."

Leading Provider of Downhole Rental Tools to the Land and Offshore Drilling Markets

DTI is a leading oilfield services company that manufactures and rents downhole drilling tools used in horizontal and directional drilling of oil and natural gas wells. DTI's success is supported by its ability to meet its customer demand with operations from 22 locations in North America, Europe and the Middle East; with over 65,000 tools in its fleet including drill collars, stabilizers, crossover subs, wellbore conditioning tools, drill pipe, and tubing. DTI also rents surface control equipment such as blowout preventers and handling tools, and provides downhole products for producing wells.

There are a limited number of competitors in the oil and gas drilling rental tools industry, with most described as local and regional players. Most E&P and oilfield service companies rent tools, as opposed to owning them, because of the many factors that affect which tools are needed for a specific task, such as different formations, drilling methodologies, drilling engineer preferences, drilling depth and hole size. As a result, DTI possesses an advantage over competitors due to its significant scale, geographic reach, large tool inventory, and strong management team, enabling it to serve a blue-chip customer base including: SLB, Baker Hughes, Halliburton, OXY, EOG Resources, ExxonMobil, Chevron, ConocoPhillips, and Phoenix Technologies.

In addition, DTI is able to leverage several differentiating strengths which include:

• Large Fleet of Rental Tools to Address Customer Needs: DTI maintains a large fleet that is dispersed across all major oil and gas producing regions of North America, Europe and the Middle East. Large, high-quality customers expect rental tool companies to meet all their tool needs, which without a sizeable rental tool fleet and competitive geographic reach, smaller providers cannot secure those large contracts. The sheer number of tool variations and the substantial cost to replicate a rental tool fleet serve as a barrier to entry for new competitors in the downhole rental tool industry.

• Master Service Agreements with Leading Blue-Chip Customers: Master Service Agreements ("MSAs") are required by many of DTI's leading E&P and oilfield service company customers. MSAs are only obtained by demonstrating a record of safety, repeatable processes and procedures and, in some cases, industry certifications. DTI has over 300 MSAs with leading E&P operators and oilfield service companies, possessing all the certifications required by its customers, as well as offering a robust quality assurance department and the ability to regularly satisfy customer audits.

• Wide and Diverse Distribution Network: DTI's scale provides an advantage as it is able to service customers across a global footprint, with a strategic operational footprint capable of servicing all major North American oil and gas basins. Most of DTI's facilities operate 24 hours per day, 365 days per year, and many are equipped with computerized machining and robotic welding capabilities to facilitate in-house tool repair, which maximizes turnaround time and minimizes downtime.

• COMPASS Inventory Management System: COMPASS (Customer Order Management Portal and Support System) is a proprietary inventory and order management system, enabling customers to place orders online, efficiently place repeat orders, obtain updates on tool orders and account status, and access customized automated scheduling reports. COMPASS helps maximize fleet utilization, enabling managers to identify underutilized tools or "right size" the rental tool fleet, ultimately increasing rental tool use and maximizing return on capital. This approach has contributed to the Company's track-record of performance, including positive and growing profitability.

• Experienced Management Team: DTI is led by oil and gas industry veterans with experience spanning many decades, industry cycles and segments of the oil and gas industry. The Company's senior leadership team has a combined tenure of over 100 years of oilfield service industry experience, led by Wayne Prejean with more than 40 years.

In addition, DTI has a well-established M&A track record, and has identified a full pipeline of acquisition targets, which the Company expects to further pursue with the proceeds raised from this transaction. Many of DTI's targets address near-term strategic priorities for the Company, and management believes it is well positioned to attain purchase prices that present accretive valuation metrics, leveraging its unique market position, management experience and established relations. Since 2012, DTI has executed and successfully integrated corporate and asset acquisitions, including a large asset purchase from SLB and acquisitions of Reamco Inc. and Premium Tool Rentals, among others.

DTI anticipates it will be able to leverage its strengths to achieve a revenue CAGR of 34% from 2020 through 2023. This future growth is expected to be supported by DTI's efforts to maximize profitability of its core rental tool business, commercialize new high-value rental tools that make the drilling process more efficient, extend the Company's reach into other segments of a well's lifecycle such as completion and production, and expand geographically.

The Company anticipates continued growth, with 2022 and 2023 revenue forecast to be approximately $130 million and $164 million respectively; and 2022 and 2023 adjusted EBITDA forecasts of approximately $41 million and $58 million, respectively. ROC believes that an investment in DTI presents a compelling opportunity at an approximate 33% discount to its peers' 2023 adjusted EBITDA multiples.

Wayne Prejean, President and Chief Executive Officer of DTI, said, "Drilling Tools' merger with ROC represents a transformative opportunity for the Company and will enable us to be more responsive to the needs of our customers. This transaction will help us grow our core business and facilitate our plan to expand via acquisitions into new markets and emerging technologies. In addition, this transaction will enable DTI to implement long term plans to align with its long-term customers' needs for additional tools and services. We are also pleased this will provide our employees new opportunities for career development as we grow and require more resources to manage the business."

Daniel Kimes, Chief Executive Officer of ROC, added, "DTI is a market leader in its segment and has a platform poised for multiple avenues of growth. The Company has a phenomenal management team that has built a highly profitable and durable business. We believe macro trends favor significant increases in oil and gas activity levels, and DTI stands to benefit as a result. We are excited to partner with the team as they become a public company."

Transaction Overview

The business combination implies a combined pro forma enterprise value of approximately $319 million, which equates to 5.5x projected 2023 adjusted EBITDA of $58 million and 7.8x estimated 2022 adjusted EBITDA of $41 million, an attractive entry valuation multiple for investors. The transaction is expected to provide net cash proceeds of up to approximately $217 million, including approximately $209 million of cash from ROC's trust account, before the impact of potential redemptions therefrom, and $45 million of cash from a common stock PIPE, which is expected to include meaningful participation by Fifth Partners, an affiliate of ROC's sponsor. Hicks Equity Partners and other existing DTI shareholders will reinvest over 95% of their equity holdings into the Combined Company for maximum cash on balance sheet.

DTI's streamlined capital structure positions the Company to lead the consolidation of the small-cap oilfield services market. DTI expects to benefit from a zero-debt balance sheet, a robust cash position, with common equity only and no warrants.

The Boards of Directors of each of DTI and ROC have unanimously approved the transaction. The transaction will require the approval of the stockholders of ROC and is subject to satisfaction or waiver of the conditions stated in the merger agreement and other customary closing conditions, including the receipt of certain regulatory approvals. The transaction is expected to close in the second quarter of 2023.

Additional information about the proposed transaction, including a copy of the merger agreement and investor presentation, will be provided in a Current Report on Form 8-K to be filed by ROC with the Securities and Exchange Commission ("SEC") and will be available on the  Drilling Tools investor relations page at http://www.drillingtools.com/investors and at www.sec.gov. More information about the proposed transaction will also be described in ROC's proxy statement/prospectus relating to the business combination, which it will file with the SEC.

Advisors

Jefferies LLC is serving as capital markets advisor and private placement agent to ROC Energy Acquisition Corp. Kirkland & Ellis LLP is serving as legal counsel for Jefferies LLC.

EarlyBirdCapital, Inc. is serving as financial advisor to ROC Energy Acquisition Corp.

Bracewell LLP is serving as legal advisor to Drilling Tools International. Winston & Strawn LLP is serving as legal advisor to ROC.

Drilling Tools International

Drilling Tools International is a Houston, Texas based leading oilfield services company that rents downhole drilling tools used in horizontal and directional drilling of oil and natural gas wells. Drilling Tools operates from 22 locations across North America, Europe and the Middle East. To learn more about Drilling Tools visit: www.drillingtools.com.

ROC Energy Acquisition Corp.

ROC is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While ROC may pursue an acquisition in any business industry or sector, it has concentrated its efforts on the traditional energy sector in the U.S. ROC is led by Chief Executive Officer Daniel Jeffrey Kimes and Chief Financial Officer Rosemarie Cicalese. To learn more, visit: https://rocspac.com.

Hicks Equity Partners

Hicks Equity Partners ("HEP") is the private equity arm of Hicks Holdings LLC, a holding company for the Thomas O. Hicks family assets. With 40 years of private equity experience, Mr. Hicks pioneered the "buy and build" strategy of investing and founded Hicks Muse Tate & Furst, which raised more than
$12 billion of private equity across six funds and completed over $50 billion of leveraged acquisitions. HEP looks for established companies with proven track records, strong free cash flow characteristics, a strong competitive industry position and an experienced management team looking to partner with long-term capital.

Forward-Looking Statements
This press release may include, and oral statements made from time to time by representatives of DTI, ROC, and the Combined Company may include, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements regarding the proposed business combination and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this press release are forward-looking statements. When used in this press release, words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan,"  "possible," "potential," "predict," "project," "should," "would" and similar expressions, as they relate to DTI, ROC, or the Combined Company, or their respective management teams, identify forward-looking statements. These forward-looking statements also involve significant risks and uncertainties, some of which are difficult to predict and may be beyond the control of DTI, ROC, and the Combined Company, that could cause the actual results to differ materially.