Drilling Tools International Corp. (DTI Quick QuoteDTI - Free Report) is taking steps to strengthen its position in the global drilling equipment rental market through a planned acquisition of Saltire Energy Limited and Foxley Energy Limited. The transaction is expected to broaden DTI's international customer base, improve its geographic revenue mix and create opportunities to generate additional business from the existing drilling technologies.

The deal comes as DTI looks to establish a larger presence in international oilfield markets without having to build an extensive operating network from scratch. The company has agreed to pay approximately $80 million in cash and issue 17.4 million shares of common stock to acquire the two businesses. The transaction is expected to close in the first quarter of 2027, pending regulatory approvals, shareholder consent and the fulfillment of other customary closing conditions.

Saltire Deal Could Transform DTI's Geographic Mix

Saltire has an established presence in key international drilling markets, supplying rental equipment, downhole tools and pressure control products. Its operating locations in the United Kingdom, Norway, the United Arab Emirates, Singapore and Malaysia give DTI access to customers across the North Sea, the Middle East and Asia-Pacific. Saltire also has established relationships with major E&P operators, drilling contractors and oilfield service providers.

The acquisition could substantially increase DTI's exposure to these markets. The Eastern Hemisphere represented approximately 18% of DTI's standalone revenues in the second quarter of 2026. Management expects the region to account for approximately 40% of revenues after incorporating Saltire's operations.

A broader international footprint could help DTI diversify its revenue sources and access additional drilling projects. It also provides an opportunity to expand in markets where the company has sought a larger presence, using Saltire's existing infrastructure and customer relationships to accelerate that process.

Saltire's Financial Profile Supports the Acquisition

The transaction's financial potential is another important consideration for investors. Based on management's estimates derived from third-quarter 2026 monthly operating updates and current business visibility, Saltire is projected to generate run-rate 2026 revenues of approximately $50.4 million.

Adjusted EBITDA is projected at $22.5 million, translating into an adjusted EBITDA margin of approximately 45%. The business is also projected to generate $15.8 million in adjusted free cash flow during the year.

These estimates indicate Saltire's potential to contribute meaningful earnings and cash generation to the combined business. Its rental-oriented model also aligns with DTI's existing operations, providing a degree of strategic consistency as the companies combine their businesses.

DTI expects the acquisition to increase adjusted EBITDA margins and adjusted free cash flow per share during the first year following completion. Management also believes the combined company's cash generation will support faster debt reduction.

However, the expected benefits remain subject to execution and market conditions. Changes in drilling activity, equipment utilization, operating costs and financing expenses could affect the actual financial contribution.

Broader Product Offering Could Unlock Cross-Selling Opportunities

The acquisition is expected to create opportunities beyond expanding DTI's geographic footprint. By combining the companies' equipment portfolios and customer relationships, DTI could introduce more products to customers already served by Saltire.

For instance, DTI plans to expand the reach of its ClearPath and Drill-N-Ream technologies, which support wellbore optimization, through Saltire's established distribution network. DTI also plans to expand its product portfolio by incorporating Saltire’s drilling jars and pressure control equipment.

This approach could help DTI increase sales across its combined customer base without relying entirely on new customer acquisition. The combined company could offer customers a broader portfolio of drilling tools and technologies through Saltire's established distribution network.

The potential revenue contribution, however, will depend on customer demand, successful product adoption and DTI's ability to coordinate sales and distribution across the enlarged business.

Share Issuance and Debt Financing Deserve Attention

DTI intends to finance the acquisition using a mix of cash and equity. The cash payment of approximately $80 million is expected to be financed through new debt and borrowings under the company's existing credit facility.

The equity component consists of a fixed 17.4 million shares. Its dollar value will be calculated using DTI's 20-day volume-weighted average share price immediately before closing. The number of shares will not change with fluctuations in the stock price before completion.

Upon completion, the sellers, including the Loggie family, are expected to own approximately 30% of DTI's common stock. Mike Loggie, Saltire’s founder, and its current management team are expected to remain with the combined entity, while Wayne Prejean will retain his roles as DTI’s chairman and chief executive officer.

The structure preserves the sellers' financial interest in the combined business but will dilute existing shareholders' ownership percentage. Additional borrowing could also increase interest expenses and financial risk, making the company's post-acquisition cash flow and debt-reduction progress important measures to watch.

What Should Investors Watch?

DTI's proposed acquisition offers a combination of international expansion, product diversification and potential cash flow improvement. Saltire's established customer relationships could help DTI expand more quickly across key overseas markets, while cross-selling initiatives may provide additional growth opportunities.

The next important milestones include securing the necessary approvals and completing the transaction, currently expected in the first quarter of 2027. Investors should also assess whether DTI achieves its projected financial benefits and manages the additional debt and share dilution effectively.

Ultimately, the acquisition's success will depend on DTI's ability to convert Saltire's existing international platform into sustainable growth, stronger cash generation and improved shareholder value.

DTI's Zacks Rank & Other Key Picks

Currently, DTI sports a Zacks Rank #1 (Strong Buy).

Investors interested in the energy sector might consider other top-ranked stocks, such as Marathon Petroleum (MPC Quick QuoteMPC - Free Report) , Delek US Holdings (DK Quick QuoteDK - Free Report) , each sporting a Zacks Rank #1, and Oceaneering International (OII Quick QuoteOII - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Delek US Holdings is valued at $4.63 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.

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