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DATE

  • Tuesday, June 3, 2025, at 8 a.m. EDT

CALL PARTICIPANTS

  • Chairman & CEO — Sharif Foda
  • Chief Financial Officer — Stefan Angeli

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RISKS

  • Sharif Foda stated that Saudi upstream activity is expected to soften further, impacting oil and gas as well as conventional rig operations, with no pickup anticipated in the second half of 2025.
  • Stefan Angeli confirmed, "We will not get back to that rate of 25% today." guiding to full-year 2025 adjusted EBITDA margins that are 100-200 basis points below last year.
  • Sharif Foda noted, "... the pricing, people will start to get nervous. People will want to secure contracts, so then you’re going to see some pricing loss," referencing softer pricing in Middle East tenders as competition intensifies.
  • Stefan Angeli attributed increased DSO and temporary cash flow headwinds in Q1 2025 to the full month of Ramadan, which closed client offices and delayed collections.

TAKEAWAYS

  • Revenue: $303.1 million, up 2.1% year-over-year but down 11.7% sequentially in the first quarter of 2025, driven by growth in Abu Dhabi, Algeria, Kuwait, Iraq, and Libya, partially offset by slower Saudi activity due to Ramadan.
  • Adjusted EBITDA: Adjusted EBITDA in the first quarter of 2025 was $62.5 million, with a margin of 20.6%, down 100 basis points year-over-year, primarily due to Saudi project slowdowns.
  • Adjusted EPS: $0.14 adjusted EPS in Q1 2025, reflecting minimal charges and credits of $2.6 million for remediation and a small investment impairment.
  • Cash Flow from Operations: Cash flow from operations was $20.5 million in Q1 2025, negatively impacted by higher days sales outstanding due to client office closures during Ramadan.
  • Free Cash Flow & CapEx: Free cash flow in the first quarter of 2025 was $20 million and $30 million in capital expenditures in Q1 2025, reflecting front-loaded technology deployment.
  • Gross Debt and Net Debt: Gross debt was $366 million, and net debt was $288 million as of March 31, 2025, with net debt to adjusted EBITDA of 0.93, below the target for the third consecutive quarter.
  • Return on Capital Employed (ROIC): 11.3% on a trailing twelve-month basis, aligned with growth investment strategy.
  • Q2 2025 Outlook: Revenues are expected to grow sequentially in Q2 2025 compared to Q1 2025, but moderate on a year-over-year basis; margin improvement anticipated from higher revenue and cost reduction measures.
  • Full-Year 2025 Guidance: Revenue growth expected, with full-year 2025 margins guided to be 100-200 basis points below last year; CapEx is forecast at approximately $125 million for the full year 2025, potentially higher with new tenders.
  • Warrant Conversion: The company is initiating a tender process to convert outstanding warrants to equity on a 1:10 basis, aiming to eliminate SPAC overhang.
  • Contract Wins and Market Share: New multi-year contracts secured in Kuwait, Oman, and UAE; positioning Kuwait to potentially become the second-largest country for the company.
  • Technology Rollout: Roeriya steel rotary steerables and MWD/LWD technologies are in deliberate, staged commercialization across Saudi, Oman, and Kuwait contracts, with extensive field and destructive reliability testing underway.
  • Pilot Initiatives: Mineral recovery and produced water recycling pilots advancing under the NEDA banner, aiming to create new markets through rare earth mineral extraction and water reuse.
  • Cost Optimization: Company is rightsizing fixed costs and reallocating variable costs toward activity growth regions, with additional margin expansion targeted from ongoing reductions.

SUMMARY

National Energy Services Reunited (NESR -1.62%) reported a year-over-year revenue increase in Q1 2025, despite sequential declines influenced by regional seasonality and the full impact of Ramadan in Saudi Arabia. Management maintained guidance for sequential revenue and margin improvement in Q2 2025, driven by recent contract wins, cost actions, and technology deployments. Saudi activity is expected to remain soft for the remainder of 2025 due to a strategic reduction in conventional rig operations, while unconventional projects, particularly in gas, continue growing and underpin company resilience. Kuwait, supported by aggressive tendering and investment, is identified as the major growth driver for 2025 and 2026, with several billion dollars in contract opportunities underway as of 2025. Pilots in mineral recovery and produced water are positioned as long-term strategic differentiators, potentially opening new addressable markets and expanding customer engagement.

  • Management confirmed that a return to 25% adjusted EBITDA margins is not expected before 2026, citing a goal to recover 100-150 basis points sequentially after Q1 2025 through ongoing cost measures.
  • The company expects a 25% growth rate relative to the market in 2025, leveraging size advantages and newly secured multi-year contracts to gain share across stable and expanding MENA geographies.
  • Sharif Foda stated, "We want to be clear top three in every segment in the countries where we operate," confirming a focus on segment leadership as a key driver for outperformance.
  • Cross-border capacity and equipment redeployment within the Middle East is described as straightforward for NESR, due to established infrastructure and local expertise, allowing for rapid scaling in growth regions.
  • Market-wide tender pricing is expected to soften, as "the tenders that are coming are going to get softer," with large contracts experiencing intensified competition but subject to less volatility than U.S. markets.

INDUSTRY GLOSSARY

  • DSO (Days Sales Outstanding): The average number of days required to collect payment after a sale; higher DSO negatively impacts cash flow.
  • MWD (Measurement While Drilling): Technology enabling downhole measurement of wellbore direction, used for real-time drilling guidance.
  • LWD (Logging While Drilling): Real-time acquisition of formation evaluation data while drilling, aiding reservoir understanding and drill path optimization.
  • RSS (Rotary Steerable System): A downhole tool system that enables precise directional drilling without stopping operations to adjust the well trajectory.
  • NEDA: NESR’s produced water recycling and mineral recovery business unit targeting new value streams and circular economy solutions.
  • SPAC (Special Purpose Acquisition Company): A publicly traded shell company created to acquire or merge with an existing operating business.

Full Conference Call Transcript

Sharif Foda: Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. I would like to thank the entire National Energy Services Reunited team for delivering the services to our de-risk customers and executing flawlessly despite all the macro environment and the full month impact of Ramadan during the first quarter. Nevertheless, the geopolitical and global economic winds have shifted immensely since the start of the year. As we have seen many times in our industry, the cycle is resetting, and we at [COMPANYNAME] are preparing to cite the many opportunities that could emerge in the coming twelve to eighteen months of market transition. As we say, never miss the opportunity of a downturn.

With that in mind, let me start with the macro and the big picture for our sector. When it comes to this oil cycle reset, we have all been here before.

In fact, this is my fourth time to navigate such an environment. From what I can see, the combination of pessimism around oil demand and unwind of spare oil supply is much like the setup for 2015-2016 cycle reset. On the oil demand side, global geopolitical tension and trade uncertainty continue to weigh on economic growth that was already fragile coming into the year. On the oil supply side, non-OPEC and particularly U.S. production remained resilient in the face of rig and frac activity decline, at least for the short term. Given continued activity reduction in the U.S., we expect to see an impact on non-OPEC production in the coming twelve months.

Despite pockets of growth in places like Guyana and Brazil, as they have announced, OPEC has the barrels. This dynamic remains the wildcard in framing the downside case for oil prices, and I suspect the commodity market will remain on edge for the time being. Now, what does that mean for activity in the MENA region? For the GCC, it is not the same answer everywhere. Saudi remains the key player with maximum sustainable capacity and therefore can reduce drilling activity with negligible impact on oil production. Those that are new to the industry may not fully appreciate this dynamic.

It is unique to the kingdom. In other words, they can cut rigs and still raise by even several million barrels if they chose to do so. Today, we believe that without the strong growth of unconventional activity, the Saudi market would otherwise be down in 2025. On the other hand, Kuwait is pushing ahead on growth despite this lower oil price characteristic of their long-term strategic vision. They have put a 2040 plan in place and are executing it. So we will see added rigs and services in the coming quarters and years. Furthermore, they have launched innovative commercial models for risk-sharing. Growth in this area will be additive to the expected standard service market.

UAE and North Africa will grow as well, and as of today, we have seen negligible activity impact from lower prices. The rest of the countries are expected to remain stable. While a materially lower oil scenario would likely impact all of these countries, it is important to remember two key themes. One, the MENA region represents the lowest breakeven cost for oil globally. Two, upstream remains a highly strategic sector, if not the main sector, in all of the countries in which we operate. Now let me discuss our strategic approach over the next twelve to eighteen months, adapted from our long-term strategy to fit the current circumstances.

As seen in previous cycles, we are moving to right-size the fixed cost structure and are using our agility to high-grade and reallocate variable cost resources where the activity growth is. Despite the softness in the market, we anticipate that National Energy Services Reunited will grow in 2025 and 2026. Why? First, we are still relatively small and have a larger set of incremental contract opportunities from which to choose. Second and perhaps more concretely, we have recently won multiple key contracts and are now in the planning phase ahead of anticipated mobilization. Let me elaborate more specifically.

In Oman, we have a strong base of contracts and recently announced a number of incremental contracts in areas such as drilling and slickline spanning five years. While Oman remains a stable market and is already one of our top three countries in terms of size, we expect to grow. Opportunities to deploy our Royal Direction Drilling platform will drive the next leg of growth, and the latest win of Slickline will enhance our drilling and evaluation performance and leadership.

Similarly, in the UAE, a stable market with capacity approaching target, we have won new contracts on top of the anchor contracts previously secured. Therefore, we have clear visibility for the coming couple of years. Moving to Kuwait, a resilient, bright spot of growth globally, we have recently won multiple awards and are in the process of tendering for several billion dollars in multi-year contracts across several segments. Given our size and momentum, we should outgrow in an already robust growth market. Depending on the outcome of these tenders, Kuwait could become the second-biggest country within our footprint there.

Therefore, we are investing strongly in the country, including in our recently announced Ahmadi Innovation Valley, which aims to mirror our successful technological launch in Saudi Arabia. We plan to bring a number of our technology investments and pilot cutting-edge solutions with our visionary customer as they move quickly to tackle key challenges in their next phase of capacity growth. We remain excited about North Africa despite the potential price sensitivity to oil. With a base of anchor contracts in hand and well-calibrated investment, we are tendering on several hundred million dollars of contracts, thus having the potential to outgrow the market there.

Geopolitical tension and security could delay the pace of our decision and additional rig deployment, but we remain optimistic. Coming back to the fulcrum of the story, our largest country footprint, Saudi Arabia. Despite the softening outlook, I'm confident that we will weather the storm because, one, we remain relatively small compared to competition and are favorably exposed to secular gas growth; two, we have numerous projects and initiatives that elevate our profile as a nimble technology provider.

Our open technology platform has proven incredibly fruitful in the kingdom, and with the collaborative support of our customer, we are driving in-country innovation led by a new generation of Saudi professionals in key areas such as water, minerals, direction drilling, methane detection, and geothermal. With that lead into technology, let me conclude by providing an update on our key growth frontier for the year and Meda. Our Roeriya steel rotary steerables have undergone extensive field and facility testing, and we are moving new tools to Oman to endeavor the next phase of the commercialization journey.

As we communicated before, the entire rollout, particularly the rotary steerable, is designed to be conservative and deliberate, with the utmost focus on reliability and continuous improvement. We are commercializing with the long-term in mind, and testing footage drilled is the key metric. Extensive testing, calculated deployment, and well-timed commercialization will help us maximize the success of the platform in collaboration with our key customers. Shifting to NADA, in recent months, we've mobilized crucial pilot projects in multiple areas of mineral recovery, with several exciting opportunities in rare earth mineral extraction. These pilots are important in boosting the overall economics of produced water through produced water treatment.

Beyond the need for the division to recycle its own water to eliminate freshwater use, we have active client engagement with our key customer, and the success of the ongoing pilot will be contagious with more updates to come in the coming quarters. Overall, while we would prefer an expanding market for all, I'm excited about our differentiated story. We cannot control the commodity cycle, but we can drive relative performance within any market framework. We started this principally as a pure-play service provider in the best geography for upstream activity. I am confident that this differentiation will come to the forefront in the coming 12 to 18 months.

Additionally, our countercyclical investing, as we successfully executed back during the COVID pandemic, will set the company up for continued growth and success over all time horizons. We are as excited about the story as ever, both in terms of balance sheet and contract positioning. To outperform. With this, I will pass the call to Stefan to discuss the financials in detail.

Stefan Angeli: Good afternoon and good evening to our audience in the Middle East, North Africa, Asia, and Europe. I am very pleased to give an update on our financial performance for the first quarter of 2025, and color for Q2 2025 and the full year of 2025. A lot has happened in the last three months since we last talked. Ongoing macro volatility worldwide, the new administration in the U.S., uncertainty in tariffs, higher inflation, lower subsidies to developing countries, ongoing war in Ukraine, and the overall geopolitical uncertainty in the Middle East have all led to lower oil prices and lower rig counts in certain countries.

All this has impacted the Q1 2025 results, making forecasts in the short-term outlook difficult. Despite all this, as Sharif highlighted in his market summary, most of the markets in the Middle East, apart from Saudi, were flat to up in Q1 2025 versus Q1 2024. We continue to see this stability for the rest of 2025 as it stands now. First, let's turn to Q1 2025. Our overall first quarter revenue was $303.1 million, up 2.1% year over year, outpacing the broader market, but was down 11.7% sequentially. Year-over-year, there was growth in Abu Dhabi, Algeria, Kuwait, Iraq, Libya, partially offset by a slow start to the year in Saudi.

The sequential decrease in Saudi was mainly due to slowdowns in our main project due to Ramadan. Now turning to adjusted EBITDA.

Adjusted EBITDA for the first quarter of 2025 was $62.5 million, with margins of 20.6%. The margin was down 100 basis points year over year on a quarterly basis. This is mainly due to the slowdown in specific project activity in Saudi in March due to Ramadan. Interest expense for Q1 2025 was $8.3 million, and Q1 2025 tax was $3.3 million, which implies an effective tax rate of 24%. Turning to earnings per share, EPS adjusted for charges and credits was $0.14 for the first quarter of 2025. The charges and credits of $2.6 million impacting adjusted EBITDA and adjusted EPS were the lowest for many periods. They were made up primarily of two items in Q1 2025 as follows: cost of remediation and material weakness controls, which should moderate dramatically from now, and an impairment of a small investment. Now turning to our cash flow and liquidity, which has been very strong over the past several years. Our cash flow from operations during the first quarter of 2025 was $20.5 million. The headwinds to cash flow generation were mainly driven by a sharp increase in our DSO in Q1 2025 as Ramadan closed most of our client offices for the last week in March. The free cash flow for Q1 was $20 million, with CapEx at $30 million as we continue to front-end load our growth in technology deployments.

As of March 31, our gross debt was $366 million, and our net debt was $288 million. Our net debt to adjusted EBITDA was 0.93, which remains below the 1 times target for a third consecutive quarter. On a trailing twelve-month basis, our return on capital employed or ROIC was 11.3%, concurrent with our robust growth investment strategy. We expect Q2 2025 revenues to grow sequentially versus Q1 2025 but moderate on a year-over-year basis as key project timing is now expected to be more back-half year weighted. The Q2 2025 growth will be approximately half the growth rate of Q2 2024 versus Q1 2024.

Despite the overall headwinds in rig releases in Saudi Arabia, for our full year 2025, we expect revenue growth due to our recent contract wins and successful technology deployments that Sharif previously highlighted. Margins for Q2 2025 should slightly improve on Q1 2025 with the modestly higher revenues and the impact of our cost reduction program initiated in April. We do not expect to be materially impacted by the U.S.-China tariff stories. Full-year 2025 interest should be around $30 million, and the full-year 2025 ETR should be in the mid-20s as previously outlined.

CapEx for the full year 2025 will be in the vicinity of $125 million as previously outlined, and may go slightly up depending on the results of some large tenders, which obviously will impact revenues in the future years.

Now on to housekeeping topics. We spent the better part of the last two-plus years reshaping our back office and the company overall with new updated processes, procedures, and controls, as well as implementing the latest software upgrades to our ERP system. In 2024, we remediated three of our four historical material weaknesses, and we are still confident that the last one will be remediated in 2025, as most of the work has already been done, and testing is all that is required. Two comments on capital allocation. The company is going through a tender process to convert its outstanding warrants into equity on a one share to ten warrant basis.

The company anticipates that this will be completed over the coming months as it goes through its regulatory processes. The warrant conversion is to clear up the capital structure and remove the overhang originating from the SPAC. For the short-term future, due to market volatility, the company will continue to use its excess cash flow to continue to pay down debt. However, the strength of our balance sheet gives us flexibility on our growth plans, and should market conditions change drastically from our current outlook, we certainly could evaluate other capital allocation alternatives including returns. We will update you further on this topic as the year progresses, as we continue to receive and discuss all investor feedback.

The outlook for most of the Middle East and North Africa region remains favorable as we've just outlined. Upstream spending remains durable, and National Energy Services Reunited continues to be focused on its stated goals of delivering profitable revenue growth, execution efficiency, technology expansion, debt reduction, and working capital efficiency to drive future financial growth. On behalf of management, I'd like to thank our entire workforce for their outstanding efforts in delivering these results, together with our directors, shareholders, and banking consortium for their continued support. The future for National Energy Services Reunited continues to look good. Now I'll turn the call back to Sharif.

Sharif Foda: Thanks, Stefan. Let me conclude by reiterating the key takeaways from the quarter and our outlook. First, while the market came into the year with extremely low expectations for the sector, and while the commodity backdrop remains uncertain, we believe that MENA upstream activity will remain a relative bright spot for growth. The gas development team is central to this view. Although competitive, contracts in our business bring multiyear visibility to the company, and overall profitability remains healthy as the sector remains disciplined.

We expect 2025 to follow the same seasonal pattern as in 2024, with the first quarter being the slowest, impacted by fewer operating days and the full month of Ramadan in March, followed by a slower sequential activity build through the year. Overall, our 25% growth outlook for National Energy Services Reunited relative to the market remains unchanged. Second, with the solid MENA backdrop, National Energy Services Reunited is extremely well-positioned to outperform due to, one, favorable project exposure, particularly related to the Broadband gas development; two, our strategic positioning in areas such as Kuwait, which are expected to lead the growth on a percentage basis.

Third, our Frontier, with pilot success in Ruiya now duplicated in other countries, and our unique NEDA positioning and investment in produced water are mirroring the announcement and commitment recently made by our largest customer and cross-industry partner. Whereas RoIA is expected to be a more linear driver of growth from here, NEDA and our water business represent massive potential, which is being defined in real time but nevertheless remains a long-term strategy with expected catalysts this year. I'd like to close by thanking all our employees and their families for a strong resilience and start of the year and wish them a happy Eid that is just around the corner.

Thank our partners, shareholders, and valued customers for their continued support and belief in [COMPANYNAME]. And with that, I'd like to pass over the call to the operator for your questions. Kevin?

Operator: Thank you. We'll now be conducting a question-and-answer session. You may press star two if you'd like to remove your question from the queue. Before pressing star one. Thank you. Good morning, Sharif. How are you?

Sharif Foda: Good morning, sir.

Operator: So as you said during your remarks, there's always been a disconnect between upstream spending in Saudi and volumes OPEC deducts from the market. But I'm just wondering if this feels a little bit different this year. We've seen Saudi cutting oil rigs for most of last year while keeping supply out of the market. And now this year, we're starting to see barrels coming back, and I'm wondering how you think this sort of the interplay with upstream spending now is going forward.

David Anderson: Are we getting close to the Saudi rig floor, and could we see Saudi activity in the second half of the year pick up if you add in unconventional, and should you continue to see growth into 2026? Just a little help in terms of what we're seeing on the ground in Saudi. Thank you.

Sharif Foda: Thanks, David. So if you split Saudi into two categories, which are unconventional on its own and the rest of the country, which is basically oil and gas, offshore and onshore, this will continue to drop. So you are going to have a softening. I do not think they're going to pick up anything in the second half of this year. I would see, obviously, depending on how much oil they put and how much production the world needs, you might see rigs being picked up in 2026. On the unconventional front, it's going as planned, no difference whatsoever. They are increasing rigs, they added more rigs, they're going to add frac crews, and that plan is intact.

It's not touched. So you're going to have more of a drop of oil rigs, more of even conventional gas rigs, and then pick up in unconventional. So overall, total activity, yes, is softer than what we expected a quarter ago because, obviously, they have that ability to put back production without adding anything. They still have a couple of million barrels of spare capacity, right?

David Anderson: Initial is enough to offset the decline at least in your business. For the second half of the year? I know everybody's got a different mix. I'm just curious about your own mix. And I know there's a bunch of contract awards we're waiting on in Geofora, how does that sort of factor into kind of the mix of your business in Saudi? So would you say that part of the reason why you're expecting to outperform in the market?

Operator: Yeah. I mean, obviously, we are more exposed to gas.

Sharif Foda: And more exposed to regulars, which is not being affected so far. The unconventional, as you rightly said, is going to be a huge catalyst. So depending on the award, yes, definitely. Some people will really outperform and some will not. So if a company is not in the gas at all or is not in the unconvention, they will definitely see almost a 20% drop year on year. Right? So we believe that we will be in a solid position overall, and then it will be seen, obviously, with the tender result. But we still believe that Saudi will grow year on year.

David Anderson: And those tender results, when should we be expecting to see those? Should those be completed soon?

Sharif Foda: Next quarter. Yeah, next quarter.

David Anderson: So if I could add one more in here for Stefan. Stefan, I noticed the margins came down a bit more in the first quarter. I recognize there's a seasonal component here. But you also talked about rightsizing the cost structure and reallocating equipment. I'm just curious, how much is that weighing on kind of margins today, and can you get back to 25% margins by year-end? I'm just curious, looking at last year's margin progression versus this year. Can you get back to those same margins? Or is that going to take a little bit more time?

Stefan Angeli: Hey, David. Yes, it will take more time, right? We will not get back to that rate of 25% today. I would say that for the full year, we'll probably be maybe 100 to 200 basis points less than what we ended last year with. Going into the cost reduction, the amount that we're looking at probably should add 100 to 150 basis points to our results from Q1.

David Anderson: Okay.

Stefan Angeli: That's our goal, is to recover, to get back to 25% in 2026.

David Anderson: Thank you very much, guys. Thanks.

Operator: Thank you. Next question is coming from Arun Jayaram from JPMorgan Chase. Your line is now live.

Arun Jayaram: Yeah. Good morning, team. Sharif, you characterized what you're seeing as a resetting of the cycle with the market in transition. Was wondering if you could comment on how you're seeing pricing trends broadly within the Middle East and maybe how the reduction in conventional activity in Saudi is impacting overall trends in pricing.

Sharif Foda: Thanks, Arun. So look, as we have seen before, large tenders with a long cycle or long duration tend to get, I would say, less discipline. Let's put it this way, right? And so if you get a big contract that is going to be defining for some countries, yes, you will see some pricing drop. Definitely, the expectation as we go along the cycle, similar to 2015 and 2016, the tenders that are coming are going to get softer, right? So the pricing, people will start to get nervous. People will want to secure contracts, so then you're going to see some pricing loss, right?

But I keep saying that before the Middle East never had a pricing gain, anyway. There was a slight bit of gain because all these contracts are characterized by long-term, and you are not a big chunk of the cost of the production per barrel, right? So they don't tend to slash the pricing like they do in the U.S. So I would say this pricing will get overall softer than as was the case in 2024.

Arun Jayaram: Got it. Got it. Okay. And maybe you could elaborate on your growth opportunities within Kuwait. Sounds like you're tendering for a lot of upcoming work, but give us a sense of what specifically you see in that market. I assume that's what's supporting your expectations of year-over-year revenue growth in 2025 and 2026.

Sharif Foda: Yeah. I mean, obviously, again, the size matters. So our size is again relatively much smaller than the big three. So Kuwait is basically tendering everything. Tendering the entire ecosystem of a contract because definitely, they're going to almost directly, in Kuwait, it will be the same like Saudi, right? So they have to add capacity, they have to have new players, they have to make sure that they have another five years of contracts assigned. So we already tendered several of those and we announced a couple and a couple more are coming on the way as well. And then we are sending everything, so that's meaning cementing, coiled tubing, fracturing, direction drilling through tubing, testing, everything.

Every single business in Kuwait has been tendered. And all these tenders will be done by the end of the year.

So if you look back at our size at National Energy Services Reunited, we didn't even exist five years ago. So now, we have a very strong position, and I think that's why I keep saying I think by next year, this will be our second-largest country. And obviously, if we win much more, then we can accelerate that growth. And the other countries are tendering as well, right? So we have separate tenders going around, and definitely the biggest one is the Saudi Arabia unconventional.

Arun Jayaram: Great. Thanks a lot.

Sharif Foda: Thank you.

Operator: Next question today is coming from Greg Lewis from BTIG. Your line is now live.

Gregory Robert Lewis: Hey. Thank you, and good morning, everybody. And thanks for taking my question. Sherif, I was hoping you could make some comments around several million dollars of contracts in North Africa. Just kind of curious how we should be thinking about, you know, potential timing of some of those contracts coming to fruition and then maybe, you know, what would you kind of characterize as a success in bidding on those, realizing they'll be somewhat competitive, i.e., you know, do we think we can win, I don't know, a third of those or... just trying to understand a little bit better what's happening in North Africa and the timing.

Sharif Foda: So most clients actually use always the downturn opportunity to tender, right? Because, obviously, smart. Right? They know that everybody's hungry. Everybody wants to get a piece of the contract. So North Africa is no different. The only thing obviously is there is a time when the contracts expire and then they tend to. So if you look at, more specifically, like, for example, Algeria, it's very, very fixed with timing. They have a tender board, all these things are happening as we speak.

So to answer your question, in the second half, these contracts would be awarded. So you're talking about in the next quarter we will know exactly our position. We will know how much we got more, how much we got less. And then the stuff that you are not part of it now, which is again, that's why I keep trying to explain size matters. You're 10% of the market, and you win 25% in contracts, that means you're going to grow definitely because you're going to drive to the 25% market share overall. Right? And that's our aim in some of these countries that you get to the sizable position.

So I would say in the second half, you would see a lot of these awards happening.

And if I move to Libya, which is a country where security is always, obviously, the biggest hurdle, but the capacity for service is very small or very limited, right? And the country always, since the beginning of the year especially, aims to increase their production capacity to go to 1.6 million barrels. So they went from 800 to 1.2 to 1.4, now they are aiming at 1.6, and the target is 2 million barrels in three years. To be able to do that, they need to add rigs, they need to add capacity, they need to add frac crews, they need to add coiled tubing, cementing services, downhole tools. All this needs a lot of services.

It's actually not the tender that is the biggest hurdle. It's actually the capability of people to get equipment into Libya and be able to operate there within the security framework, which is obviously what we are aiming to do.

And we already have a couple of new segments in the country today working that didn't exist before. So, Libya, for us, it's not going to be an incremental, it's going to be doubling. Right? So, we should double and triple the size of the company because we're very, very small there, right? But the country is going to invest heavily. Egypt is more of a stable, very, very stable. I don't think we're going to have a very big up or down, but we are stable. Our market share position is quite strong now. And we aim again to win our fair share of contracts.

So if I look at North Africa overall, definitely, I would say, we can double our market share as a percentage by next year.

Gregory Robert Lewis: Super helpful. Thank you very much.

Operator: Thank you. Next question today is coming from Derek Podhaizer from Piper Sandler. Your line is now live.

Derek John Podhaizer: Hey. Good morning. I just wanted to maybe expand on your comment around never missed an opportunity for a downturn and what that could mean for your future portfolio. Recently, we've seen JVs form with the large diversified players as they optimize their portfolios. We've seen Baker and Cactus yesterday with the service pressure control, Schlumberger and Adnoc drilling, the Middle East land rigs in Oman and Kuwait. Just maybe wanted to get your take on these types of deals that we're seeing and what it means for the Middle East region. And also, could this be a potential structure National Energy Services Reunited pursues as you think about scaling your overall business in the region?

Sharif Foda: Yeah. I mean, obviously, I cannot tell you exactly what we're going to do, but we have plans. But I would say when you have this downturn, I think first of all, for ourselves, we counterinvest. So we actually are investing heavily into the cycle because we know that the Middle East will be strong, but the sentiment will be negative. But we're going to invest heavily and then add CapEx, adding equipment. We know some contracts that we have; we can gain significant market share where people have no access to that market.

So I would say some of the move that you see lately is people buying access to the Middle East, and sometimes not in a very pricey way. I don't—we don't need to do that. We have the best position in the Middle East in terms of relationship and market footprint.

So now for us, it's really to make sure that we know which clients are investing, which clients are growing, which we know very, very well. And we have the core base of contracts and the infrastructure to add service. So for example, if we have like, let's say, one of the countries, like, for example, in Kuwait, where basically we know that we are tendering a lot of contracts. We need to have a very solid infrastructure. This country is going to grow. Five, six percent capacity, can I grow 25 percent? Right? Can I get all these contracts and invest and be a very serious player in multiple segments?

And that's our plan because we have the infrastructure now, we have the very good relationship with the client. And that's basically when I say when everybody else is shrinking, cutting, everybody else is firing people, we are going to invest and grow, then we're going to be a counter-cycle to the Middle East. So I see that this is an opportunity for us in the next twelve to eighteen months to be a significant market share player. And as we always said, we want to be clear top three in every segment in the countries where we operate, which is similar today. Today we have three, four segments where we are almost number one.

In the Middle East with our market positioning, that's our aim in this cycle.

Derek John Podhaizer: Great. Appreciate all the color. That's it for me. I'll turn it back.

Operator: Thank you. Next question is coming from Soral Palm from Bank of America. Your line is now live.

Derek John Podhaizer: Hey. Good morning, Sharif and Stefan.

Sharif Foda: Good morning, sir.

Soral Palm: It's a little contrasting how you talk about a downturn resetting of the cycle, yet National Energy Services Reunited is growing. And obviously, a large part of it is market share and investment in Frontier technology. But just to help us compare and contrast, Sharif, for the scale of your output, maybe talk a little bit to the underlying market. What's going on? Maybe you want to talk Middle East, more broadly, Southeast specifically, however you want to address that. But maybe just compare and contrast the overall market versus National Energy Services Reunited, just to help us understand the scale of your outperformance.

Sharif Foda: Yeah. Sure. I mean, I as I explained in my prepared remarks, the GCC overall will be stable to slightly up, except Saudi that is going to be down. That's, in a nutshell, the story. North Africa and Iraq will be stable to up. So overall market in the Middle East will be up, but it's not going to be up as we said before or as expected before the oil price drop and the whole tariff and geopolitical uncertainty. We said it's going to be 6% to 8%, and we're going to double that. I think the Middle East overall will be like flattish because of, obviously, the size of Saudi, which is different from all the others.

And I think if I talk more specifically, then Kuwait is definitely going to be the biggest growth year over year because of the added rigs and added capacity. Because they want to go to the 4 million by 2040. The other guys are almost at the reach of capacity, so they are just going to add some activity, and some others will be totally flat stable. The only one that is really dropping rigs is Saudi because they can, right? They have the capacity, they can produce another two million barrels without doing anything, right? So except for the unconventional project that is going to grow. And that's really the characteristic of all the countries.

I think the one that is kind of a wildcard will be the security-related countries. Libya is a very, again, very aggressive growth target, depending on security, depending on the geopolitics, this plan might get pushed back. But we are planning to go full on as if nothing is going to affect security. Know how to operate, obviously, in a tight situation, different than others, which gives us the advantage of knowing the place inside out.

David Anderson: Okay. Perfect. No issues. I think I got it. Right? So flat to up a little bit, and you should be growing at double that rate. Right? That's the expectation. So that's how you're outperforming. Perfect. And then just a quick follow-up, Sharif, obviously Saudi is seeing pressure, but Kuwait, on the other hand, is probably the best market. UAE is growing. How easy is it, Sharif, for you or for the industry in general to move capacity equipment from, let's say, in this case, Saudi going down rigs or other service capacity from, let's say, Saudi? I'm using that as an example to Kuwait.

So, how easy or not is it to move capacity from one country to the other within the Middle East?

Sharif Foda: Very easy. So within the Middle East, it's very easy. Obviously, again, I keep saying that for the people that know the Middle East, it's very easy. For the people that do not know the Middle East, it's very complicated, which I like it. Right? For someone in the U.S. that does not know the Middle East, it's an impossible task, right? It's almost very, very hard. For us, it's a matter of a couple of weeks. As simple as that. So now, the key for us, as we said, is to have a base of contracts, know all the legal entity, the infrastructure, the approval, etc. So I think newcomer to the Middle East is impossible now.

Put it this way. It's the current players in there and the people that know the place inside out.

And that's why I go back to our strategy of being an open platform for... We have a lot of partners. Today, for the work that, for example, we are doing in Kuwait with Innovation Valley and some of the pilot projects, we are talking to dozens of clients and partners in the U.S. We know that they have very good stuff that would work in that field, and obviously here, as I call it, the marriage is a very simple one because I have the infrastructure, I have the contract, I have the facility, with a unique technology, let's say, in Canada or the U.S., or Europe, I bring that over there. They don't need to spend any money.

Because I have everything, and then I secure the contract, and then we share. So this is a very good model for me because I don't need to invest in the technology, and a very good model for them because they cannot even operate there. It's almost impossible.

So more of these... and that's why we are quite confident and happy to enter this market with a fast pace, and we can mobilize equipment from the U.S. with the downturn happening. And I think the U.S. is going to get much worse, so there would be a lot of equipment available to mobilize. And, obviously, if you have a partner, you can mobilize it easily. So that's really our whole aim. And then again, I say back, don't miss the opportunity of a downturn because that's the opportunity. I get all this equipment, I can mobilize it and deliver, and then I just need to secure the contracts which we are working on.

David Anderson: Right. Right. No. That's fantastic color. Sharif, I'll turn it back. Thank you.

Sharif Foda: Thanks a lot.

Operator: Thank you. Next question today is coming from Jeff Robertson from Water Tower Research. Your line is now live.

Jeff Robertson: Thank you. Good morning. Sharif, with respect to Roia, can you talk a little bit about progress toward further commercialization? And really, where do you see the greatest opportunity for contract awards for that platform over the next couple of years that would be incremental to the ones you've already announced?

Sharif Foda: So our platform is, let's put it this way, we have three distinguished technologies: MWD, LWD, and RSS. I think we're going to commercialize first our MWD, which is basically an enabler to be able to do the other services but as well, then we stop renting or taking some of our partner stuff. And then you'll have the logging while drilling, which commercializes after, and RSS, where what we call the deliberate extensive testing. So today, we have contracts in three countries: Saudi, Oman, and Kuwait.

Honestly, we are not planning to have more contracts in the short term because what we want is we want to do the deliberate testing of all these extensive commercialized and run these three contracts professionally. These are plenty of services for us before we go and, you know, scout for others.

Today, we get some invitations from others. Obviously, we can attend there. But we want to deploy first in those three countries to make sure that the tools are commercial, reliable, and credible and then we have a track record. Just to give you numbers again for people to understand, it's a couple of billion dollars of a market. So for us to take, you know, five percent or ten percent of that is quite significant for us. Right? And that's why it's a homegrown technology, which is the only thing really we are investing in. And that's why as a technology or R & D besides the NEDA story, we need to make sure that this is properly commercialized.

Today, we are in what I call the extensive testing phase, which is basically we run the tools, we run a lot of them; so like we did in Saudi, we did in Oman, we get back the tools, we do something called destructive tests—we break them, basically—to know what is the footage, what's the reliability, and then we put them back. Maybe we do some little design changes, like change a thread, make something stronger, send back the tool, do the same thing, come back, and then that's where we call it, I don't call it commercial. Some other people call it commercial. We do not like to call this commercial.

We like to call it when ... I call it trouble-free or it is ... it does not cause any non-productive time. And it just becomes a matter of an industry normal efficiency, 99% to 98%. So we hope to reach that by the end of the year while we are deploying and running all these tools on these contracts.

Jeff Robertson: Thank you. And with respect to NEDA, can you talk about where you are in the pilots that you mentioned, and is demand for those types of services being driven by the push in the region for unconventional development and the need for water handling?

Sharif Foda: I would say—okay. I will answer your second question first—no. It is not. It is actually, I have to say, NEDA is a kind of creation of a market. It's not a market that exists. It's we are creating a market. The need exists dramatically, but since years, it's just been uneconomical, right? So today, the world produces so much water, and most clients dump that water, right? In the US, that's exactly what you do, right? You just put it in disposal wells, right? But today, if I can save the planet and make that water fresh or usable, then we can do a lot of that.

In the Middle East, when I keep saying it's scarcity of water, scarcity of mineral, why can't we find an economical way to do so, which is today, for the last, what, two years? We are testing, we have a very successful pilot now. We are going through the pilot of mineral recovery, which is happening as we speak. So that pilot is already in the country, and we are going to go next month, and put it on a site of a client and test continuously for six to twelve weeks; then it becomes a scale.

Then we obviously determine the parameters of the mineral, how much minerals you get out of that produced water, what could you do with it, can you get rare earth, can you sell some of these unique minerals? And if you do that, then the economics becomes massive, and that's why I'm super excited about that because it's going to change the whole ecosystem. You're not only making water, but you are making minerals, you're selling those minerals, making rare earth, you sell those, you offset your entire cost, then the water becomes like a free—imagine you get free water, free produced water, that you can use for everything.

For, obviously, unconventional as you mentioned, other products, even agriculture, for a lot of other reasons, then it becomes a real, real story that is pure carbon and circular economy responsibility, and economics work because you make money. And definitely the driver, as you have seen, a joint venture between Saudi Aramco and Mahdi, which is the largest companies in the world, to produce rare earth minerals. So if we can make that, then obviously we are on the same wavelength and in sync with our customer, which obviously makes everything much easier.

Jeff Robertson: And then just to follow-up, are you seeing interest or at least other of your customers watching this project? And is there a significant difference in water chemistry between the countries that would make rare potential rare earth recovery more attractive in one country versus another?

Sharif Foda: Everybody's watching, right? So obviously, everybody's watching. And that's why I use the word contagious. So if the success of that pilot and work is clear, oh, everybody's going to jump in it. We will not even have capacity to service this, but which is a good problem to have. Now, the key is to make it economically. Now for the water, as to your other question, no. It's very different. It's very different from the minerals. The produced water is bad everywhere. I mean, it has, like, two hundred thousand to three hundred thousand particles per million, but some is purely salt, so then the sodium is very low priced.

So the economics becomes harder than other—that's what you really look for. If you do the same thing you do in the Permian, that's exactly what people look for—can you have some lithium, can you have some, you know, some earth minerals that can sell and make money to offset the cost, and then it becomes economical or you make a lot of money. Obviously, when the lithium was ten thousand dollars, everybody was happy. It dropped a bit, but it's still economic to make.

Jeff Robertson: Thank you.

Operator: Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Sharif for any further or closing comments.

Sharif Foda: Thank you very much. We are again, we are excited about the cycle. We are excited to be a differentiated story among others and looking forward to the coming quarters and years. Thank you very much.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.