National Energy Services Reunited Corp.(NESR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $398.3 million, marking a 34.9% sequential increase and a 15.9% year-over-year growth, driven by the mobilization of the new Jafurah contract and increased activity in North Africa [16][17] - Full year 2025 revenue totaled $1.324 billion, up 1.7% year-over-year, supported by higher activity levels across several countries, although partially offset by lower rig counts in Saudi Arabia [19] - Adjusted EBITDA for Q4 2025 was $84.4 million, with a margin of 21.2%, remaining stable despite higher revenues due to strong cost discipline and operational execution [17][19] - Full year 2025 adjusted EBITDA was $281.4 million, with margins of 21.3%, down approximately 250 basis points year-over-year due to country and segment mix [19] Business Line Data and Key Metrics Changes - The mobilization of the Jafurah contract significantly contributed to revenue growth, alongside strong activity in North Africa, Saudi Arabia, Kuwait, Iraq, Egypt, and Libya [16][17] - The company is focused on optimizing operations and cost control, particularly in the Jafurah project, which is expected to enhance margins as efficiencies are realized [43][44] Market Data and Key Metrics Changes - The MENA region is experiencing steady activity growth driven by oil capacity expansion and domestic gas development, with significant investments announced in countries like Kuwait and Libya [5][10] - Kuwait is set to become the second-largest market for the company, with a commitment of $8 billion-$10 billion per year in upstream spending through 2030 [7][49] - North Africa, particularly Libya, is highlighted as a key growth area, with substantial investment commitments and plans to increase oil capacity [10][11] Company Strategy and Development Direction - The company aims to double its size over the next few years, leveraging its existing contracts and pursuing new opportunities in the MENA region [27][36] - The strategic focus includes enhancing technology capabilities, reducing leverage, and optimizing working capital to deliver sustainable long-term value [25] - The company is also exploring opportunities in critical minerals and decarbonization, aligning with regional trends and customer needs [83] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for 2026, anticipating a path to an annualized revenue run rate of approximately $2 billion, supported by a growing contract portfolio [22][23] - The outlook for the MENA region remains constructive, with expectations of continued investment in oil capacity and gas development [25] - Management emphasized the importance of aligning strategy with the multi-year view of customers to maximize shareholder value [28] Other Important Information - The company reported strong cash flow generation, with fourth quarter operating cash flow and free cash flow being exceptionally robust [20][21] - As of December 31, 2025, gross debt totaled $310 million, and net debt was $185.3 million, with a net debt to adjusted EBITDA ratio of 0.66 [21][22] Q&A Session Summary Question: Update on Jubail and ramp-up to $2 billion run rate - The company is on track with the ramp-up at Jubail, expecting to reach a steady state by Q2 2026, with additional fleets potentially added in Q3 and Q4 [31][32] Question: Supply chain concerns and optimization strategies - The company has proactively addressed supply chain issues by ensuring local supplies and aligning with partners, allowing for timely delivery of required materials [33][34] Question: Medium-term targets and growth beyond $2 billion - The company is optimistic about winning a significant share of tenders across the region, which could facilitate doubling the company's size in the coming years [36][37] Question: State of the union in Saudi Arabia outside of Jafurah - Activity in Saudi Arabia is ramping up, with Aramco adding rigs and a significant tender backlog expected to drive growth in 2026 [61][63]