National Energy Services Reunited Corp. Q1 FY2025 earnings call

• Macro Environment: The oil cycle is resetting with geopolitical and economic factors impacting oil demand and supply. MENA region's oil markets have varying dynamics, with Saudi having unique production capabilities, Kuwait pushing for growth, and UAE/North Africa showing stability despite oil price fluctuations.
• Strategic Approach: NESR is right-sizing fixed costs and reallocating variable costs to areas of activity growth. The company anticipates growth in 2025 and 2026 due to incremental contract opportunities, recent key contract wins, and focus on technology deployment. For example, in Oman, there are incremental contracts in drilling and slick line; in UAE, new contracts on top of anchor ones; in Kuwait, multiple awards and an Innovation Valley initiative; and in North Africa, tendering for contracts.
• Financial Performance: Q1 2025 revenue was $303.1M (+2.1% Y/Y, -11.7% Q/Q). Adjusted EBITDA was $62.5M with 20.6% margins. EPS adjusted for charges and credits was $0.14. Cash flow from operations was $20.5M, free cash flow was negative $9.6M, net debt was $288M with a net debt to adjusted EBITDA of 0.93.
• Technology Deployments: Progress on [ROA] steel rotary steerable with field and facility testing, and mobilization to Oman. In [NEDA], crucial pilots in mineral recovery with opportunities in rare earth mineral extraction.

In the first quarter of 2025, NESR's overall first quarter revenue was $303.1 million, which was up 2.1% year-over-year. Adjusted EBITDA for the first quarter was $62.5 million with margins of 20.6%. Year-over-year, there was growth in Abu Dhabi, Algeria, Kuwait, Iraq and Libya, partially offset by a slow start in Saudi due to Ramadan. Sequentially, revenue was down 11.7% primarily due to slowdowns in main projects in Saudi during Ramadan. The revenue contribution by region showed growth in certain areas while Saudi had a sequential decrease.

• Q2 2025 revenues are expected to grow sequentially versus Q1 2025 but moderate year-over-year due to key project timing.
• Full year 2025 revenue growth is anticipated due to recent contract wins and successful technology deployments.
• Margins for Q2 2025 should slightly improve on Q1 2025 with the impact of cost reduction program initiated in April.
• The company is going through a tender process to convert outstanding warrants into equity on a 1 share to 10 warrant basis, expected to be completed over coming months.
• Excess cash flow will continue to be used to pay down debt, with flexibility on growth plans depending on market conditions.

• Geopolitical tensions and global economic uncertainties impacting oil demand and supply.
• Oil price fluctuations affecting activity levels in various MENA countries.
• Security issues in some regions (e.g., Libya) potentially delaying rig deployment and award decisions.
• Market volatility affecting capital allocation strategies, though the strong balance sheet provides flexibility.

Q: David Anderson asked about the interplay of upstream spending in Saudi and how NESR's exposure to gas and Jafurah tender results factor into outperformance.

A: Sherif Foda responded that NESR is more exposed to gas and Regulus, and Jafurah tender results expected next quarter will impact performance.

Q: Arun Jayaram inquired about pricing trends in the Middle East and growth opportunities in 2025.

A: Sherif Foda stated pricing will get softer due to cycle reset, and growth opportunities exist in Kuwait's large tendering and North Africa's potential.

Q: Derek Podhaizer asked about JVs and NESR's portfolio scaling.

A: Sherif Foda mentioned NESR will invest during the downturn to gain market share, leveraging existing infrastructure and relationships.

Q: Sara Pan compared NESR's growth to the overall market and asked about moving capacity between Middle East countries.

A: Sherif Foda explained the Middle East market will be flat to slightly up, and moving capacity within the region is easy due to existing infrastructure and partnerships.

Q: Jeff Robertson asked about progress towards commercialization of [indiscernible] platform and contract awards.

A: Sherif Foda discussed ongoing testing and commercialization plans, focusing on deploying in existing contracts first for reliability.