National Energy Services Reunited Corp. Q2 FY2025 earnings call

• Countercyclical investment strategy continues to deliver differentiated performance, with $300 million in free cash flow generated over the past 10 quarters.
• Strong performance in key regions: Kuwait has an all-time high rig count, North Africa secured solid new contracts, Saudi is seeing growth in gas with Jafurah project as a key focus.
• Remediation of material weakness controls is nearing completion, with costs associated with this moderating going forward.
• Completed warrant conversion to clean up capital structure, with debt refinancing ongoing.

In the second quarter of 2025, NESR's overall revenue was $327.4 million, which was up 8% sequentially and 0.71% year-over-year. Adjusted EBITDA for the second quarter was $70.6 million with margins of 21.6%. Cash flow from operations for Q2 was $98.5 million, and free cash flow was a spectacular $68.7 million. CapEx was $29.7 million. For H1 2025, cash flow from operations was $119 million, free cash flow was $59.1 million, and CapEx was $59.9 million. The net debt to adjusted EBITDA was 0.74x, remaining below the 1x target.

• Q3 2025 revenues and EBITDA expected to be consistent with Q2 2025 results.
• Full year 2025 revenue expected to be higher than 2024, with Q4 expected to show an increase due to tender wins.
• Net debt to adjusted EBITDA remains below 1x for a fourth consecutive quarter.
• CapEx for full year 2025预计 to be around $125 million, with potential to increase based on tender results.
• Warrant conversion completed in July, and debt refinancing expected to be concluded over the next 3 months.

• Macro-economic volatility worldwide, including trade uncertainty, inflation, and fully supplied oil markets.
• Geopolitical uncertainty in the Middle East impacting oil prices and rig counts.
• Security concerns in some regions affecting activity and investment plans.

Q: Within the guidance, Stefan, you had said flat in 3Q. I was just wondering if you could kind of break that apart a little bit, some of the moving parts. We know Saudi is coming down. I think I had heard you say that you think Saudi is kind of bottoming here. Help me sort of understand kind of the different things that are happening in the fourth quarter. Are you expecting fourth quarter to start picking up in Saudi?

A: Well, you touched on Q3. It's consistent with Q2, as you said. And then in Q4, it will be up, right? As I said, the full year revenue for '25 will be higher than '24. The revenue for Q4 will be right now with all our tender wins, which we've had over the last 3 or 4 months, together with what we think we're going to win over the next couple of months. We're in a range for Q4, right, right now. But I think it will be, let's say, higher than -- Q4 will make the full year higher than '24 up to plus or minus $40 million, right? And if you look at it from where it's going to come from, it's going to come from, as Sherif touched on, there's going to be upside in Kuwait. There will be upside in Saudi depending on the results of the tender. And we've had wins in Algeria, and we've had wins in Libya, right? So that's where the activity will come from.

Q: So overall, Sherif, I'm just kind of curious, it sounds like you're going to start seeing some tailwinds into 2026. It feels like kind of all your different regions, if we assume that Saudi is bottom, we should start to see at least Saudi picking up from here. So kind of an early look at '26, if you wouldn't mind, Sherif, in terms of how you're thinking about the MENA region overall?

A: Thanks, Dave. So the MENA definitely will have an uptick in '26. That's without a doubt. As you said, the countries that did cut rigs or did cut activity are all planning activity pickup in '26. Obviously, Saudi is always on the news because of the size and the importance and their capacity, but they clearly said that they're going to pick up rigs. And you saw that -- even people saw that from some of the tender activities of the rig companies, right? Kuwait is on the path. To date, Kuwait is, as I said, is an all-time high. So if you take that and multiply even Q4 rig count by 4, then you have an impressive increase year-over-year in Kuwait. And as we said, Kuwait today, and people -- I don't think a lot of people know that, but today is the second largest country in terms of rig count. I mean it's above 200 rigs already in Kuwait running, as we say. And then you will have Iraq, it's planning to pick up to increase capacity. I would say -- and UAE is picking up and people can know UAE because of the ADNOC Drilling is public company. So they know the number of rigs, and they announced the amount of rigs that they're going to add on from jack-up and from land. And then you have Oman, obviously always stable. Then North Africa will continue their growth profile. And again, if you multiply Q4 x4, you get above 20% increase year-on-year in just North Africa. I think Libya will always be the security question mark. People will -- they have always this -- is the security be clear. They will be able to add those amount of rigs. The ambition in Libya is to go from 1.2 million barrels to 1.6 million barrels. That's 400,000 barrels more, right? So -- which means that they have to put a lot of rigs to work. So once all the payment and all the stuff is happening, then you're going to get it done. Algeria, as you saw some of the announcement, people saw it, ExxonMobil signed, and they are negotiating with Chevron in addition to all the Total and E&I activity there. So if you add all this up, actually, it's going to be quite significantly uptick, '26 over '25. But usually, you get some delays, geopolitical, et cetera. But definitely, '26 is much higher than '25.