National Energy Services Reunited Corp. (NESR) Q3 2026 Earnings Call Transcript

Operator: Greetings. Welcome to NESR Reports Third Quarter 2026 Final -- Financial Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Blake Gendron, Vice President, Investor Relations. Thank you. You may begin.

Blake Gendron: Thanks, Sherry. Hello, and welcome to NESR's third quarter 2026 earnings call. With me today are Sherif Foda, Chairman and Chief Executive Officer of NESR; and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our third quarter results and overall performance. After our prepared remarks, we will open up the call to questions. Before we begin, I'd like to remind our participants that some of the statements we'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I, therefore, refer you to our latest earnings release filed earlier today and other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details on reconciliations to the most directly comparable GAAP financial measures can be found in our press release, which is on our website. Finally, feel free to contact us after the call with any additional questions you may have. Our Investor Relations contact information is available on our website. Now I'll hand the call over to Sherif.

Sherif Foda: Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. Let me start by thanking the nearly 8,000 men and women of NESR and their families. For 3 quarters in a row, they have worked through silence, closed airspace and supply route that changed by the week. And for 9 months, you delivered safely with 0 evacuation, 100% reliability for our customers. You grew revenue 70% year-over-year despite all odds, which is a testimony to your resilience, dedication and commitment to the highest level. We owe it to our customers and our countries where we operate. I also want to speak directly to our clients and shareholders and thank them for their trust and partnership. You invested in a company built for this region in good times and in tough times. And this quarter, NESR did exactly what it was built to do. Our crews kept working. Our customers kept investing, and our multiyear outlook has not changed. That is the NESR story, and it is the reason I have never been more confident in the value we are building for our communities. On today's call, I want to cover three things: first, the resilience of the region, which I have watched out closely since the very first day of the conflict; second, what I call the post-conflict call on Middle East oil, which, in my view, is one of the most underappreciated opportunity in our sector today; third, why a pure-play Middle East company with frontier businesses like lithium and water is meant to capture many opportunities and translate it into significant value in the short and long-term. First, resilience. This year, the Gulf went through the most serious disruption it has seen in a generation. Shipping lane closed, airspace closed and some of the world's most important export hub declared force majeure. And yet, what I saw on the ground was not a region in retreat. It was a region that rallied around one singular focus, keep operating, keep investing and be ready for the day after. This was the message I heard again and again over the past few weeks at the World Petroleum Congress, WPC, in Riyadh in October, where all energy minister were present, despite all warnings. And in my meetings with leadership across the Gulf and last week at ADIPEC, the world's most visited conference, the tone was not defensive. It was confident. Energy leaders spoke about reliability as a responsibility to the world, about the cost of years of underinvestment finally coming due and about the need to invest more, not less, in capacity, redundancy and in gas. The word I just learned in real time, what happens when Gulf barrels stop flowing. Nobody in the region is taking that lesson lightly. What I saw myself was a region that did not flinch. The key example is Saudi Arabia, which built flexibility into its system and whose foresight kept barrel moving. Despite the kinetic disruption, upstream activity was maintained. The gas program kept moving and as announced, planned 80% increase by 2030 from 2021 level. Jafurah kept accelerating. New fields announced earlier this year remain firmly on the development plan. The ambition for the region to lead the next chapter of the global economy was not paused this year. If anything, it was reinforced. And it is not only Saudi, Kuwait kept its rigs and the growth plan it laid out at KOGS,fully intact. UAE doubled down with an accelerated, locally focused investment program. Oman and North Africa with uninterrupted export routes stepped up, and more to come. Across the leadership did exactly what I described on our last two calls: decouple activity from export; keep the ecosystem warm; and be ready for the restart, which brings me to my second point, the call on Middle East oil. Let me be very simple here. Before the conflict, the world was already consuming more than 100 million barrels per day, with demand still growing across India, China, Southeast Asia and Africa. And with years of underinvestment outside the region, then the market lost tens of millions per day of gulf supply, together with a big chunk of global LNG. Inventories have been drawn. Strategic reserves have been tapped. And as we discussed before, short-cycle land and shale cannot respond at scale without much higher prices and a much tighter supply chain. So when the Strait of Hormuz fully reopens, the world will not simply go back to where it was. It will need to rebuild inventories, refill strategic reserves, meet demand growth that never stopped. There is only one region with the reserves, the lowest cost, lowest carbon barrel and the capacity to answer that call. That is the Middle East. And the region will not just restore production. It will invest in redundancy, new pipelines, new export routes, new storage, more domestic gas, more diversified set of fields. Energy security, localized capacity and infrastructure diversity, the three themes I raised in May, are no longer slogan. They are now budget lines. And this is exactly what the region energy leader have been signaling this fall. Spare capacity is the world's insurance policy. Someone has to pay the premium and that the Gulf is prepared to do so. For NESR, this means two waves: first, the post conflict box of restart work, coiled tubing, slickline, intervention, work overs, reentering wells, drilling the reservoir section that were deferred; second behind it, a multiyear wave of capacity and infrastructure investment. We are ready for both. Our equipment is in each country. Our supply chain is diversified. Our people never left. Our customers know it. We stand very, very close to them. Now my third point, why NESR? We are the only publicly listed pure play in the Middle East and North Africa oilfield services. When the call of Middle East oil comes, there is no diluted exposure. No North America drag because of election outcome. Every dollar of that recovery flows through our anchor countries. We invested in significant infrastructure and equipment over the past 5 years. And beyond the core, we have frontier businesses that we believe are exciting value drivers in the company future. Rare earth minerals, especially lithium within NEDA, for which we just announced a groundbreaking $200 million contract award, this is very significant, not because of value, but potential. The Middle East produces some of the highest quality lithium brines globally and even in some oilfield produced water. After successful pilot with our customer, we are moving from pilot to demo scale with economics that stand on their own, reflective of the quality and cost competitiveness of Saudi Arabia. Once these projects succeed as planned, we believe the region can become a meaningful source of battery-grade lithium and NESR intends to be the partner that unlocks it. Together, those frontier business can add millions of annual revenue as they scale. The key is unlocking these new markets. And with the support of the largest energy companies in the world, we are well positioned. In addition, we still believe in the water story, and we are moving ahead with new pilot in Oman. We know that story takes time as the ESG is out of fashion recently. However, once economics are proven, I'm confident on the scale of projects that we will be able to unlock. Putting it all together, a resilient core, a post-conflict call on Middle East supply and frontier businesses on the cusp of commercialization. That is why today, we are reaffirming our multiyear outlook and our 3B3 strategy. And with that, I will pass the call to Stefan to discuss the financials in more details.

Stefan Angeli: Thank you, Sherif. Good morning to everyone joining us from the United States, and good afternoon or good evening to those joining from the Middle East, North Africa, Asia and Europe. It's great to have you with us today. This was a quarter that tested our resilience, and I'm proud to say our team delivered. I'll walk you through our third quarter '26 results, share the momentum we're seeing across the business and explain why we remain so confident about the rest of the year and beyond. First, let's -- let us talk third quarter performance. Let us start with the headline growth. Revenue for the quarter was $504.7 million, up an outstanding 70.9% or $209.4 million compared with the third quarter of last year. Sequentially, revenue was down a modest 3.1% or $16 million. That year-over-year growth tells the real story. It was driven primarily by the significant contribution from our Jafurah contract together with higher activity across Kuwait, Oman, Abu Dhabi and Algeria. In Jafurah, we maintained four active hydraulic fracturing fleets throughout the quarter, consistent with the second quarter, a clear sign of the stability and scale of this flagship contract. Kuwait, Abu Dhabi, Oman and Algeria, all delivered strong operational performance, helping to cushion the impact of external events elsewhere. Those external events explain the small sequential dip. In GCC, operations were affected during September by regional, geopolitical and security developments. And in Iraq, activity continued to be impacted by ongoing geopolitical disruptions. Iraq also remained a principal offset to our year-over-year growth. Turning to profitability. And here, I want to highlight the resilience of our business. Adjusted EBITDA for the third quarter was $95.9 million, representing a margin of 19%. We achieved that despite geopolitical developments during September and continued disruption in Iraq throughout the quarter. Throughout, we put our customers first. We incurred approximately $5.5 million in incremental freight and logistics costs, equivalent to around 110 basis points of margin, primarily for special charters and other contingency measures to ensure uninterrupted service. Excluding these incremental costs, our adjusted EBITDA margin would have been approximately 20.1%, which is in line with our expectations given the slowdown in activity during September. That resilience is no accident. It reflects our disciplined cost management, improved operational execution, greater activity efficiencies and our lean overhead structure. For completeness, adjusted EBITDA also excluded $5.3 million of net charges and credits, primarily related to three items: an impairment associated with a small technology investment; and expected credit loss provision relating to a North African customer; and some other provisions. Now to the bottom line, where the strength of our growth really shows. Adjusted net income, which also excludes the $5.3 million of net charges and credits I just mentioned, was $39.6 million, up an impressive 156.8% year-over-year and down 12.8% sequentially. Adjusted diluted EPS was $0.38, the second highest level in our history. Put simply, the significant increase in our activity continues to translate into higher profitability and earnings growth. Cash flow and liquidity have consistently been areas of differentiation for NESR over the past several years, and our year-to-date picture remains healthy. Year-to-date cash flow from operations totaled $201.5 million, resulting in free cash flow of $48.7 million. As many of you will recall, first quarter cash flow was affected by the normal seasonal buildup in working capital associated with Ramadan. That reversed strongly in the second quarter when we achieved record low DSO for a non-year-end quarter. In the third quarter, free cash flow was a negative $45.9 million. This primarily reflects increased working capital requirements and continued capital expenditures to support our growing contract portfolio as well as temporary slower customer collections associated with national holidays and geopolitical developments across several key markets. The good news is we collected a significant portion of these delayed receivables early in the fourth quarter. Working capital also reflects a deliberate protective investment with an approximately $45 million to $50 million increase in inventory over the past 6 months, as we implemented our 30, 60 and 90-day contingency sourcing plans in response to regional, geopolitical disruptions. These measures safeguard our supply chain and ensure uninterrupted service delivery to our customers across all markets. At the same time, consistent with our countercyclical investment strategy, we continue to deploy capital expenditure against recently awarded contracts that we are ready to ramp up operations quickly and meet our customer requirements. Capital expenditure for the third quarter was $42.7 million, bringing year-to-date capital expenditure to $152.8 million. Looking ahead, we expect a significant improvement in free cash flow generation during the fourth quarter, supported by stronger customer collections, improved working capital efficiency and normal year-end seasonal trends. Our balance sheet remains one of our greatest strengths. As of September 30, gross debt stood at $267.3 million and net debt was $160.5 million. That represents net leverage of just 0.44x adjusted EBITDA, comfortably below our long-term target of maintaining leverage below 1x. This gives us significant financial flexibility to support organic growth, while maintaining disciplined capital allocation. And our returns continued to improve, reflecting the sustained improvement in profitability throughout '26. Our trailing 12-month return on capital employed increased to approximately 13.7%, driven by higher earnings, disciplined capital allocation and better utilization of our asset base. Freight and logistics remain our primary areas of exposure to the current geopolitical environment. We have proactively planned for these costs based on current conditions to -- and based on current conditions, do not expect them to exceed the incremental cost experienced during the second and third quarters, unless the regional situation deteriorates materially. Now to the full year 2026 outlook. And I'm pleased to say that our performance through the first 9 months exceeded our original expectations coming into the year. Both our second and third quarter revenue levels demonstrate an annualized run rate of more than $2 billion. As a result, we now view approximately $2 billion, plus or minus, in revenue as our goal for full year 2026. We continue to expect full year adjusted EBITDA margins of approximately 20%, including the impact of the additional freight and logistic costs. We remain committed to our countercyclical investment strategy and now expect full year CapEx of approximately $220 million to $225 million. This reflects higher activity levels, the execution of recently awarded contracts and continued investment to support a robust tender pipeline and our longer term 3B3 strategy targeting $3 billion in annual revenue. For the full year, we currently expect net interest expense of approximately $28 million, an effective full year tax rate of approximately 22.5%, net income margins of approximately 8% and free cash flow conversion of approximately 30% to 35% of adjusted EBITDA. Overall, we believe NESR is well positioned to deliver another year of record financial performance, while continuing to invest in long-term profitable growth and advancing our 3B3 strategy. Before concluding, I'm delighted to share two important corporate development milestones. First, as announced last Wednesday in our SEC Form 8-K filing, we successfully completed our comprehensive refinancing with a consortium of leading international and regional financial institutions. The new syndicated financing arrangements provide approximately $747 million in aggregate facilities, comprising approximately $298 million in term financing and approximately $449 million in uncommitted working capital and credit facilities. These arrangements refinance our existing facilities, extend our maturity profile and provide additional financing capacity of $219 million to support our operations and future growth. They also include an uncommitted accordion feature, which allows the company to request up to a further $153 million subject to lender approval. This is a significant enhancement to our capital structure. It demonstrates the continued confidence and support of our banking partners and further strengthens our ability to pursue attractive growth opportunities across our markets. Second, and this is a proud moment for all of us, at its meeting last Friday, the Board of Directors approved NESR's first ever dividend. The dividend will be $0.10 per share payable on December 10 to shareholders of record as of December 3. This milestone reflects our confidence in the company's financial position and prospects. We expect to continue paying quarterly dividends subject to approval by our Board of Directors and consideration of our financial position, liquidity requirements and other relevant factors. To conclude, despite the geopolitical headwinds, we remain very excited about the opportunities ahead. The Middle East and North Africa continue to represent some of the most attractive energy services markets in the world. And as Sherif discussed earlier, we believe the region is well positioned to lead the next phase of industry growth. Over the past 6 months, we have developed a detailed road map for our 3B3 strategy, targeting $3 billion in revenue. Combined with our strong market position, expanding technology portfolio and growing backlog of long-term contracts, we believe NESR is exceptionally well positioned to capitalize on these opportunities. Our priorities remain firmly focused on four key areas: delivering profitable growth; driving operational excellence; maintaining disciplined capital allocation and working capital management; and further expanding our technology leadership. Strong operational momentum, resilient financial performance, robust cash generation and disciplined capital allocation give us confidence in our ability to continue delivering profitable growth and creating long-term shareholder value in 2026 and beyond. Before I hand back to Sherif, I want to thank our employees for their dedication and outstanding execution in the demanding quarter. I'd also like to thank our customers, shareholders and banking partners for their continued trust and support. With that, I turn the call back to Sherif.

Sherif Foda: Thanks, Stefan. Let me conclude. Markets have a short memory, but the leadership of this region thinks in decades, not quarters. Everything I heard this season points the same way. The world will come out of this conflict, needing the Middle East more, not less. The region will produce more, invest more and build more resilience into the system than ever before. If anything, the case for our region is stronger today than it was a year ago. To our shareholders, thank you for standing with us. We will keep doing what we have always done: executing; performing; investing; and delivering results. Our inaugural dividend is a milestone for our young company, and it is our confidence in the future expressed, not in word, but in capital. The best of the NESR story is still ahead of us. To our dear customers, thank you for your trust. We stood with you through these difficult months, and we will stand with you through the restart and the growth that follows. We owe it to you and to all the communities where we live and operate. And to our people in the field, you proved once again that NESR is the national champion of the region. We will continue to punch above our weight, and we have big ambition for the future. With that, I'd like to thank you and turn the call to Sherry. Please open the floor for questions.

Operator: [Operator Instructions] Our first question is from David Anderson with Barclays.

John Anderson: So in your guide, you clearly have good visibility on fourth quarter, reaching that $2 billion revenue target. Can you kind of help us frame 2027? You talked about the post-conflict box of opportunities and the multiyear investment story. Obviously, that's a timing issue. A lot going on in the Middle East and North Africa, though at the same time. If you just assume nothing changes here in Strait of Hormuz, does upstream spending still grow in the Middle East next year, just to sort of help kind of level set us here? And then maybe how much could that post conflict raise that? I know there's a lot of -- very cloudy visibility, but if you could just help us frame kind of what '27 could look like for you?

Sherif Foda: Thanks, Dave. Obviously, yes, a moving target. If you consider status quo, meaning the straight remains as is, which is basically half open, half closed, some people manage to do the ship-to-ship shipment and get the things out, some people cannot, sometimes you have good days, sometimes you have bad days. Let's say this remains the same. Overall, the Middle East will be more or less flat, right? Meaning that '27, '26, same. We will grow, yes, we will grow. So we will grow outside because we obviously outgrow the market, as we always said, plus we have projects that we have on our belt, if you like, that will continue to grow the overall year '27 over '26. And why is that? Because the places, again, that are very in a problem areas, we are very, very small in it. So our impact -- or impact on us is very limited. And the places where we know that the project is going to continue to go ahead and the investment will go ahead, we are -- we have a very high exposure to it that, therefore, our revenue for '27 will grow over '26. Now the conflict, let's say, which is, I would say, most likely going to cool down and things will start to open, yes, the people will invest, as I tried to explain in the -- my remarks. First, they have to restore some of the activity, which is what I call the post-conflict box, and we are very well positioned in that. And some of the projects that were basically pending, will be accelerating. I was just in -- as explained in ADIPEC and met with all the leaders, all of them have plans for investment, right? All of them have plans for growth. All of them have plans for putting rigs that were stopped back, et cetera, et cetera. So there is a momentum, but definitely, all of them have the security and if things get really bad or if things get a bit better or it stays the status quo. I mean the consensus is, things will get better.

John Anderson: I would hope so. Second question, maybe for Stefan. Stefan, could you talk a little bit about the margin progression this quarter, kind of -- it came down a little bit in terms of kind of thinking about how much of the margins today sort of being held back by the conflict? Is there sort of like a -- I don't know, if you can quantify that, how much of this is sort of mix? And maybe talk about how this mix could potentially shift and the path going forward your margins over the next, let's say, 12 months or so?

Stefan Angeli: So as I said, we ended up with 19% for the quarter. The direct impact, which was freight and logistics was probably 110 basis points, which was 20.1%, right? As from the original where we were for Q3, we were short 3% or 4%, right? And there would have been some margin on that, right? So that's the impact on Q3. Q4 is always the strongest quarter of the year, right, where you have some seasonal improvement, right? So I expect the margins to improve slightly in Q4 to get to a full year rate of 20%, as I put in my prepared comments. Right? And so for 2027, that's a moving target, as Sherif said on the revenue side, right? It depends on what happens with the geopolitics, right? But if we -- where we are today, the margin should be the same or improve slightly, right, and if the geopolitics conclude, right, that margin may improve to where we were looking at a year ago for '27. I hope that helps.

Operator: Our next question is from Josh Silverstein with UBS.

Joshua Silverstein: Maybe just near term, talking about the $2 billion target for the revenue for this year. It's obviously a pretty big step-up from 3Q to the fourth quarter number. Can you guys just bridge that gap and kind of what's locked up today and secure versus what's still kind of market conditions?

Sherif Foda: Yes. And as -- I think as we tried to explain, as the projects that we have on hand are, I would say, uninterrupted, you will be able to capture that in Q4 versus Q3. We feel pretty comfortable that this number is achievable, right? So if the conflict remains as is, or get a bit worse and the countries are affected, the ones that are affected today get a bit more affected, is not really making a big difference to us. The project that we are working on, that are very good and we have the awards planned. We are going to be able to achieve those results. So overall year will be plus or minus the $2 billion, give it $5 million here, $5 million there, it's kind of noise. If I look at some of what I would call spook the market and explained by a lot of people early September as obviously, some of the rigs were released in some of the places -- and yes, did it affect us? Yes, it did affect us, obviously because we were working on it. But if I look at the big picture, we always said Q2, Q3 that are kind of flat and there is a step-up in Q4. If I look at Q3 with a $4 million, $5 million difference or something, but it's still a 70% growth year-on-year, it gives you the indication, if you take the same growth on Q4 versus Q4, you will get the numbers.

Joshua Silverstein: Got it. Then maybe along the same lines, I was curious just to get an update on the fifth or fourth crew. It's in country. Is it starting to work? When do you guys expect it to work? Just an update on that progress?

Sherif Foda: Sure, Josh. So as we said last time, we ship things ahead of time, right? So that's our motor, right, countercyclical. And as Stefan explained as well on inventory, we looked at the working capital, this is what I call our duties to our customers. So we know that we plan 30, 60, 90. We plan to put things in motion. We plan to have inventory almost $50 million more than before. It's not by coincidence by design, right? We plan to have that buffer to ensure that we have 0 interruption to our operation, which we did achieve. So now for the fifth crew, we shipped it. It arrived. It's in Saudi Arabia. It's for Aramco to decide when they think they want to start that fifth crew. But we wanted to always be ready, ahead of time. My expectation is, again, a number of stages. If we improve the stages all the time, and we're working with our -- with Aramco on that, and then what do they need for the delivery of the number of stage per quarter. So I believe that, that fleet, it will be called upon sometimes towards the end of Q4. And then whether it will work the full '26, '27, most likely. But again, it's Aramco's decision to go for it or not.

Operator: Our next question is from Arun Jayaram with JPMorgan.

Arun Jayaram: Yes, Sherif and Stefan, I was wondering if you could elaborate on your commentary around spare capacity and maybe provide some of the data points you're hearing about general planned increases in spare capacity across the regions, just to deal with energy security redundancy, as you mentioned in your prepared comments?

Sherif Foda: Sure. So I think the Saudi is 12 million, intact. They have it. They spoke about it. They can restart it very quickly. So they are maintaining the 12 million spare capacity. The one that's obviously elevated is UAE. As announced, they go to 5 million, and they might go above 5 million now with their increase of activity. And they are as well opening up for more gas and more oil. And I think they're going to announce something very soon with some of the maybe international players. So then you are left with really the rest of the region that is on plan for their spare capacity. So you have Kuwait that, as announced by KPC, 3.5 million, then 4 million. Obviously, Kuwait has kept all the rigs, which is for a lot of people, especially here in the U.S. would be very surprising. Why would you keep all these rigs if they are not drilling the reservoir and you are not increasing the production. But again, that's what all the region believe, the ecosystem is more important than short-term. The long-term is the key and they wanted to maintain that 200 rigs in Kuwait uninterrupted. So then they can get back to the spare capacity that they are planning to do. And the rest is really, I would say, a very, very small percentage. So the region has that, if you like, the main thing is Saudi and UAE -- and Saudi, obviously at 12 million and UAE at 5 million, which they're going to achieve next year, right? So it's quite significant. The gas, I think what people underestimate is very significant because these projects, if you talk about 80% more gas in Saudi Arabia, 2030, that's only 3 years from now from the '21 level, that's a lot of gas, there are a lot of projects that has to come online to be able to achieve those numbers. So I would say all of them are on the same path. North Africa could do better, especially they have the exports not filled and the customer on the other side in Europe are hungry for it. So if they do that, then obviously, more activity will happen in North Africa.

Arun Jayaram: My follow-up is for Stefan. Stefan, I ran through your guidance using a quick goal seek. We were thinking that your fourth quarter guidance implies around $570 million of revenue and $121 million of EBITDA if we solve for $2 billion of revenue for the full year and 20% EBITDA margins. Are we in the right ballpark? And perhaps you could just comment on some of the working capital tailwinds and free cash flow tailwinds for 4Q?

Stefan Angeli: As we've always said, we don't actually give guidance, but we gave you the full year guidance, right? And mathematically, obviously, you're in the ballpark, right? From the working capital, we got impacted in Q3 by two events, right? Our collections were lower than what was originally anticipated, right, that was due to the timing of the national holidays in certain countries and just the geopolitical circumstances making back-office transactions very slow. And that all got picked up in the first 2 weeks of October. And then the working -- then the inventory, the 30, 60 and 90 days added $50 million, half of it in Q2 and half of it in Q3, right? That's -- those two things added together caused the negative free cash flow. Right? As I said, we should get back to the 35% adjusted EBITDA percentage for the full year. Right? And that implies that the inventory will stay approximately flattish and that we'll get back to the normal level of collections in Q4, which is just a seasonal thing. Right? And that always happens in Q4 if you go through where we are for the last 5 years in our company and all our peers, right? So we should get back to a 35% conversion rate.

Operator: Our next question is from Derek Podhaizer with Piper Sandler.

Derek Podhaizer: I just want to go back to the 3B3 strategy. I know we've kind of talked about Dave and Josh's question on your initial outlook for next year. We've talked about the fifth to fourth frac fleet. You have big tenders out there in the $3 billion to $4 billion of opportunities. Maybe you can kind of help tie it all together for us and bridge us around the 3B3? And you reaffirm that multiyear outlook. So if we think about the fifth fleet, we think about the tenders, ROYA, just really how we can get back up to the 3B3 over the next couple of years?

Sherif Foda: Yes. Thanks. If you look at our performance and the project that we have on hand and multiply the expected Q4 by four, you're almost there on our strategy. In addition to that, we have -- as we announced, we just secured our lithium first project, which was -- for me, it's very significant because it's the first project in the region actually, and maybe even in the world, with that scale and that speed that you have to deliver on. We have a lot of tenders that we believe will be announced. I know they delayed for obvious reasons. I mean they always think the customer, if I am going to award someone, let's say, X that's going to replace Y and Y has 30% market share and Mr. X will not be able to deliver for the next 7 to 8 months because of the routes, the problem of the logistics, the equipment, the people, et cetera, et cetera. Once we -- some of this discussion we're having and proving that we will be able to deliver at a certain speed, these projects will get awarded. And we believe we are going to win, as I always keep saying, more than our fair share, which means that our market share will grow. Some places we don't have some of those segments. We will start those segments in some of those countries. If you add all this up, you are on the right track. And then in ROYA platform, we are today working extremely well in Oman. We have Saudi. We have as well in Kuwait. So we have three countries. We have contracts. We -- I think we will be able to start announcing the commercialization of the ROYA platform next quarter. And with that, we'll be able to capture all this -- basically, we don't need to win contracts, we have the contracts. We are the ones that are deploying it slowly because we are testing deliberately to make sure that the tools are -- when we say commercial, they are commercial, they don't have recalls later on. So if you add all this up, you are on the right path to exit '28 for the $3 billion.

Derek Podhaizer: Got it. That's a very helpful overview, Sherif. And then I guess, maybe just a little more on the state of the Middle East. Obviously, there were impacts over September. We've heard of rig suspensions onshore/offshore. I know you're not really exposed to the offshore side. But maybe just help us understand if this is more a temporary slowdown in your opinion and how we can think about the sequencing of the restart? So just some color around the rig suspensions that we've heard, maybe some time lines around that and then expectations to kind of -- to restart the work?

Sherif Foda: Yes. If you look at it -- again, if you -- let's divide it by country to make it a bit very easy for people to understand. Yes. Saudi Arabia, all the GCC basically kept the rigs almost intact, except the fact when there is a conflict or security issues or insurance issue, et cetera, et cetera. So that's what they keep doing. So they do this, what they call suspension, not release of rigs, suspending the rigs. So rigs offshore in a dangerous place, they suspend them. They said, "Guys, in the next 3, 4 months, don't operate, you start operating from January." And they always -- most of the clients, they do that with the rigs that have no penalty or something like that or they move them, if they like, from oil to gas. And that's what happened in September, obviously, with some of the heightened security issues and some of the hit that happened. Some of those rigs were suspended, had to stop. Some of the land as well, by the way, got suspended and had to stop. Did it affect us? Yes, it did affect us because obviously, we have cementing, coiled tubing, a lot of things. And we are -- we work offshore and onshore, and I keep saying that. We work on all the jackups. We have the same share, right? But the key is, once these things drops, our business on that rig drops, right, and everybody else had the same effect. But the countries where there is a serious issue, which is Qatar with force majeure and Iraq with a lot of the projects, obviously, waiting for the IOC to restart them, they will not restart them with the conflict, right? So even if they still commit. So you have, for example, Kirkuk that is working. But overall, Iraq cannot come back to normal until they are 100% sure, those like BP, Eni, Total, all these guys will not put all the heavy money until they are 100% sure that things are back to normal. If I look at Oman, Kuwait, North Africa, actually, it increased. Kuwait is special because, as I replied before, they wanted to keep that ecosystem warm and they did not release any rigs. They just do not drill the reservoir for a lot of those rigs. Oman obviously increased because they actually can have potential and obviously, they make more money with the oil price. North Africa -- but North Africa do so much more because they have the other side ready. So if I look at my natural exposure, our exposure was again limited to the areas -- and we just got Q3, Q2, but the difference is just some of those releases where we worked, we had to release as well our -- basically take the coiled tubing, cementing, whatever testing thing. That's why I keep saying, look at year-on-year, it's 70%. Year-on-year growth is 70% growth, which tells you that all our projects -- the other projects that we are involved in, are working as planned, and that's why we delivered those numbers. Q4, we feel very comfortable we can do the same growth, which means we end up with the right number, right? So the sentiment over the past, I would say, week, I mean, if I look at it, in September, it was very dangerous. There is a lot of talks of, like very, very serious escalation. And since I would say the midterm election, there is a theme that maybe things will come to order and there will be some kind of a deescalation and people are ready to put everything back.

Operator: Our next question is from Saurabh Pant with Bank of America.

Saurabh Pant: Sherif, I think Josh touched on this, Derek touched on this a little bit, but I want to just draw attention back to what one of the largest land drillers in Saudi was talking about, how some of the land rig suspensions may be in part because the rigs are running way far ahead of completion, right? So it seems like completion has a lot of running room for you in Jafurah. There's a big inventory of wells, that I'm sure is good for your own efficiencies. And you talked about Jafurah continuing to accelerate. Maybe talk to that a little bit in terms of the track inventory, the runway you have in front of us, the ramp-up and where do you think things stabilize from a plateau activity standpoint and the efficiencies that you're seeing in that operation?

Sherif Foda: Jafurah is very, very good. And I always talk about it in conferences, in places. Amazing job Aramco has done in drilling the wells, completing the wells, et cetera. There are very good backlog, if you like, of stages, of pads to be fracked, to be completed. And that's why we are very positive about it. Whether Aramco now decision to some of the rigs replace, they want to get better rigs, I obviously leave it to them to decide how they manage. But for us, the key is that we have a backlog of stages that we can perform, and that's why we feel very, very comfortable that we will be able to make our numbers, right? So the key now is, can I -- as we talked about it before, we are working on a project internally with ourselves, with embedding all, what I call the latest AI on our system -- ecosystem to improve efficiency, eliminate NPT, nonproductive time. So that project, we believe it's 6 months, we put it together. And once we get to that, can I get 20% efficiency. I mean that's significant. That's enormous, right? And that will reflect immediately in revenue and more important, in cost, right? So then once you eliminate NPT -- because you are stage by stage. So once you can perform more stages with the same equipment, that means that your profitability will automatically improve. So if I look at the big picture for the Kingdom and they want to reach 80% more gas by 2030, it gives you very simply that you need a lot of Jafurah, you need a lot of conventional. You need a lot of gas to be able to reach that benchmark that his Royal Highness reiterated during the WPC, the World Petroleum Congress, in Riyadh last month.

Saurabh Pant: Got it, Sherif. That's very helpful. And then my next one, Stefan, maybe for you. I know Dave at the start of the Q&A was touching on 2027. We heard that answer, looks like a positive outlook for you. But from a margin standpoint, Stefan, right -- Again, I don't expect you to give a guide. But from a relative to 2026 margins, that 20% kind of number for 2026, how should we think about '27 margins, the pluses and minuses from a pricing standpoint, cost inflation standpoint, the efficiencies that Sherif was talking, standpoint? What are the moving pieces that we should bear in mind for 2027 margins?

Stefan Angeli: So I think we touched on this answer in one of the other questions, right? But there's a lot of moving parts, as you just said, right? And so for '26, right, where we end up is around the 20% mark is, as I said in my prepared remarks. Right? If you look at '27, right -- if you go back a year ago or so and if all the conflict ended, right, you'd probably look at probably -- it's kind of moving and it depends on the mix in each country and whatever. Right? But a year ago or so, I said around the 21.3% mark. Right? And that's -- but it's hard to say, right? There's still pricing pressure on every new contract as we keep saying. Right? Obviously, we look at efficiencies on every contract we win, right? But if you -- if the conflict was to end, I would say, look at the number I originally said a year ago. Right? But if it wasn't to end, it's around today or a little bit more.

Operator: Our next question is from Doug Becker with Capital One.

Doug Becker: Sherif, an important part of the growth story has been the opportunity across Algeria, Libya and Egypt. I was hoping you could provide just an update on contract starts in North Africa and just your assessment of geopolitics and supply chain risks that might push any of those time lines to the right?

Sherif Foda: Yes. I mean North Africa, as I always keep explaining before and maybe for some people they don't know, North Africa has like the fantastic setup today to print money, right? You have two countries where their export pipe is not full. So -- and the client on the other side pay $100 for gas. So they -- it's a perfect, perfect scenario. What is the issue? You have some, I would say, geopolitics in the sense, not a war, not a conflict, but internally, you have some security issues. If this gets solved, I think it's going to get unlocked so much faster. And overall, that's, I think, the theme. So I still -- I'm still positive about it. I still believe -- and I met with the leadership again of the two countries, they can do so much. And I think you will see something it should have been in '26, in my personal opinion, that for outside reason, not because of energy, but for politics, it got delayed. So I think -- but I still believe that '27 will be the year where this gets unlocked, and you will see activity - really feeling the activity getting better. Egypt is different. Obviously, Egypt doesn't have the same -- Egypt as an importer, but Egypt activity is good. And we have as well some projects that we are looking with them to unlock some of the brownfields in the Western Desert and get some of this production back. We just did a study, I actually presented to the minister, to unlock that. So overall, I'm still positive about North Africa, and I still believe North Africa could be 20%, 30% growth year-over-year easily '27 over '26, easily.

Doug Becker: That sounds very encouraging. And then another growth driver, you've highlighted it a couple of times, but the direct lithium extraction project. Just anything you can do to help frame the commercial time line, the capital intensity and really the ultimate revenue potential for this specific application as we think about '27 and 2028?

Sherif Foda: Yes. I mean we announced it is $200 million. We have to deliver the first lithium by the end of '27. It's not an option. It's a obligation, right? So we are working very well with our -- all our suppliers and partners to ensure that we do deliver that 2,000 ton in December. If I look at people jumping on that opportunity, because obviously, something everybody thought, oh my God, it's never going to happen, who can produce this amount. I think now everybody is asking me to test their fields, their brine. Every single country, right? Because everybody wants to say, "Oh, we can -- if you can produce in Saudi, let's produce as well otherwise." Once the project sees the light in the sense of production, I think if the brine that we found in Saudi is found somewhere else, this project is going to be multiplied immediately. And I see a potential of $1 billion opportunity over the next 5 years for that business.

Operator: Our next question is from Phillip Jungwirth with BMO Capital Markets.

Phillip Jungwirth: I was hoping you could help us understand the post-conflict box and what this looks like for NESR? Here you on the key product lines, but assuming a resolution to the conflict, how does the recovery actually look like or play out here by country product? And just generally, how is NESR positioned? And last, just are reports of higher crude exports helping activity at all, which I mean at times have been up to 90% to 100% of pre-conflict levels?

Sherif Foda: So look, the -- most of the business will come into the intervention market. So you'll -- some of the wells you'll have to go, either a workover unit or replace ESPs, check the production, do coiled tubing, slickline, cased-hole logging, some of the wells you'll have to drill that actually reservoir section that you never -- that you decided not to drill because you don't need the production and you don't have enough storage in your country to do so, right? So a lot of the production business, production completion segment, if you like, which is our strongest segment, will be needed. We are already -- I'm already in conversation with the leadership and CEOs of those companies to ask me what -- how many units, how many package you have? Do you have the people? Do you have the resources? Do you have something of the chemicals to be able to do that? And obviously, the answer that we -- I keep repeating, is the same. Guys, we never left. We never evacuated. Everybody is there, so -- and we bought equipment when everybody stopped buying. So we are ready to restart in all these countries once they ask us to do so, right? So this will happen before drilling new wells, right? So -- and that's why intervention and completion will be the number one activity that comes back before drilling fresh new wells.

Phillip Jungwirth: Then you mentioned the detailed road map on the 3B3 strategy. And I was just hoping we could focus on the specific business lines or just how do you see the pathway to share gains for businesses where you don't already have a top 3 position such as maybe fluids, specialty chems, integrated projects, tubular running services, just to name, a couple of the more significant ones? And if you could also just update us on the overall tender pipeline right now, how you're seeing that, understanding that some slippage is maybe reasonable here?

Sherif Foda: So look, the tender -- I think I would start with your latter part, right? If you look at the tender, Kuwait and UAE today have the largest piece of tenders that we submitted, negotiated some of them, round one, round two, round three, waiting for the award. And the award, as I explained before, for obvious reasons, they don't want to announce. If there is a replacement of some of the key players, they want to make sure that new player will be able to perform and send their equipment properly during a conflict, right? So they might extend, they might award. Obviously, they would see. These tenders is on everything, right? So you have coiled tubing, you have TRS, you have fishing, you have all kind of segments. Some of it for us is new because we were either very small or did not exist. And some, we -- it's defending, right? So that's why I don't -- I mean there is a lot of tenders as well all the time in, like in Saudi and in Oman. But those are already in. So I need to defend my position, maybe get more, maybe get less, but this is something what I call the defensive mechanism. But the new is a lot and a lot of -- I mean, for -- I don't want to bore everybody, but I mean, there is a lot of tenders out there. Some of it we already got awarded, but it's not announced officially, so we don't announce it on a press release until we get it with basically saying to everybody, the clients say, go ahead and announce publicly that you got awarded and then we put the press release. And that's why you always find that we announce those results once we know. But overall, I feel very comfortable and very confident that we are going to win more than our fair share of all these tenders.

Operator: Our final question is from Jeff Robertson with Water Tower Research.

Jeffrey Robertson: Sherif, when you talk about 3B3 and think about the investment climate in the Middle East and North Africa over the next several years, how do you think about the tailwinds for NESR's long-term business in the region? And also maybe the revenue diversity that you could see in future years?

Sherif Foda: So we feel very comfortable because of what we just laid down that we are in projects that are not being stopped or not being delayed and the places where it stops because of the conflict. So what's the tailwind, the conflict stops, right, very simply. Conflict stops tomorrow, all these people are going to increase their investment dramatically. And all the post-conflict box will stop. I don't have a conflict, I have a settlement, let's go, right? So -- and then everybody now has that focus -- laser focus on resilience if I did not -- I planned it before. But it's exactly like insurance, right? You always are worried about something, but you kind of like put this at the last of your priority list, until the place burn down and then you go and buy a fire extinguisher, make sure everything is very clear in your place, right? And that's exactly what they are doing now. Now they know the places where they kind of did not spend enough on storage or on backup, et cetera, they are putting this in the highest priority. Obviously, the guys in the pipeline are going to get the lion's share of that because everybody is building a pipeline alternative, right? But everything else around as well. You need flowback. You need to make sure that all these business surrounding your resilience and security is intact, and that's what they're going to call for a lot of service that were never there before because it was never part of the equation. You don't think about it because it's -- every day is okay, everything is secure, you go home nicely. Now let's make sure that there is a security for everything. Let's make sure that there is a contingency plan A, plan B, plan C on everything. And that's why we will see a tailwind that is going to push the entire region very actively once the conflict is finished, or not finished totally, but at least diminish by a significant factor.

Operator: There are no further questions at this time. I would like to turn the floor back over to management for closing remarks.

Sherif Foda: Thank you, everybody, for attending. Again, we're very, very excited about the future, and we're very confident that being with the customer in the tough times will pay off big time in the long way. Thank you.

Operator: Thank you. This will conclude today's conference. You may disconnect at this time and thank you for your participation.