National Energy Services Reunited Corp. Q3 FY2024 earnings call

Macro Outlook: The MENA market activity remains stable despite global upstream sector uncertainties. Core Business Performance: The core business continues to outperform, leveraging leading share in anchor countries to expand into other segments. ROYA Direction Drilling Platform: Achieved the first successful run in Kuwait, demonstrating commercial viability, with multi-year contracts in Kuwait, Saudi Arabia, and Oman. NEDA Segment: Invested in SALTTECH for circular water economy and mineral recovery from produced water. Financials: Record revenue, EBITDA, EPS, and cash flow; balance sheet strengthened with net debt to trailing 12 months adjusted EBITDA at 0.96, below the target; strong cash flow from operations and free cash flow used to reduce debt.

In the third quarter of 2024, NESR's overall revenue reached a record $336.2 million, which is a 3.5% sequential increase and a 12% year-over-year growth. For the first nine months of 2024, revenue stood at $958 million, marking a 14.3% year-over-year rise. Adjusted EBITDA in the third quarter was $80 million with a margin of 23.8%, and for the year-to-date period, adjusted EBITDA was $222.9 million, up 21.9% year-over-year with a margin of 23.3%.

Fourth quarter year-over-year growth is expected to largely match that of the first three quarters of 2024. The MENA market is anticipated to continue growing in the remainder of 2024 and into 2025. The ROYA platform is expected to be a significant growth contributor and returns accretive over the coming years.

Market uncertainty may affect activity levels. Geopolitical changes could impact the realization of growth opportunities. Capital expenditure cycle and infrastructure challenges in the MENA region may hinder the ability to scale capacity.

Q: David Anderson asked about the situation in Saudi, including rig activity and the Jafurah project.

A: Sherif Foda discussed Saudi's rig plans, offshore vs onshore dynamics, and the progress of the Jafurah project, including drilling and fracking activities and future tender expectations.

Q: Gregory Lewis inquired about revenue growth in 2025 compared to 2024 and the impact of OPEC Plus production.

A: Sherif Foda stated that the MENA market growth is expected to be in the single digits year-over-year, while NESR aims for double that growth rate. The impact of OPEC Plus production depends on geopolitical and demand factors.

Q: Derek Podhaizer asked about the equipment base, CAPEX investment cycle, and partnerships with North America companies.

A: Stefan Angeli discussed CAPEX investment, and Sherif Foda elaborated on partnerships with North America companies for deploying U.S. shale technology in the MENA region and the progress of technology adoption.