National Energy Services Reunited Corp. (NESR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance, strategic growth, and optimism. Record revenue expectations, strategic contracts, and efficient operations in key regions like MENA and Kuwait are positives. However, the lack of specific guidance and some management evasiveness slightly temper enthusiasm. Overall, the positive growth outlook, strategic partnerships, and potential shareholder returns suggest a positive stock price movement.
Key Financial Performance
Fourth Quarter Revenue $398.3 million, an all-time high, representing an increase of 34.9% sequentially and 15.9% year-over-year. Sequential growth was driven primarily by the mobilization of the new Jafurah contract beginning November 1, along with strong activity increase in North Africa. Year-over-year growth was supported by higher activity levels in Saudi Arabia, Kuwait, Iraq, Egypt, and Libya.
Adjusted EBITDA (Q4 2025) $84.4 million, representing a margin of 21.2%, broadly in line with the third quarter levels despite higher revenues generated from competitively priced contract wins. Margins remained stable due to strong cost discipline, improved operational execution across the portfolio, and the continued benefit of a lean overhead structure.
Full Year Revenue (2025) $1.324 billion, up 1.7% year-over-year. Growth was supported by higher activity levels across Kuwait, Iraq, Abu Dhabi, Libya, Egypt, and Algeria, partially offset by lower rig counts and contract transition in Saudi Arabia.
Full Year Adjusted EBITDA (2025) $281.4 million with margins of 21.3%, down approximately 250 basis points year-over-year, driven by country and segment mix in addition to certain contract transitions.
Free Cash Flow (Q4 2025) $120.8 million, representing approximately 43% conversion from adjusted EBITDA. This was driven by record fourth quarter collections and the lowest year-end DSO ever, reflecting disciplined working capital management.
Capital Expenditures (2025) $150.9 million, fully aligned with previously communicated plans. The majority of free cash flow was directed towards reducing bank debt, further strengthening the balance sheet.
Net Debt (End of 2025) $185.3 million, with a net debt-to-adjusted EBITDA ratio of 0.66, well below the target threshold of 1x. This reflects disciplined execution of growth investment strategy and improving capital efficiency.
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Operating Highlights
Jafurah frac project: Successfully initiated operations on time in November 2025, ramping up safely and effectively. Cost control and operational efficiency were evident, with plans to triple and quadruple the footprint.
Ahmadi Innovation Valley (AIV): Launched in Kuwait to enhance core services and drive innovation in decarbonization, water, and critical minerals.
Kuwait market expansion: Kuwait is set to become NESR's second-largest market. The country plans $8-10 billion annual upstream spending through 2030, aiming to increase oil capacity to 4 million barrels per day by 2035.
North Africa growth: Significant activity in Libya, including a $20 billion investment over 25 years with ConocoPhillips and Total. Libya aims to increase oil capacity to 2 million barrels per day by 2030.
Abu Dhabi investment: ADNOC approved a $150 billion oil and gas investment plan for 2026-2030, ensuring sustained growth.
Revenue growth: Fourth quarter 2025 revenue reached $398.3 million, a 34.9% sequential increase and 15.9% year-over-year growth, driven by new contracts and increased activity in key regions.
Cost management: Maintained stable EBITDA margins at 21.2% despite competitive pricing, through strong cost discipline and operational execution.
MENA region focus: Positioned as a leader in the MENA region, leveraging its decoupling from global oil and gas price volatility to drive upstream growth and strategic gas development.
Future growth strategy: Plans to double the company's size in the next few years, focusing on winning new contracts, commercializing technologies, and enhancing its regional position.
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Risk or Challenges
Credit Loss Provisions: The company reported $7.1 million of current expected credit loss provisions, primarily in Oman. While the company remains confident in collecting these amounts, this represents a financial risk.
Impairment Charges: $8.1 million of impairment charges were recorded related to two small legacy technology investments impacted by global changes in market focus on ESG. This indicates a risk of losses from investments in non-core or underperforming assets.
Contract Mobilization Costs: $4.7 million of restructuring costs were incurred related to recent contract wins and deployment in Oman. This highlights challenges in managing costs during contract mobilization.
Vendor Bankruptcy: A $3.1 million provision was recorded for a construction in-process prepayment in Saudi Arabia following a vendor bankruptcy. This underscores risks related to vendor reliability and supply chain disruptions.
Competitive Pressures: Margins remained stable despite higher revenues from competitively priced contract wins, indicating ongoing pressure to maintain profitability in a competitive market.
Geopolitical and Regional Risks: The company operates in politically sensitive regions such as Libya, Iraq, and Syria, which could pose risks to operations and financial stability due to geopolitical instability.
Economic Uncertainties: The company acknowledged negative consensus views around global growth and commodity prices, which could impact future activity levels and financial performance.
Operational Scale Challenges: The company is ramping up operations for the Jafurah frac project, which involves significant logistical and supply chain efforts. This scale of operation poses risks related to cost control and operational efficiency.
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Guidance & Outlook
Revenue Expectations: The company expects to exit 2026 at an annualized revenue run rate of approximately $2 billion, driven by a growing contract portfolio and consistent operational delivery.
Margin Projections: Full year 2026 EBITDA margins are expected to remain broadly consistent with 2025, with gradual sequential improvement in margins over the course of the year.
Capital Expenditures: For 2026, capital expenditures are projected to be approximately $165 million, aligned with the expanding growth outlook and supported by a strong pipeline of recently awarded contracts.
Free Cash Flow: Free cash flow for 2026 is projected to comprise approximately 35% to 40% conversion from adjusted EBITDA, representing sector-leading free cash flow growth.
Market Trends and Regional Outlook: The Middle East and North Africa region is expected to lead the next wave of activity growth, underpinned by continued investment in oil capacity and accelerating gas development. The region's trends are largely decoupled from oil and gas prices, providing a solid floor for activity growth.
Business Segment Performance: The company anticipates robust growth in Kuwait, North Africa, and other core markets, supported by recent contract wins and tenders. Specific growth drivers include the Jafurah frac project and strategic investments in technology and operational scale.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the current status of the Jafurah project and its ramp-up?
A:The Jafurah project started on time on November 1st, with the first three fleets operational. Additional fleets are being coordinated with the customer, and by Q2, the project is expected to reach a steady state. Another fleet may be added in Q3 or Q4, with the run rate for stages per quota becoming clear in Q3.
Q:How are supply chain concerns being addressed for the Jafurah project?
A:Supply chain concerns have been addressed by planning early and ensuring local sand, adequate supplies of trees, plugs, wireline perforation, and other materials are ready on time. Partnerships with local and U.S. suppliers have been established, and logistics issues have been resolved to ensure timely delivery and cost control.
Q:What are the medium-term targets and outlook for NESR beyond the $2 billion revenue target?
A:NESR aims to double its size in a couple of years, with $2-3 billion worth of tenders submitted across the region, mostly outside Saudi Arabia. The company is optimistic about winning a significant share of these tenders, which will contribute to its growth.
Q:What optimization and efficiency improvements are planned for the Jafurah project?
A:NESR plans to achieve incremental efficiencies by optimizing rig-up, perforation, and between-stage processes, potentially improving efficiency by 20%. A new state-of-the-art facility in SPARK with AI-driven maintenance and reliability is being built, expected to be ready by Q3, to support long-term cost savings and margin improvements.
Q:What is the growth potential for NESR in Kuwait?
A:Kuwait is set to become NESR's second-largest market, with $8-10 billion in upstream spending. NESR has already won contracts and is awaiting results for additional tenders, all expected to be awarded in 2026. The company is prepared to mobilize quickly and double its business size in Kuwait.
Q:What level of investments and acquisitions are planned to support NESR's growth?
A:NESR plans to maintain CapEx in the range of $150-180 million over the next couple of years, potentially increasing to $200 million if growth exceeds expectations. The company also invests in startups and technologies through a VC-style approach, aiming to commercialize innovative tools and equipment to support its growth.
Q:What is the company's approach to shareholder returns and leverage?
A:NESR aims to maintain a leverage ratio of 1 or less and is considering options for shareholder returns, including dividends and stock buybacks. A formal plan will be announced in the next earnings call.
Q:What is the state of the oilfield services market in Saudi Arabia outside of Jafurah?
A:Saudi Arabia is ramping up activity, with an expected increase of 40-60 rigs in 2026. Aramco is adding rigs and issuing tenders for lump sum turnkey contracts, which will drive growth for NESR and other service providers.
Q:What is the status of NESR's operations in Oman?
A:NESR has taken a one-time write-off for legacy equipment in Oman and is mobilizing new equipment for a scope of business it previously did not have in the country. This represents a new segment for NESR in Oman.
Q:What opportunities exist for NESR in new markets like Syria and Libya?
A:NESR is exploring opportunities in Syria and Libya, leveraging its regional expertise and existing workforce. In Syria, the focus will be on revitalizing production, while in Libya, NESR aims to triple its business size by supporting the country's goal of reaching 2 million barrels per day.
Q:What is the impact of Saudi Arabia's easing of foreign investment restrictions on NESR?
A:The easing of foreign investment restrictions has no direct impact on NESR, as it is not listed on the Saudi Tadawul. However, the company benefits from Saudi Arabia's open investment culture and strong market position.
Q:What is NESR's involvement in critical minerals and decarbonization?
A:NESR is actively involved in critical minerals and decarbonization, with pilots for lithium extraction and plans for bromine and magnesium. The company is working with Aramco and Maaden to develop these initiatives, which are expected to become a significant part of its business.
Q:What is the margin profile and timeline for the $2-3 billion worth of tenders?
A:The margin profile for the tenders is expected to be consistent with NESR's current levels. All tenders will be awarded in 2026, with some business starting in the second half of the year and others impacting 2027.
Q:What is the outlook for tender activity in the Middle East?
A:Tender activity in the Middle East is expected to be at its highest levels in 2025 and 2026, with contracts being awarded for 5-7 years. This provides long-term visibility and growth opportunities for NESR.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain competitive strategies, optimization processes, and margin profiles for tenders, citing the need to protect competitive advantages. Additionally, they did not provide formal guidance on Q1 financials or specific timelines for shareholder return plans.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AIV
COGS
IOC
Iraq Egypt
Kuwait year
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Saudi Arabia
activity level
balance
bid
capacity expansion
capital expenditure
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contract transition
contract win
core
expansion gas
exploration
flow cash
frame
gas development
income tax
industry conference
interest expense
investment capital
leverage
macro
meeting
mobilization restructuring
oil capacity
oil gas
opportunity NESR
phase
priority
program
provision
ramp
sic NESR
spending
technology development
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NESR Transcript
National Energy Services Reunited Corp. (NESR) Q4 2025 Earnings Call Transcript
Positive2-17
The earnings call summary and Q&A indicate strong financial performance, strategic growth, and optimism. Record revenue expectations, strategic contracts, and efficient operations in key regions like MENA and Kuwait are positives. However, the lack of specific guidance and some management evasiveness slightly temper enthusiasm. Overall, the positive growth outlook, strategic partnerships, and potential shareholder returns suggest a positive stock price movement.
National Energy Services Reunited Corp. (NESR) Q3 2025 Earnings Call Transcript
Positive11-13
The earnings call highlights strong revenue projections, strategic investments, and a positive outlook for the MENA region, particularly with the Jafurah project. Despite some concerns about cash flow and unclear management responses, the company's strong financial health, strategic partnerships, and growth in unconventional resources are positive indicators. Incremental EBITDA from Jafurah and a robust contract pipeline further support a positive sentiment, likely leading to a 2%-8% stock price increase.
National Energy Services Reunited Corp. (NESR) Q2 2025 Earnings Call Transcript
Positive8-22
The earnings call presents a favorable outlook, with anticipated revenue growth driven by recent contract wins and technology deployments. The Q&A section indicates positive sentiment from analysts, with expectations of increased activity in key regions and strong infrastructure. While there are some uncertainties regarding stock buybacks and contract delays, the overall guidance remains optimistic, with margin improvements and a focus on growth opportunities. The strategic investments and potential for increased shareholder returns suggest a positive stock price movement in the short term.
National Energy Services Reunited Corp. (NESR) Q1 2025 Earnings Call Transcript
Unknown6-3
The earnings call summary presents mixed signals: a slight revenue growth, a negative free cash flow, and declining EBITDA margins. The Q&A reveals management's evasive responses, especially concerning future JV plans and contract awards, adding uncertainty. Positive aspects include debt reduction efforts and strategic positioning in key regions. However, regulatory, competitive, and cash flow challenges create a balanced outlook. Given these factors, the stock price is likely to remain stable, with a neutral sentiment expected over the next two weeks.
NESR Report
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