Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- National Energy Services Reunited Corp (NESR, Financial) achieved record revenue of $336.2 million in Q3 2024, marking a 3.5% sequential increase and a 12% year-over-year growth.
- The company reported a record adjusted EBITDA of $80 million for Q3 2024, with margins of 23.8%, indicating strong operational performance.
- NESR's net debt to trailing 12 months adjusted EBITDA fell to 0.96, below their target of 1, showcasing effective debt management.
- The company successfully re-listed on NASDAQ, enhancing its market presence and investor confidence.
- NESR is making significant strides in technological advancements, particularly in directional drilling and decarbonization, which are expected to drive future growth.
Negative Points
- The global upstream growth outlook is more cautious, impacting sentiment in the energy services sector.
- Despite strong performance, NESR faces geopolitical headwinds in the Middle East, which could affect future operations.
- The company anticipates a stable to slightly down activity level in Saudi Arabia due to rig count adjustments.
- NESR's free cash flow conversion is expected to be around 40%, which may be impacted by less efficient working capital management.
- The company's growth is contingent on successful deployment and commercial viability of new technologies, which poses a risk if not achieved.
Q & A Highlights
Q: Can you provide an overview of the current situation in Saudi Arabia's energy sector and expectations for the next 12 months?
A: Sherif Foda, CEO, explained that Saudi Arabia has adjusted its maximum sustainable capacity plans, reducing it from 13 million barrels to 12 million barrels. This led to a release of offshore rigs initially planned for increased capacity. The focus has shifted towards unconventional gas projects like Jafurah, which remains untouched and is expected to increase rig count. Overall, Saudi activity is expected to remain stable, with potential growth in gas and unconventional projects compensating for reduced oil drilling.
Q: How does NESR plan to grow in the MENA region, and what role will new technologies play?
A: Sherif Foda stated that NESR aims to double the market growth rate in the MENA region, which is expected to be around 5-6% year-over-year. The company plans to leverage its contracts in Saudi Arabia, Oman, and Kuwait to deploy new technologies like directional drilling and decarbonization solutions. The success of these technologies will determine additional revenue growth.
Q: What is the expected impact of potential changes in OPEC+ production levels on NESR's activity?
A: Sherif Foda noted that the Middle East needs oil prices to remain at current levels or higher for economic growth. NESR's forecasts are based on stable oil prices and OPEC+ maintaining production cuts. If geopolitical factors lead to a drop in production from other producers, Saudi Arabia and others might increase production, which would boost activity levels.
Q: How is NESR positioned to handle growth in the MENA region in terms of equipment and capital expenditures?
A: Stefan Angeli, CFO, mentioned that NESR plans to maintain a flat CapEx of $120 million for the next year, supporting a 5-10% growth. This includes investments in new technologies like Roya tools. The company is well-positioned to cater to growth without significant additional capacity build-out.
Q: Can you elaborate on NESR's partnerships with North American companies and the deployment of US technologies in the MENA region?
A: Sherif Foda highlighted that NESR collaborates with North American companies like Cactus and Phoenix to bring best-in-class technologies to the MENA region. These partnerships focus on deploying advanced technologies for unconventional projects, particularly in Saudi Arabia, to enhance operational efficiency and performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
