National Energy Services Reunited Corp. Aktie

Greetings, and welcome to the NESR Reports Second Quarter 2026 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Blake Gendron, Vice President of Investor Relations. Thank you, sir. You may begin.

Thanks, Maria. Hello, and welcome to NESR's Second 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 second 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.

Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. I could not be prouder of the nearly 8,000 men and women of NESR, who not only rose to the challenge in the second quarter, but exceeded all expectations and stood by our customer when needed most. I also have immense gratitude to all our clients that prove to the world that it will take more than a geopolitical disruption to change the strategic inertia of the region.

Our differentiated record-setting results reflect the resilience of our customers, our unique project exposure and the responsiveness of our local team that consistently and repeatedly turned crisis into opportunity. As stated in the beginning of the conflict on our last conference call, we were first to rally to our customers. We remain by their side, and we nimbly reoriented our 30-60-90 supply chain strategy to ensure 100% reliability with 0 interruption. This response showed up clearly in our fantastic results just as we had planned and communicated.

Throughout the conflict, we've stayed true to our founding ethos. NESR began with the vision of creating a MENA energy service company built for local content leadership, supply chain resilience, fit-for-purpose technology and to empower our 100% in-country workforce to set new standards for safety, quality and reliability as a true national leader. The strategy was simple: attract capital globally to cultivate locally what our customer could consider the national champion. If we could simultaneously match or even exceed the service delivery standard to the global peers, then the growth, profitability and cash flow would naturally follow. We would also be the go-to partner in times of crisis.

The story across the Middle East has been a story of in-country investment, innovation and human capital development. NESR's founding simply reflected the trends that had been put in motion. This story was certainly tested over the past several months, but I can proudly say that NESR's star has never shined brighter amidst the din of conflict and uncertainty. Our second quarter results speak for themselves. They speak clearly to the Middle East story of national champion resilience and speak unambiguously to the success of our founding strategy.

Despite the conflict, we've exceeded the $2 billion revenue run rate target that we originally set at the founding of the firm. And we've already established new ambitious targets that are well on the path to achieve these even more quickly. As we have proven to the market, the NESR growth story continues to accelerate, and our momentum will be tough to stop or even slow down. Our recent performance is not a one-off, but the solid track record that we have been building over many quarters.

While the conflict presented its own set of challenges and opportunities for NESR market capture, the growth trajectory that has been in motion, particularly over the past several years, has proven rock solid regardless of the commodity price, geopolitical backdrop or competitive landscape. It's been precisely the execution of our countercyclical investment strategy that has helped us decouple fundamentally from the broader cyclicality of the energy service sector and the geopolitical daily news cycle, which is why I can confidently trust that our path to our 3B3 corporate strategy, a step-by-step playbook to reach a $3 billion revenue run rate target, is achievable.

This strategy launched late last year, including fueling the funnel, expanding our anchor country footprint and realizing the technology portfolio built over the past 5 years. It captured our main R&D focus areas and include opportunistic M&A, along with strengthening our unique technology partnership. Now let me expand upon our 3B3 in more detail. First, fueling the funnel. Today, we are the largest frac company in the Middle East. And across our largest segments, we are well within the top 3 provider in the region.

This scale is what fuels our supply chain efficiency and also our ability and agility as we can move people and assets seamlessly around the region to respond to, for instance, what I call the post-conflict box of restart opportunities. But this also means that our remaining segments still have plenty of growth runway to reach the scale of our top services. Here, we need to ensure winning more than our fair share of tenders so that funnel is always filled with secured multiyear contracts. We have very good visibility of these tenders. And with our past performance, we have secured the license to enable bidding on bigger contract sizes for the different product lines.

The second part is adding to the list of anchor countries. Here, we are talking about enlarging our geographical footprint smartly by either entering a new country or making one of the small ones much bigger. We are present in all basins of the Middle East, but some we are way too small or decided to limit our exposure in the past. As we gain momentum, we are invited and asked to participate in several new opportunities with innovative business model that ensures we maintain our slogan of only profitable growth. A good example of this is Syria, where ConocoPhillips, Total, QatarEnergy and others have signed a wave of recent agreement to revive the country oil and gas industry alongside its economy and also play a crucial role in the export capacity build-out ongoing to the Eastern Med. We know the blueprint of how to intelligently start the operation and support both the IOCs and the newly formed national company with partnership and scalable operations.

The third pillar encompass our frontier growth, especially NEDA and ROYA, among other R&D and innovation venture. We have invested in the past, did multiple pilots and time has come to realize the fruits of our past investment. We will be able to demonstrate in the coming quarters the results of those efforts. We recently announced a number of contract awards in Kuwait, but we are particularly excited about our Ahmadi Innovation Valley contract. As an inaugural partner in AIV, we were one of the first to announce our commitment and plan for a world-class innovation center in the new heart of upstream innovation in Kuwait.

More importantly, for NESR, this contract represents our new entry into a long-term master technology agreement framework, which unlocks an entirely new innovation budget that is aligned with our Open Technology Platform, which we will exploit to adapt promising solutions tailored to the Kuwait market. To give you an idea of the magnitude of the scope, the next AIV focus area include drilling, flow assurance, heavy oil, industrial inspection service, enhanced recovery and very crucially unconventional resources, where we have established a leading best-in-class in the region from our work in Jafurah in Saudi Arabia.

This engagement will be supported by over a dozen R&D partnership with leading tech company globally, several hundreds granted patents, and with the forthcoming groundbreaking of a world-class research center. This is our DNA, build and invest in the future of the region with commitment at the highest level for long-term sustainability and prosperity.

And with that, let me turn over to Stefan to discuss our stellar results in details.

Thank you, Sherif. Good morning to those joining us from the United States, and good afternoon or good evening to the participants across the Middle East, North Africa, Asia and Europe. Thank you for taking the time to join us today. I'm pleased to discuss our financial results for the second quarter of 2026 and provide our perspective on the business, our continued momentum and our outlook for the remainder of the year.

Let's begin with our second quarter performance. Revenue for the quarter reached a record $520.8 million, increasing 28.7% sequentially and 59.1% year-over-year. Sequential growth was driven primarily by Saudi Arabia, reflecting the continued successful ramp-up of the Jafurah contract where 4 hydraulic fracturing fleets were active throughout the quarter, together with strong growth in our conventional Saudi operations. We also delivered solid growth in Oman and in Egypt, partially offset by lower activity in Iraq, which continued to be impacted by the regional disruptions during the quarter. Year-over-year growth was also driven by the strong contributions from the Jafurah contract together with increased activity across Oman, Kuwait and North Africa. Iraq remained a principal headwind during the quarter with activity levels affected by ongoing regional disruptions.

Shifting our focus to profitability. Adjusted EBITDA reached a record $106.2 million during the second quarter, representing a margin of 20.4%. The margin expansion reflects the normal seasonal improvement we typically see in our business, together with the benefits of key project ramp-ups, most notably Jafurah. During the quarter, margins were impacted by approximately $4 million or around 80 basis points of incremental freight and logistic costs resulting from regional geopolitical disruptions. These costs primarily related to special airfreight charters and other contingency measures that enabled us to maintain uninterrupted services for our customers.

Despite these headwinds, margins remained resilient, supported by disciplined cost management, improved operational execution, higher activity efficiencies and our lean overhead structure. Adjusted EBITDA also included $1.5 million of net charges and credits, primarily reflecting $1 million of expected credit loss provision related to a North Africa customer. From an income and earnings per share perspective, adjusted net income for the quarter reached a record $45.5 million, increasing 70.1% sequentially and 125.9% year-over-year. Adjusted diluted EPS was a record $0.44, reflecting the strong operating leverage in our business as high activity levels continue to translate into expanding profitability, particularly within our unconventional completions and testing service lines.

Looking at cash flow and liquidity. This continues to be one of NESR's key strengths in an area where we have consistently differentiated ourselves over the past several years. As many of you will recall, our first quarter operating cash flow and free cash flow were impacted timing-wise by the normal seasonal build in working capital associated with Ramadan and the higher activity levels we experienced during the quarter. As expected, this reversed in the second quarter with operating cash flow increasing to $174 million.

The improvement was primarily driven by 3 factors: one, record working capital execution, including our lowest day sales outstanding on record for a non-year-end reporting period, resulting in a significant reduction in accounts receivable and unbilled revenue; two, higher accounts payable and accrued expenses at quarter end, largely reflecting the timing difference between customer collections and outbound payments, many of which were settled in the first few days of the third quarter; and three, partially offsetting by higher inventory balances as we proactively secured critical materials to ensure uninterrupted operations across the Middle East during the regional conflict, consistent with our 30-, 60-, 90-day contingency planning.

Capital expenditures totaled $74.1 million during the quarter, consistent with our countercyclical investment strategy as we continue deploying equipment into recently awarded contracts and position the business for the next phase of growth. Overall, free cash flow reached $99.9 million during the quarter. As noted previously, included within that result was approximately $40 million of temporary quarter end working capital timing associated with accounts payable and accrued expense. Even after normalizing for this timing effect, the business generated approximately $60 million of free cash flow. This reinforces the consistency and resilience of our cash generation and reflects the same seasonal working capital pattern we experienced during the first half of 2025.

Moving to debt. As of June 30, gross debt was $274.6 million, a reduction of $12.7 million from the end of the first quarter, while net debt declined to $99.6 million. This resulted in a net debt to adjusted EBITDA ratio of just 0.3x, well below our long-term target of maintaining leverage below 1x. This provides significant financial flexibility to support both organic growth and disciplined capital allocation. As highlighted earlier, quarter end cash benefit from approximately $40 million of supply payments that were made shortly after quarter end. Even after normalizing for this temporary timing difference, our net leverage ratio would have remained a very conservative 0.42x. Finally, reflecting the significant improvement in profitability during the quarter, trailing 12-month return on capital employed increased to approximately 13.5%, driven by higher earnings, disciplined capital allocation and improving asset utilization.

As we look ahead to the third quarter, we remain encouraged by the momentum in the business and currently expect: one, continued strong year-over-year revenue growth, supported by the ongoing ramp-up of the Jafurah contract and recent contract awards across Kuwait, the UAE and North Africa; two, sequential margin improvement consistent with the normal seasonal trends we have discussed previously; three, net interest expense of approximately $6.8 million; and four, an effective tax rate of approximately 24%. From a cost perspective, freight and logistics continues to represent the primary impact from the current geopolitical environment. We have proactively planned for these costs and based on current conditions, do not expect them to exceed the incremental cost experienced during the second quarter, unless the regional situation deteriorates materially.

We also expect third quarter operating cash flow, free cash flow and capital expenditure to remain consistent with our long-term objective of generating free cash flow equivalent to approximately 35% of adjusted EBITDA on a full year basis. With respect to our full year outlook for 2026, our performance through the first half of the year exceeded our original expectations. As a result, we now view $2 billion of revenue as a minimum objective for 2026, having effectively achieved our previously communicated fourth quarter annualized exit rate target 2 quarters ahead of schedule. We continue to expect full year adjusted EBITDA margins to remain broadly in line with 2025 levels despite the additional freight and logistic costs associated with the current regional geopolitical environment.

We remain committed to our countercyclical investment strategy and now expect full year capital expenditures of approximately $210 million to $215 million, reflecting the increased activity levels, the execution of recently awarded contracts and continued investment to support our long-term $3 billion 3B3 growth strategy. For the full year, we currently expect net interest expense of approximately $26 million to $27 million, an effective tax rate of approximately 24%, net income margins in the 9% to 9.5% range and free cash flow conversion of approximately 35% to 40% of adjusted EBITDA, depending on final collections. Overall, we believe NESR is well positioned to deliver another year of record financial performance while continuing to invest for long-term profitable growth.

As the company enters its next phase of growth, we also announced last quarter a formal capital allocation framework designed to ensure we continue deploying capital in a disciplined and value-accretive manner. I'd like to briefly reiterate that framework today. Our approach is built around 3 priorities. First, we'll continue investing in high-return growth opportunities, including recently awarded contracts and technology-led expansion across core markets. These investments remain the primary driver of long-term shareholder value creation and are fully aligned with our $3 billion 3B3 growth strategy. Second, we remain committed to maintaining a strong balance sheet, targeting net leverage at or below 1x adjusted EBITDA. This provides financial flexibility through the cycle while supporting continued investment in the business. Given our current trajectory, achieving a 0 net debt position over the next 2 years is a realistic possibility.

Third, we're committed to returning capital to shareholders in a consistent and sustainable manner. And as announced last quarter, we intend to: one, initiate a quarterly dividend beginning in the fourth quarter of '26 at $0.10 per share or $0.40 per share annually. We expect to announce the record and payment dates with our next earnings release. This reflects our confidence in the durability of our cash flow generation and our commitment to establishing a sustainable dividend that can grow over time. Two, maintain our $50 million 12-month share repurchase program while evaluating its renewal upon completion of the initial authorization in the first quarter of 2027. This provides us with flexibility to repurchase shares opportunistically when we believe they are trading below intrinsic value while continuing to prioritize investment in the business. Taken together, this capital allocation framework balances investment for growth, balance sheet strength and disciplined shareholder returns, positioning NESR to deliver sustainable long-term value creation.

Today, as you may have seen in one of our 8-K announcements, we announced that we'll be changing our auditors from Grant Thornton Dubai to PricewaterhouseCoopers Dubai, effective for the 2027 audit. The required rotation of the Grant Thornton lead audit engagement partner provided an appropriate opportunity for us to take a comprehensive look at our independent audit requirements and consider how best to support NESR as we continue to grow. Thus, NESR undertook a competitive tender process. Given the significant progress we have made as a company, including our growth to date, the successful completion of our back-office transformation and our strategy for the future, we concluded that a Big 4 international accounting firm will be the best fit for NESR's audit requirements going forward.

As noted in the announcement, there were no disagreements with Grant Thornton on any accounting matters or principles. While we believe this is the right decision for NESR at this stage of our journey, I want to take a moment to sincerely thank Darren Newell and the entire Grant Thornton Dubai team for their tremendous support over the years. From 2020 through 2025 audit program, they have been a trusted partner to NESR, and their dedication, professionalism and commitment have been greatly appreciated. They've also played an important role in helping us successfully complete our back-office transformation, which was a significant undertaking for the company. We're grateful for everything the team has done to support NESR during the period of growth and change. I would also like to thank them in advance for their continued commitment and support as we work together to bring the 2026 audit to a successful conclusion.

To conclude, we are excited about the opportunities ahead. The Middle East and North Africa continue to be the most attractive energy services markets globally, and we believe the region is well positioned to lead the next phase of industry growth, as Sherif discussed earlier. 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. Against that backdrop, NESR remains focused on delivering profitable growth, driving operational excellence, maintaining disciplined capital allocation and working capital management and expanding our technology leadership.

The combination of our strong operational momentum, resilient financial performance, robust cash generation and disciplined capital allocation gives us confidence in our ability to continue delivering profitable growth, strong cash generation and long-term shareholder value in '26 and beyond. On behalf of the management team, I'd like to thank our employees for their continued dedication and outstanding execution as well as our customers, shareholders and banking partners for their continued trust and support.

With that, I turn the call back to Sherif.

Thanks, Stefan. Let me conclude. I'm extremely pleased to be here today, reaching the target of $2 billion that we set ourselves to a couple of quarters in advance. I'm proud of our team and extremely thankful to our clients for their trust and support over our journey. I continue to feel honored serving all our esteemed customers and be with them every day during those difficult times. We have demonstrated resilience, exceptional growth while the region has suffered lockdowns, sirens, evacuation alerts, but nothing deterred our momentum. We are very confident with our upcoming growth profile. We believe we will achieve our 3B3 target faster than anticipated and encouraged by the contract wins and continued R&D success.

With that, I'd like to open the door for your question. Maria, please go ahead.

[Operator Instructions] Our first question comes from Arun Jayaram with JPMorgan.

Sherif and Stefan, I was wondering if you could help us understand the drivers of the strong revenue growth. Sequentially, your revenues were up $116 million, almost 30%. And I guess we're trying to think about framing the second half outlook. Stefan mentioned that you believe that $2 billion is kind of a floor for revenue this year. But we're just trying to understand is if that fourth frac fleet in Jafurah was fully utilized in 2Q, and I know you're adding a fifth later in third quarter. So just trying to think about what the run rate could look like for the top line as you get into 3Q, 4Q.

Thanks, Arun. So obviously, as Stefan explained, the second quarter, definitely Jafurah was the main highlights. As we had started the project back in November, we said we are going to ramp up faster. We decided to countercyclical, as we call it, the investment. So we bought the fleets ahead of time. We shipped them all. We maintained all this inventory, 30-60-90, et cetera, et cetera, to ensure that we have all products available. We -- in the second quarter, the fourth fleet was working. And we shipped the fifth fleet. It should be in the country very soon. And we will work with our clients to see the best timing to deploy it, right? So it's obviously their decision.

But what we wanted always to maintain is we have all this equipment ready. And at the same time, as we did in other countries, replace anyone that either evacuated, decided to stop, decided not to work. So -- and we -- and obviously, this benefited us to capture some of this work. As Stefan mentioned as well, Oman was very, very strong this quarter. Obviously, they don't have any problem with exports. So they benefit from the price. We had as well good North Africa incremental quarter-on-quarter.

So overall, I would characterize it, Jafurah is definitely the stellar. And we had support from the others. And all, again, as we said last quarter, we are very fortunate that the disruption in the main areas is not affecting us because we are very small in the areas where the disruption did happen or did occur. So our -- that's why our decremental is very, very small.

Got it. And my follow-up is, can you provide more details or thoughts around timing of achieving the $3 billion kind of run rate kind of target? Obviously, a lot of tender activity going on right now, but what is a reasonable expectation to reaching that new -- relatively new target?

So the idea 3B3 means $3 billion in 3 years. That's the definition of the -- and we launched it last year. And basically, the idea was if you have the pillars, you get the contract awards as we anticipate, you win more than your fair share of the contract, especially on the smaller segment than the bigger segment. Therefore, that you will be able to deploy those equipment and on these contracts that are all long term, I believe that we will be able to achieve the target, as I call it, faster. So it's called 3B3, again, 3 years. So we think we will be able to have that run rate faster than even 3 years, so again, depending, obviously, on the contract wins, we have to win these contracts.

As I mentioned in my prepared remarks as well, we have this new countries where we wanted to enter and start new business. We have very good dialogue over the past 3 to 4 months with several of them. And I mentioned in my remarks as well, Syria, in particular, very promising. You saw ConocoPhillips. You saw the engagement even with the administration with them. You saw the Iraqi Prime Minister was here in the U.S. So there is a lot of action being happening, a lot of IOCs deciding to really up their game in North Africa and other places. So the key now is that you are one of the reliable and very, very strong supplier in the Middle East. So they will come to you like they come to our peers.

But we -- again, we are ready. We have local workforce. We never stopped. We never evacuated. So we have a lot of equipment being bought. So that size make us available to be able to capture that growth faster. And if we do between the 2 and as well have a success of our advanced direction drilling and our NEDA, our decarbonization and mineral and lithium, et cetera, then you will be able to achieve that hopefully faster than our 3 years' target.

Our next question comes from David Anderson with Barclays.

Sherif, I want to dig into Kuwait in a second here. But before we go there, nobody spends more time in the Middle East than you. I was wondering if you could kind of give us an assessment on the ground. You talked about a post-conflict box of restart opportunities, but how are your customers sort of thinking about the next 6 months? You also talked about a $3 billion tender pipeline. Can you update your view there? Is that pushed to the right at all? Is it bigger than you thought? Just some kind of broader kind of commentary on kind of what you're seeing on the ground, please?

Thanks, David. So first, the macro. Nothing has changed from what I said before, which is basically the majority of the countries with the leadership preparing for the post-conflict, which obviously took some time now, but the post-conflict readiness. So rigs are all warm stacked, nothing more cold stacked if they had to release rigs. Kuwait, for example, did not release the rigs. Abu Dhabi kept the rigs. So everybody kept their fleet to be ready to -- when the export is happening. So the activity -- and I repeat this many times to investors, you have to decouple the activity and production and export. So the region decided I am not shutting down. I am not laying off the rigs or facility. I'm keeping the activity.

What I do, I manage my production by either not drilling the reservoir section like many of them did or -- but I keep the rigs running because I need the ecosystem to maintain the same. I need the supply chain to remain. I need the people to be employed. And unless you have a disruption that is -- that you cannot change about it, which is like Iraq, like Qatar. And this is project that cannot continue. So you have LSTK that, for example, shut down dramatically in Iraq. You have LNG that stops, you had a force majeure, et cetera. But the majority of them are ready. Some of them are saying, "I am going to get back to my production in a matter of 2 to 3 months once the conflict is off, once I can export, when the Hormuz is open. If the deal is struck between Oman and Iran now and the U.S. accept it, I can export immediately. I am ready, and I can do that." UAE, you saw that they produced north of 4 million barrels a day. So everybody is ready for that.

And when I call the post-conflict box, which is basically you need to be ready with coiled tubing, slickline, intervention, et cetera, because some of these wells you need to enter, you need to put plugs, you need to do some workover. And some of them, you need to go back and drill the reservoir section. So who is ready, and that's what they assess. So I am more optimistic than others on the Middle East recovery, and I still believe that it's going to be much faster than what people think once the Hormuz is open.

Now for your other question...

Yes. I just want to know a little bit more about Kuwait, the Master Technology Agreement. You just talked about that quite a bit, and it sounds like it's quite a bit more extensive than I realized. You've been talking about Kuwait as one of those anchor countries for a while. I think you said it's going to be the -- I don't know if it's still going to be the second largest country in your portfolio this year. But can you just talk about the significance of this contract? And when do you start to expect -- when does revenue or sort of contracts start to flow from this Master Technology Agreement from what you can gather?

Sure. So the AIV, why -- I'm very excited about it. Why? Because it's been in the work for some time, but the leadership in Kuwait, very visionary, decided to make this a reality. And they made an inaugural. So this is basically for people that maybe visited Dhahran before, you have the Techno Valley. This is going to be very similar, which is in Ahmadi where the space is, they took the space. They took the -- and then they will have a research center based on fit-for-purpose technology for the Kuwait market.

Four of us now signed as inaugural players. We announced the award. But the way they did it very smartly, you have a contract with a value and you are going to open and build the research center, but as well, you need these technologies to work. And if you prove that those technology underground will make differentiated and address the issues, the challenges of the Kuwait as an R&D, but with an application, you make revenue immediately from this even before you build the facility. And that's why it's very significant. It's going to be very big. There is -- it's a choice that obviously, the leadership in Kuwait decided. And we are obviously honored to be the top 4 companies -- 1 of the top 4 companies worldwide chosen for that.

And then they're going to have another set of companies that will come as Phase 2.

And they will be in, if you like, an inauguration ceremonial officially done sometimes in Q4, obviously, barring any more issues to make something like that in the Middle East, but it's going to be within the ADIPEC and WPC, within that kind of time frame. So it's very important because this never happens.

So basically, if you have a Master Technology Agreement with the national oil company of Kuwait, and let's say, you have a very innovative flow assurance like downhole water separation technology, you are able to immediately operate it and run it. You don't need to have a tender and a contract and an application, no. Ship the tool and we start. It's successful, and it really made what you said it will make, then you have a contract with it for a multiyear, let's say, $30 million to apply this technology and for example, in some wells. Immediately, you have that contract and you don't need to wait for anything. So it's like a single source if you prove that your technology is differentiated enough to maintain that in the Kuwait market.

Our next question comes from Derek Podhaizer with Piper Sandler.

I just wanted to go back to the 3B3. I think you mentioned, Sherif, that you talked about gaining the licenses to enable bidding those bigger contract sizes. So maybe just help us understand what you meant by that comment, what you mean like growing your footprint or what licenses you're talking about and then how that can really support the timing of the 3B3?

Yes. So just for explanation in more details, in the contracts in the Middle East, these are multiyear contracts, 5, 7 years, sometimes 9 years, right? So if the client decide to, I am going to give, let's say, a coiled tubing contract, right? So I will dissect this into big companies and smaller company or middle companies. Everybody does it in a different shape or form. But let's say, for a big picture, this is basically what it means. If you are -- we always used to be like the national, fine, the local company, very good, but you are not at the level, et cetera, et cetera, in the past. And then we kept growing, growing, growing. So as I explained, we have what I call the majority of our completion product line or production product line like coiled tubing, cementing, we are the top 3 or top 4, right? So you are allowed to bid on the big lots.

Now on the smaller ones, you have to prove that you are capable from a technology perspective, from people, from equipment that you can cover the majority of that product line, right? So once you have that and you proved it either with a cycle of contract wins or a track record, then you are invited to bid as well on the big lots. And today, we're very proud that we are already at that level in the majority of the -- of our segments, meaning in this coming $3 billion or $4 billion tenders that has been running now, we are tendering, some of it are huge contracts, like massive contracts. Obviously, some of these awards are being pushed. And I said it before, it's going to be in Q2, Q3. I think now it's going to be Q3, Q4. Why? Because, for obvious reason, they don't want someone, a new, let's say, somebody, a newcomer that takes a big part, 20% of a contract, but he was never there, how he's going to ship the equipment, how he's going to start sending people, how he's going to get visa when there are wars and the planes are not flying, et cetera, right?

So I would say these tenders are going to be pushed for a quarter or something. All the awards -- sorry, the awards will be pushed because the tenders -- majority of it, we submitted our pricing. And it's going to come. So -- and that's why, back to the main question, if you have the license to bid on a bigger lot, that means you can win one of the big lots, which means that you can grow much faster. And that's why we believe if we win more than our fair share in the coming tenders, then the $3 billion is not going to be like in '29, it could be faster than our 3 years' target that we launched back in Q4 of last year.

That's great. I appreciate all the comments. I mean just a quick follow-up on that. I mean, is it fair to think you can be awarded something as big as the Jafurah contract?

No. Jafurah is massive, man. Jafurah is the largest contract in the world, the largest tender in the world in the oilfield services. And we won 100%, right? So no, these tenders will not be awarded as a binary or one-off, right? This will be awarded as multi-award to multiple companies. So some of it, they will award like 5 players, 6 players, 7 players. All of them will be there. But the key for us is I want to be from those 3 big ones or the 4 big ones, right? So then we establish our position to be that big. Like, for example, today, very, very proud when we walk in the Middle East and we talk to the clients, and we are the #1 frac company, the largest frac company. So people come to us for technology, for everything, but we have the scale that we can replicate in other countries.

Got it. Okay. Very, very helpful. And just my follow-up question is, you mentioned in your opening remarks -- obviously, we know Jafurah is a huge growth driver in Saudi, but you did mention your strong conventional operations in the country as well. So maybe just quickly educate us on kind of what you're performing there, maybe the different service lines and some of the technology you're feeding and are you gaining maybe some national market share in the country there on the conventional side?

On the conventional or unconventional?

Conventional, the conventional side.

Okay. Sorry. So the conventional side of Saudi, which has been going on for years, right, this is the normal frac operation, again, for the audience to understand, these are nothing to do with the United States. This is not unconventional. This is exactly the frac that happens over the last 20 years in the Middle East. These are like majority are single well, single stage, single frac. You have this in Kuwait, you have this everywhere, in Saudi, Egypt, Libya, Algeria. So this is a much smaller footprint. It's very good as well. And today, we used to -- this contract completed for us. We moved out of it. Now it's being retendered for several people.

But size-wise, is much, much, much smaller than the unconventional. And today, in the Middle East, I would say there will be maybe 20 fleets running things like that in the different countries. Oman is one of them, much -- very big as well. But these are all for people education. Again, this is 1 stage, 2 stage, 3 stage, sometimes 10 stage, but nothing to do with the pad, 4-well pads, 5-well pad, 6-well pad, which is basically now, as I say, Aramco managed to have a world-class unconventional operation in Jafurah that is exactly the same style like you have in the Permian or Delaware or everywhere.

Our next question comes from Saurabh Pant with Bank of America.

Sherif, you talked about 3 pillars of your growth. I think we touched on the first 2 pillars in quite a bit of detail. But on the third pillar, you were talking about, Sherif, frontier growth, the NEDA and ROYA. Maybe just talk to that a little bit. And then maybe just clarify, Sherif, do you need a step change in those frontier endeavors to get to that $3 billion target? Or do you think you can get to the $3 billion target just with the first 2 pillars that you were talking about, the post-conflict opportunities and then the tender pipeline?

We have -- yes, thanks so much. So if you look at the third pillar, what we call it, this is part of our $3 billion, right, based on what we have accomplished from the technology so far, right? So we've been investing -- so let me a bit elaborate more. So if you have ROYA, which is advanced drilling, which is basically MWD, LWD and rotary steerable, we've been investing on that now 5, 6 years. So we did a lot of pilots. We did a lot of jobs. We have contracts already in 3 countries with those tools.

Now we deliberately pass those tools or run those tools very -- in a very engineering, detailed manner. We don't expand fast. We expand very slow because we wanted to make sure that the reliability of the tool, I can call it commercial tool, meaning the tool can compete with the established best-in-class tools in the world, which is -- majority of them are with 3 service provider, I can be an equivalent. I can be a me-too, I can be some -- the client can take these tools and run it properly. So we believe this will -- it's already like a year late because of the deliberate testing, but we believe that this will be part of the magnitude. This is a $2 billion market. And today, we don't play in it, right? So we are going to take share of that.

On the NEDA, which is the decarbonization and mineral recovery, water, and I think we talked a lot over the past 2, 3 years about it. It's been launched since 2021. We established, we invested in, I would say, dozens of ventures, partnerships, et cetera. Today, those pilots are reaching a maturity level that we believe we will be able to have a project. And those projects have been discussed now for the last 8 to 9 months in details. Again, that's what I call it the conflict problem. Obviously, if you are a client and you have a lot of other priorities to get back your production to export, to open the Strait of Hormuz, you're not going to go and let's look at the methane and let's look at a water project, et cetera. So obviously, this goes to the bottom of the list, which would happen. And -- but the negotiation and the discussion is ongoing.

And I believe we -- with the technology we've already proven based on the pilot over the past 3 to 4 years, we are getting to the economical model that we can make that a reality. If this is a reality and we have a project, then that project could start in '27, which mean it realize a very good revenue target in, for example, '28, right? So if I have that, then you fuel the funnel or what -- I don't want to use the same word, but I mean, you fuel the growth story by $200 million, $300 million that you can realize yearly based on those 2 that the technology is already just waiting to be commercialized. So -- and that's why we are positive about it. But I said we are going to talk in the coming quarters once I have an award or I have a technology breakthrough with the award being given and then we can say publicly, "Guys, we just got this award, and this is the value of the contract."

Yes. Yes. No, that makes sense, right? I mean I guess where I was getting to, Sherif, was that the funnel of opportunities for you is getting broader. So you're not relying on 2 things or 3 things because those 3 things in themselves are getting broader, right? So even if one of the things gets a little slower, you still have more than enough in the hopper to get you to that $3 billion target.

Absolutely correct. That's why we have 3, like, arms, and all of them -- I mean, if everything works, then it will be $3 billion so much faster, right? So we always say, okay, one will work, one will delay, one there is a conflict, one there is this. But overall, all of them -- put them together, that's why we are very confident that we can reach it faster.

Yes, yes. And then my follow-up, Sherif, and Stefan, maybe you want to jump in on this one, is as we think about that, the $3 billion target, maybe it comes a little sooner now, how should we think about the margin side of that equation? And how are you preparing the organization for that $3 billion run rate? Because, just for context, right, last year, 21%, 21.5% kind of EBITDA margin, is that what we should still think about? Or do you think as you gain operational scale and get more operating leverage, do you think your margins can even be accretive as you go from here to that $3 billion number?

So there's 2 bits to that, right? In the short term, for your own models on that, use the same margins, 21.5%, 22%, right? But obviously, as we grow our revenue, right, our target is to get back to our historical margin rate, right? And we believe that with the extra revenues, the extra -- you'll have activity efficiencies, we've got low overheads, right? So the margins should improve over the years to come, right? Whether we'll get back to the exact margins we had 3 or 4 years ago, that's to be seen, but that's our target, right? But it will improve over the years to come.

Our next question will be from Sherif Elmaghrabi with BTIG.

Maybe just starting with supply chain. I'm curious if you've been -- how you've been able to ensure uninterrupted operations. I guess on the ground, right, you mentioned you guys kept working and other people stopped. That's one thing. But particularly on supply chain side, some of the larger service providers have specifically said they've been impacted. And so I'm very curious what you guys are doing so right.

Thanks. So obviously, we're not going to give you all the secrets. But in a nutshell, we had that establishment in the beginning, and we treated this like the COVID exactly. So we had all the CEOs of the main supplier. We put a list from our CMT, crisis management team. This is the list. These are the suppliers. These are the partners. And again, we walk with -- we talk to the guys like exactly like partners. And we told them, "Guys, this is what's going to happen. We need to -- who has a store where we need to have diversity? If the road stops between country X and country Y, all of you cannot just depend on like Jebel Ali, and then you cannot export anything because the things are blocked or the Strait is closed" or something like that. And we diversified our supply chain. We put -- store things in a different spot. And we ensure that once we get back, if this stops, I have an alternative. If this stops, I have an alternative.

And as Stefan had mentioned, we decided, in some of them, there is no way they can do anything. So we took that initiative to air freight, right? And some people thought we are crazy. Some people said, "Guys, it is going to cost you a fortune," and we said, "It's fine." And we decided to load planes with a lot of stuff and shifted it to Saudi Arabia, for example, and ensure that we have those material -- critical material that we know in a place of a war will be an issue, and it worked very well with us, right? So we worked. We were able to do that. We took the cost, and we decided as well that we are not going to do anything. We told the clients, this is part of our duty to be with you. And even if it cost us more, and it's not in there, but we are happy to take off this cost on ourselves because that's what partnership and trusted adviser to our clients means, right?

On the other side, on the evacuation, we decided that we have national people, and we are not evacuating anything, right? So if you have a 90% -- 95% Iraqis in Iraq, they stay there, right? So we stayed, we ensured that the security is there. We told the clients we're not going anywhere. If anybody has a problem, and we can capture this work because we stand with our clients in times of crisis. So that's how basically we maintained our 100%, and we captured some work from others, and that's reflected in the results.

All right. And then just a follow-up, I want to turn to the opportunity set in North Africa. Are you seeing any projects there being pulled forward due to what's going on in the Middle East? And maybe that's part of 3B3, but just wondering what you're seeing there.

Look, I mean, so far, the answer is, like, in the ground, is you don't see it like rigs coming in -- but what you see is all the projects being signed. This is -- again, it takes time. All the projects have been signed. You saw Total. You saw ConocoPhillips as well. You saw Eni. Now Chevron is very heavy engaged. So all these contracts being signed. So once they sign the contract, it will take 3, 4 months for the permits, they move their stuff. So things, I would say, could move faster. But knowing North Africa and the way there is an organization, there is tender, there is committee, there are a lot of check-the-boxes that have to take place.

But I'm positive it's going to happen faster once everything is signed because, again, this is a place where they have the pipeline not even full. So they don't need to do anything. They just need to drill wells, get oil and gas, they would put it in the pipe, sell it to Europe, and Europe is dying for gas and oil. So it's a no-brainer for North Africa, especially Libya and Algeria, to grow much faster than what they have.

Our next question comes from Jeff Robertson with Water Tower Research.

Sherif, you mentioned -- or you talked about the technology center in Kuwait, and I know you have one in Saudi Arabia. Can you export some of the learnings from those centers to -- or leverage those in other countries in your -- in the MENA area?

Yes, absolutely. Absolutely. That's the whole idea. And obviously, people that work on technology know that's how we do on -- that's what you do in your research or technology application. And we have a very strong as well alignment with universities because that's the key. So we have a very good alignment with world-class KFUPM, which is stellar, by the way, people should study this, under the leadership of Dr. Saggaf, but it is -- it's a state-of-the-art, and we're doing a lot of projects together. We're doing as well some with the Kuwait, and we are going to establish the same kind of setup. And all this, then you can do with the ADNOC, UAE.

So this is where you get a lot of learning across portfolio and across technology and as well, the key is the research doctors to have access to that they are excited about what you're doing. That's where technology happens because if a research doctor, like you have in MIT or Texas A&M, likes what you see and you have as well the apparatus, which is basically you invested in some of the particles and some of the equipment in this lab, then they are happy to come and work with you, right? And then we have, obviously, I think all the mineral recovery and the advanced, like, technologies, a lot of it will be put there and people would really like to see.

And then some of the stuff will be for the future, like I mentioned downhole separation. This, as an industry, we've been working on this for the last 20 years with, I would say, 0 technology breakthrough. Nothing really works. We still separate everything on surface because we cannot intelligently separate water and everything downhole. If we can reach that and have a research project, it might be 2, 3 years, 5 years, but still people would be excited. So we definitely want to have the Saudi, the Kuwait, with the U.S., all this with the partnership and technology transfer, doctor going from here to there, makes a big difference.

So those work as a magnet essentially for your Open Technology Platform that you spoke about earlier. Is that correct?

Yes, correct.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Thanks, Maria. Thanks, everyone. We really appreciate your time and support and looking forward for a very, very exciting journey going forward. Thank you so much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to NESR Reports First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

At this time, I'd like to turn the conference over to Blake Gendron, Vice President of Investor Relations. Thank you. You may now begin.

Thanks, Rob. Hello, and welcome to NESR's First 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 first 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.

Ladies and gentlemen, good morning, and thank you for participating in this conference call. The world and particularly the Middle East has experienced a seismic geopolitical shift over the past several months. I want to start the call by sincerely thanking all our employees and their families, not only for delivering fantastic results in the face of unprecedented challenges but also for their focus on safety, supporting our customers and outstanding operational readiness.

Beyond the strong results, I'm most proud to report that all our team members and their families remain safe, our operations remain unimpacted, and our commitment to our customer remains undeterred during these tough times. We see this as our obligation to stand alongside our customers, ensure their operations are not impacted, delayed or interrupted.

I have two key messages for today's call. First, I want to report on what I personally saw on the ground in the Middle East from the very outset of the conflict to today. While some of the global media is the reporting in Middle East paralyzed by conflict and constrained, what I have seen myself is a region that has rallied around a singular focus of resilience, an unstoppable operation. Second, I want to zoom out to discuss the differentiated positioning of NESR and the substantial post-conflict opportunity set that I see on the horizon. Energy security, localized capacity and infrastructure diversity are now resounding themes in the energy sector.

To reiterate the key message, we remain uniquely aligned and stand shoulder to shoulder with our customers. We've had zero evacuation. Our local workforce has committed to safely ensuring no turndown of any jobs and 100% reliability. We've implemented a 30-60-90 supply chain program to maintain uninterrupted flow of materials and spares. Our crisis management team ramped up its oversight seamlessly, and we stand ready with extra capacity to effectively meet the evolving needs across the region.

Just as in the COVID pandemic, our countercyclical investment strategy is not just a slogan, but it's Nest's commitment to step up in times of crisis. In that spirit, let me relay some key observations from the region since landing in Saudi on March 1. My goal was to ensure close contact with our customers and employees. And what I came away with was a deeper admiration for the resilience of regional leadership and field crews throughout the value chain.

From our largest customer in the Gulf, the message was clear. Safety, contingency planning and operational flexibility. This is not the first time the region has grappled with security and shipping challenges. And that fact was on display in the way our biggest clients have courageously maintained core operations and adapt supply routes and storage. As can be expected, Saudi Arabia is leading these efforts extremely proficient and pragmatically with an unwavering eye on the future.

As stated publicly, they are bringing on three of the largest and lowest cost upstream project globally and are pushing ahead with two more mega projects over the next several years to enhance a diversified crude mix. Exploration continues apace with six new fields and two new Arabian oil reservoir that add multi-decade visibility to upstream development. The same goes for the natural gas program in the kingdom. If anything, the recent impact on global LNG market has only involved Saudi gas development.

Likewise, Kuwait has exhibited an exceptional level of resilience, which clearly shows that the growth plans message in February conference, COGS, are among the most durable in the region. Our recent contract announcement and my discussion over the past several weeks understood that the tender pipeline remains robust and that activity today remains closely aligned with capacity expansion decoupled from near-term oil flows.

My visit to UAE and Oman were similarly constructive as land base activity has been essentially unimpacted, and expansion continues across both oil and gas. This discussion truly punctuated the view that massive infrastructure investment will be needed and that more local service capacity with proven track record of quality and robust supply chain will be needed to support this investment program.

As just announced, ADNOC pledged to spend $55 billion on new projects over the next 2 years, again, confirming the commitment to massive investment. I had a couple of stops in North Africa, starting with Egypt and Libya and ending with Algeria. The takeaway was unambiguous. North Africa has untapped existing capacity for undisrupted export to Europe. The authorities and the clients recognize that now is the time to enhance their resources and increase the spending to substantially increase the production and use the untapped excess pipeline capacity that already exists to meet urgent global demand.

Algeria and Libya are at the forefront of this, and both countries represent colossal frontier for both conventional and unconventional resources. This is why NESR has invested in and deepened our footprint across North Africa. The reshuffling of global supply chain plus the entry of key IOCs has the potential to supercharge the growth outlook in this part of the world. Energy security, localized capacity infrastructure diversity -- all three dominated my discussion with customer industry leader since the outbreak of the conflict.

Let me sum up in brief why each will contribute to an even stronger multiyear [ INAP ] cycle that previously conceived. Number one, energy security will only accelerate oil capacity expansion with enhanced flexibility across areas of production. Domestic gas is more crucial than ever for growing power needs. Number two, localized capacity. NESR already plays a central role and we will surely be called upon to expand further, leveraging our fully localized workforce, equipment and resilient supply chain. Number three, infrastructure diversification will ultimately drive and orient the upstream capacity build-out, particularly in the Gulf countries.

Now let me turn to Nestle differentiated positioning in this macro landscape. Best described as the saying it is better to be lucky than smart. Honestly, our project exposure and activity mix are uniquely favorable given the impact of the conflict in the region. As an example, we have limited exposure to places that have experienced the greatest disruption and force majeure and in the key LNG export hubs in Qatar.

Additionally, our offshore exposure to exploration or to some of the suspended rigs are much less than others and is not significant in comparison to our entire operation. The bulk of our business is land-based and concentrated in the solid GCC countries that have shown remarkable resilience and keep the upstream sector active. Jafurah is also particularly and uniquely positive for NESR. And I'm pleased to report both an acceleration in the overall project and also flawless execution with many more to come in the future. We are extremely proud and honored to be really the trusted partner of our beloved customers.

On the supply chain front, we quickly established and executed a 30-60-90 days of blueprint strategy which essentially buckets inventory level across all our projects to ensure that we are identifying supply routes smartly and with an overall eye on operational continuity. This work for NESR during the COVID pandemic, and this proactive approach is giving our customer confidence in net readiness.

As I always tell our team, never missed an opportunity to convert crisis into continuous improvement for the future, like we have on supply chain, secure inventory step into the voice, safely and closely deliver when our clients need us most. Predictably, we've had to absorb extra freight and logistic to ensure our readiness at all time. However, it pays off. The trust we continue to build with our customer is an invaluable asset that will endure well past the current conflict and short-term expenses.

With that, let me pass on to Stefan to discuss our solid results and update on our capital allocation plan. Stefan?

Thank you, Sheri. Good morning to those joining us from the United States, and good afternoon or good evening to participants across the Middle East and North Africa, Asia and Europe. We appreciate you taking the time to be with us today. I'm pleased to provide an update on our financial results for the first quarter of 2026 and to share our perspectives on the outlook for the year.

Let's start with our first quarter performance. Revenue for the quarter was $404.6 million, an all-time high, increasing 1.6% sequentially and 33.5% year-over-year. Sequential growth was driven primarily by Saudi Arabia, reflecting the continued ramp-up of the Jafurah contract, partially offset by lower activity in Egypt, Oman and Iraq, the latter of which was due to regional disruptions during March. On a year-over-year basis, growth was supported by a full quarter contribution from Jafurah and increased activity across Kuwait, Algeria, Libya and Egypt.

Shifting to profitability. Adjusted EBITDA for the quarter was $76.7 million, representing a margin of approximately 19%. This reflects typical Q1 seasonality combined with key contract ramp-ups and two, incremental freight logistics costs associated with the regional geopolitical disruption which is estimated to be around $4 million, which covered special airfreight charters and other like measures to ensure zero interruptions to our client operations. Despite this, the margins remain resilient due to strong cost discipline, improved operational execution and our lean overhead structure.

Adjusted EBITDA included $2.9 million of charges and credits primarily related to ForEx losses of $3.6 million in North Africa, partially offset by favorable items. Consistent with prior commentary, we continue to expect charges and credits from restructuring and contract mobilization related costs to be minimal going forward. Net income for the quarter was $23.8 million, more than doubling sequentially and increasing 129% year-over-year. Adjusted diluted EPS was $0.26. This performance reflects strong operational flow-through as activity scales, particularly in our unconventional completions and testing service lines..

Turning to cash flow and liquidity, which remain key sources of resilience in our model. Operating cash flow for the quarter was $30.7 million. Working capital was a headwind in Q1, primarily due to seasonal DSO increase driven by Ramadan and Eid, which were anticipated; and two, the unforeseen impact of geopolitical events in March across the region. Free cash flow was negative $5.3 million, an improvement versus Q1 '25. CapEx for the quarter was $36 million, aligned with our stated countercyclical investment strategy as we continue to deploy capital into recently awarded contracts and position the business for the next phase of growth.

Moving to the balance sheet as of March 31. Gross debt was $287.4 million. Net debt was $194.4 million. Our net debt to adjusted EBITDA ratio remains at 0.66x, well below our 1x target. Return on capital employed improved to approximately 10.9%, reflecting continued disciplined capital allocation and improved asset utilization. Looking ahead for Q2 2026, we expect a continued robust year-over-year growth driven by the Jafurah ramp-up and recent contract awards. two, sequential margin improvement consistent with normal seasonality; three, interest expense to be around $6.5 million; and four, tax to be at the 22.5% ETR.

From a cost perspective, the primary impact from current geopolitical conditions remains freight and logistics, which we have planned for. We also expect Q2 operating cash flow and free cash flow to rebound similar to Q2 '25 in the normal seasonal pattern. As we highlighted in the last two quarters, we continue to see a clear path to our $2 billion target and maintain our margins despite the increase in costs due to the recent present conflicts in the region.

We will continue with our countercyclical investment and CapEx will be around $180 million for the full year of '26 reflecting increased activity and a strong pipeline of contract awards. We continue to expect strong operating cash flow with free cash flow conversion of approximately 35% to 40% of adjusted EBITDA on a full year basis. As the company enters a new phase of growth, we are formalizing our capital allocation framework to ensure we continue to deploy capital in a disciplined and value-accretive manner. Our approach is grounded in a clear set of priorities.

First, we'll continue to invest in high-return growth opportunities, including recent contract awards and technology-led expansion across our core markets. These investments remain the primary driver of long-term value creation. Second, we remain committed to maintaining a strong balance sheet with a target net leverage ratio at or below 1x providing flexibility through cycles and supporting our growth strategy. Third, and as a new feature, I'm very pleased to announce that we're now in a position to begin returning capital to shareholders in a consistent and sustainable manner.

Accordingly, we plan to initiate a quarterly dividend beginning in Q4 '26 at $0.10 per share or $0.40 annually. This reflects our confidence in the durability of our cash flow generation and our intention to establish a sustainable and growing base dividend over time. In addition, we are launching a $50 million share repurchase program over the next 12 months. This program provides us with flexibility to opportunistically return capital when we believe our shares are trading below intrinsic value, while continuing to prioritize investment in the business. Taken together, this framework balances growth, financial and shareholder returns and positions the company to deliver consistent long-term value creation.

To conclude, despite ongoing [ ledial ] uncertainty, the outlook across the Middle East and North Africa remains very positive with the region expected to lead the next phase of global activity growth, as Sherif highlighted in his remarks. NESR remains focused on delivering profitable growth, strength seen in operational execution, expanding technology capabilities and maintaining disciplined capital and working capital management.

On behalf of management, I'd like to thank our employees for their continued dedication and performance at our shareholders and banking partners for their ongoing support. NESR in 2026 has strong momentum and a clear durable path to continued growth.

I will now turn the call back to Sherif.

Thanks, Stefan. Let me conclude. I hope first quarter results show our customer first and foremost that we do not shrink in the face of conflict. We continue to invest both in the opportunities today and for the long-term vision that our clients continue to stand behind. Our people and field teams are among the most dependable in the industry.

For investors, I hope the message resonates that growth plans across the MENA region remain durable and that the Nest growth model is not only solid, but is stronger than ever, considering the favorable project pipeline and robust investment outlook beyond the conflict. The time I spent with clients over the past several months were some of the most meaningful interactions that I've had.

I applaud our customers for their strength, commitment and trust in NESR, which I'm humbled to say are reflected in our results and outlook. Our industry is not just steel, engines and consumables. Our industry encompass not just our people in the feed, but the families, communities and countries that have stood together during these uncertain times. We created net to reflect the ingenuity of the MENA region, and to build a national champion that could weather the greatest storm and emerge even stronger. While we pray for a speedy and safe resolution to the current complex, we stand ready to meet the emerging needs of our customers and our communities.

With that, I'd like to open the floor for your questions. Please go ahead.

[Operator Instructions] Our first question today comes from the line of Arun Jayaram with JPMorgan.

Sherif, last quarter, you highlighted a very robust tender pipeline for NESR, you highlighted, I believe, $3 billion of tender activity. Just wondering if you could just kind of update us on kind of the status of some of that tender activity as we think about the balance of the year?

Thanks, Arun. We had, as we announced the award in Kuwait and North Africa with the cementing, which is -- the first thing that was basically announced by our customer, we were -- we got awarded much bigger than our fair share, if you like, which we are very happy with. So we will have, I would say, a leadership position in both markets for that segment. The rest of the tenders are going on as planned.

As a matter of fact, there is like no delay or suspension. So we are actively in that bidding strategy now or the bidding, not such, I would say, the feedback with our customers. Some of them, they like to have like a clarification. Some of them, they have round of negotiations. So all this is going on. And I believe, I still believe that the majority would be awarded in the next 2 to 3 months, and then they will be announced as obviously, as we get the news from the customer.

So the pipeline is still $3 billion and I would say, actually, there will be more activity and stuff that we were not planning for due to the conflict that is going to restart and you're going to see it with the people or the customer trying to see how they can enhance their capacity. So some of the fees, I think, in my opinion, personal opinion, that some of the customer will bring some of those projects earlier than expected.

Great. And just a follow-up. You guys printed, call it, $77 million of EBITDA in 1Q. Obviously, a quarter that had some Middle East disruption in Ramadan, and then you highlighted $4 million of quarter-specific costs. Stefan, do you have just any additional color on 2Q or how you're feeling about the full year? Just -- I know there's some uncertainties, but just give us a little bit of thoughts on framing you did beat the Street number this quarter. Just helping us frame near-term expectations would be helpful.

So for a full year basis, as I said previously, we'll maintain the same margin as we did last year, which is around 21%, 21.5%, right? Q1 is always the seasonally low number for the year. As I said in the prepared remarks, we had $4 million of freight costs right? And Q4 will be the highest for the year and will traject will improve each quarter to the highest quarter at the end of the year to end up with an average, which is roughly the same as the previous year. Even with the additional freight costs, we think we'll be close to or maintain the same margin as the previous year.

Our next questions are from the line of Josh Silverstein with UBS.

You had mentioned before that there were a few areas that you didn't really have exposure to, which is good for right now, in [ our ] Qatar offshore, Saudi or a few other places. I'm curious if this potential conflict has maybe open up some doors in those areas or maybe you're thinking about now expanding into those regions that you previously didn't have that much expected?

So what I'm I have to say if we are lucky that we will not, for example, exposed into the -- some of the [ areas ] where we had force majeure, et cetera. I would say, obviously, when they return, we will, for sure, be involved and we tender actively. But I would say this is not going to be the focus for us in the very near future, right?

So I think they will be, as I said, diversification and with a lot of customers for some of the new areas, I would say. And definitely, we are active in bidding in all projects, whether it's offshore or land, everywhere in the MENA region. Now we have the very solid infrastructure across all the 15 countries. So -- and we are authorized and allowed basically to bid on all the big projects and small projects because now we have the track record. So we're very actively engaged. We're going to obviously put the correct pricing and the proper bidding strategy and whether the client award us in the different areas, it's up to them, obviously, to choose.

And then Stefan, can you just walk through, I guess, some of the thoughts around the return of capital strategy? Is the dividend level to start putting off of why a little bit more focus on that versus the buyback? Any help there would be great.

Right now, we've got free cash flow coming from all the big projects we've won, right? Free cash flow will continue to improve over the years to come, right? And so we've been looking at how we're going to return amounts to shareholders. And we thought it was best to go with the dividend first, right?

The dividend has been set at $0.40 per year, which at a $25 price is 1.6% return. And that's to reward our long-term shareholders, right, our Middle Eastern shareholders. And if there's funds that are interested in buying dividend stocks in the U.S., right? And we also took the advantage to announce the buyback just in case the share price was the dip to opportunistically buy back at a cheaper price, right? But we continue to hope that the share price keeps going up.

Our next question is from the line of Saurabh Pant with Bank of America.

Sherif, maybe I want to touch on Jafurah a little bit. In your prepared remarks, Sherif, you were talking about acceleration in the overall project and obviously, flawless execution. Maybe can you talk to where we are in the Jafurah ramp-up process? Maybe any update on timing of the deployment of the fourth fleet? And just a little more color on what you meant by acceleration in the overall project. Is that part of the ramp-up? Or what exactly are we talking about?

And then secondly, Sherif, related to that on the efficiencies, where are we on the efficiency front? Do you think we have reached optimum efficiency as the project is ramping up? Or do you think there's more upside as you continue to ramp up?

Thanks. So Jafurah has been obviously a fantastic project for us and for Aramco. I'm sure you saw Aramco announcement on it already publicly. So the readiness and the efficiency that Aramco is managing to add wells because of the fantastic performance on the rigs. That means that more pads are ready which means that if we continue with our performance, which is obviously our plan and improve on it, that means that we will be able to have more pages than planned for the year.

And if we continue to do that and Aramco allow us, that means that we will be able to ramp up that number of stages that we do per quarter faster. So let's say, if we planned whatever number of -- x number of stages in Q3, we will be able to do it in Q2, right? And therefore, whatever we're planning in Q4, we can do it maybe in Q3. And that's what I call it the acceleration of the project because Aramco is performance has been really outstanding.

And our business, we added fleets and as I always say, we countercyclical. So basically, we added more fleets than Aramco basically planning. So we are always ready and that worked extremely well for us especially with what happened now with the current conflict of the logistics problem, but we have our equipment already in Saudi or on the way to Saudi, right? So we have our fourth fleet already in country and which means that we are going to be deploying it very, very soon. So now for the efficiency, there is always room for efficiency improvement.

So what we did ourselves internally is we looked at all our now fleets and everything new and everything that comes in the U.S. with continuous pumping, is it do it fleet? Is it extended? A lot of this, we are implementing as we speak now in the Kingdom, obviously, in very close consultation with our clients. And we see that we still have a very nice room of improvement, and we see as well we can beat actually the number of stage that is being done in the Permian.

So I am a believer that the Jafurah project will be the best-in-class worldwide in number of stages, pumping our efficiency, et cetera, which is obviously, it's going to be a very nice upside for us in terms of the number of stages and definitely in terms of profitability.

That's fantastic update, Sherif. Clearly, very strong execution over there. And then just a little update maybe on the ground situation in the Middle East, right? First quarter, March, obviously was impacted by the conflict. But since the cease fire was announced in early April, Sherif, what has changed on the ground? I'm assuming operations are smoother, air transportation has improved, right? But how have things changed since then?

And Stefan, you said $4 million impact. Can you give some thoughts on what's baked into your thinking for 2Q at this point? Are you thinking $4 million times 3 million for $12 million impact? Or is it less than that, just given the cease fire might have improved the situation on the ground?

So if I tell you, first, the political stuff, right? So I think that's what people have a bit of a misconcept and I tried to explain it in details, right? The clients in the Middle East think, again, long term, think about their capacity, think about how they're going to perform. You have to, again, decouple the production from activity. So unless there is a direct hit to something that is significant where they announced it, which is -- they are, again, all very transparent. So you saw his [ Hines ] in Qatar declared there is a force majeure there is an LNG hit. It will take 3 to 5 years. It will take this x billions of dollars.

Therefore, we are suspending. And some of the rigs that were in, I would call, a dangerous zone, they told them to suspend operation. And some of the rigs, they asked them to not to operate at night. All this were actioned in the places where it was basically safely, dangerously. But all the other places, even when they did not export, they did not release the rigs. They did not stop activity because the ecosystem is very important. And some of the clients, the way they manage it is they actually drilled until the reservoir.

So they drilled basically the first two casing and they don't drill the reservoir, but they keep the wells ready to ensure that the activity is intact, to ensure as well the capacity of the people, everything is there. So then when they ramp up, they ramp up again the same. And you saw Kuwait, for example, where they have an issue with -- obviously, with the straight, we still have our operation almost uninterrupted, right? So -- and I think that's very important.

So even with the cease fire, definitely, it makes things better. It makes some of the logistics stuff a bit easier. But at the end of the day, the street is still closed. So if you had -- you did not diversify your supply chain, you are in trouble. And that's where I keep repeating this, very important that you balance your -- and you have -- you balance your supply chain, you balance your routes. So we send all our Saudi stuff directly, for example. So we have our Saudi business. We have a hub in Saudi. We manage everything in Saudi directly. We don't go through another route.

And that's very important because that's what makes us strong. And then we obviously balance with the authorities between the different ports, right? Now if you look at the cost, what we did is -- which is something in our DNA, we make sure that we have excess capacity, excess spares. And if we anticipate there are issues, we actually took the proactive approach to air freight some of the stuff despite the fact that it might have come normally, but we don't take chances.

So we airfreighted a lot of the stuff that we wanted to be in country, so we never disrupt the client operation. We believe that this cost will go down as we go in the next quarter. Why? Because, again, hopefully, that whole story of shipping and you have to air freight, et cetera, is much less. And then this cost will drop. Now you can be very positive as well and say the street will open, everything will be hunky dory. So then even the freight of the shipping will go to what it was before.

Our next question is from the line of Derek Podhaizer with Piper Sandler.

I was curious to get your thoughts on having a bit of a tighter U.S. supply chain, just given where oil prices have gone, the U.S. independents and E&Ps are talking about returning rigs and frac rigs -- frac crews to work, excuse me, capital equipment cycle potentially kicking off. So I'm just curious if there's any potential pressures as you continue to scale Jafurah? Or have you already efficient effectively locked in your equipment needs for the committed and uncommitted work over the next several years or so?

No, Derek, I mean, I'm actually quite happy that the U.S. is very tight and it's going to get tighter, which is great. So we already locked our fleet, the fourth and the fifth. So we have all our equipment. And as I said, the equipment is either in country or in route to the country. So if the U.S. gets tighter, it's even better because that means less competition, and we will be able to keep performing as we are.

So we locked our products, our chemicals, our spares, our engines, we plan all this ahead of time. And at the time, as I said before, the conflict, we did a very, very detailed study on what we need over the full year. And as well, we plan some buffering to ensure that we can meet or even exceed the client demand with equipment and spares. So we are in good shape. And I hope the U.S. keeps ramping up.

That's great to hear. Your comments on ADNOC were really interesting as far as the $55 billion. Obviously, they're leaving OPEC, so a clear opportunity set here. Just curious if you could expand on how you see your opportunity set growing with ADNOC, particularly as they've brought a lot of services in-house over the last several years. So just curious how you'll be a partner to them as they look to scale now leaving OPEC.

So look, I mean, ADNOC, we are -- we've been working with them since the start. We keep ramping up. We won a couple of contracts lately, and now we are bidding on a lot of mega projects. with them. So definitely, the acceleration of their spend and their -- what they call Made an Emirates initiative that was announced by his excellency, [ Dr. Sultan ], and you see it on the news, all over the news, right?

So it's very public, and they made that announcement for the AED 55 billion, it's AED 200 billion in over 2 years. So we will be bidding on all these projects, a lot of it. Definitely, the lion's share of a lot of the activity in Abu Dhabi goes to ADNOC and ADNOC Drilling and affiliated company, which is known, right? But it's fine.

The rest huge, right? So we always bid for all these projects, and we bid against ADNOC Drilling as well. And that's how the whole structure of ADNOC E&P itself, they put the floor for everybody, the international, ourselves, others. So I -- when the pie is bigger, we will get bigger even with the ADNOC Drilling taking the lion's share.

So we see it very positive. We see even more positive with the acceleration of spend. And as I keep repeating, this diversification, and I think people are underestimating it, there will be a lot of diversity of even some of the fields, people will look into the fields that will have a supply route that is different and they will accelerate some of those projects that were, for example, planned for '28, '29, '30, they will bring them ahead of time. And that's why a lot of the countries are putting budget ready for some of those projects to be executed. So very positive for us.

The next questions are from the line of Greg Lewis with BTIG.

I was -- Sherif, I was hoping you could talk a little bit more about the opportunity in North Africa. Clearly, there's a growing theme that hey, the Middle East is going to remain in the Middle East, but you could see incremental capital flow to some other markets. So just kind of curious when we could start to see that maybe show up in numbers in terms of incremental revenue? And then as we see more capital deployed in North Africa, how should we think about supply chain? And are there any capacity constraints we could see in that market that could limit upside?

Look, the North Africa actually has a huge opportunity. And I think for people to appreciate that you have countries with capacity of pipeline that is not full. So imagine the amazing opportunity. Now the world has a problem because of not because of capacity, it's mainly because of supply route that is blocked.

And now you have Europe that is in need of gas and they have a pipe that is underwater in the Mediterranean, not in full capacity. So what you need to do is you just pump more gas into it, right? So I think the opportunity is very clear. Obviously, the authorities, the clients, they all recognize that. So now it's the time to really add investment. So this will be two pronged, right?

So you have a strategy to sign a new exploration and production agreement with international. And you saw that, that did take effect already. Total, ConocoPhillips, MOU, Chevron, Exxon. So I think these guys, when they come, you will see very high intensity of new projects because the money comes straight from the IOCs to these projects. And then you have the national oil company like Sonatrak, like the NOC, et cetera, or the local E&P companies, where they are going to add their capacity as well or their budget to ensure that they can add production.

And you saw even visits from like the Prime Minister of Italy, et cetera. So it's very clear the opportunity is there. I see it very positive. Do we see it in the ground? Yes, we see it. Do you see the additional of rigs. Yes, we see it. We see the Libya, for example, is at an all-time high in the rig count, Algeria is adding rigs, it's adding the concession. So I think the positivity in North Africa will come very soon in the sense of significant percentage year-on-year growth.

Obviously, the size-wise for us, it's much smaller than GCC. However, obviously, if you grow 20%, 30% year-on-year, it's very positive. In addition to that, there is the new unconventional scheme that is opening up and some people as well do not know, but Algeria has the same fantastic unconventional resource like you have, for example, in Argentina, in Vaca Muerta. So which means once it's unleashed, you can see a significant increase of activity, production and business for everybody.

[Operator Instructions] The Next question is from the line of Jeff Robertson Water Tower Research.

Sherif, when you think about the tinder pipeline and some of the diversification that your opportunities you're seeing in the markets, can you share any color on what that -- what impact that might have on margins in the next few years?

Look, it all depends on the client, the country and the segment. So I don't want to just tell you vague answers, but in sum, just for you to appreciate, in some countries, we have segments or product line that runs above 30%. And some, they run less. And so it depends on the bidding. It depends how competitive. It depends as well some of the costs or requirements.

So I would say now we are at that size and we are kind of prioritizing the CapEx that we spend versus some of the project that we get awarded as we are to get awarded on a much larger project, I think the margin and the majority of the time would be accretive. So it will be better than what we have. So -- and that's again, now you can -- I don't want to say you want to be choosy, but some of the segment and some of the business, it doesn't make sense for us to bid at a less price of what we have been running or what we have in the pipeline and others, then definitely we will have a pricing impact.

In addition to that, we have to take into account all like the logistic cost, the increase of freight, et cetera, which means that we need to, as an industry, needs a bit to move up because the cost is higher, right? I give you the best example. Diesel. If you look at today, the diesel price, it is up by 100% based on, obviously, the oil price, right? So you get like punished from that, right, because your cost structure. So that is why we need to elevate a bit some of our pricing because, obviously, the cost is higher. And our clients understand that very well.

And we always make sure that as long as you are doing this properly and professionally and then you should be fine.

And secondly, just on a different note. Is there any update you can share on some of the water projects you're working on within the [ Nedis ] segment?

Yes. I mean, obviously, we don't talk much about it, not because it's kind of slowed or anything, but I guess because of priority and what's happening in the region. But we -- all our projects are actually, I would say, going well from like the third phase of testing. And now our water project is in the last stage of the economics viability with the return of the minerals and our lithium and project that we do with our customer is going as well very well after the successful pilots.

So all this is -- it's very positive, and we are working on it. And again, because the client has such a good long-term view on this, despite what's happening, we're still working on it. And I still believe that we will have a nice upside on some of these projects with the economic obviously being viable, right? So some of the other countries where they are like in the middle of the [ cost ], if you like, yes, this got postponed. Some of the trial, some of the pilots, obviously were pushed until after the fact because you cannot ship stuff now and just to do a trial of a water project, right?

So even despite the ESG, it's not like in the best favor of the world, but it's still -- all these projects are running because what we're trying to do is, again, make sure that these projects are economic without subsidies. So are the economic viable without the slogan, then we know that then it's a good business, and it will stay alive. So yes, you will hear hopefully before year end on some of these projects on cutting to scale outside the pilot and to a scale project.

The next question is from the line of [ Tom Bishop ] of BI Research.

Well, actually, good evening, I guess, for you. I just want to know how big is the North African part of your revenue?

We don't declare per country or per region, our split. But I would just say the GCC is much larger than North Africa.

At this time, I'll turn the floor back to management for closing remarks.

Thank you very much. I appreciate all the time. And again, we're very positive about our future and the strength and I guess, as Stefan mentioned, with the capital return, I think that pass the right message to everyone that we are extremely, extremely positive for the future. Thank you very much.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings. Welcome to NESR Reports Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Blake Gendron, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Sherry. Hello, and welcome to NESR's Fourth Quarter 2025 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 fourth 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.

Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. I'm pleased to report that we ended a tremendous '25 with even stronger-than-expected results in the fourth quarter. Most importantly, we safely and efficiently kicked off the largest unconventional frac program in sector history, effectively managed our costs and achieved yet another record high for revenue and free cash flow.

These results are a testament to our hard-working teams in the field, their dedication and commitment. Thanks to our customers for their trust and unwavering support in the entire region. Reaching this stage of company growth was NES's (sic) [ NESR's ] original national champion vision, and we now have our sights set on even much greater heights.

On today's call, I'll start with an update on the Middle East macro and activity ties to key megatrends related to global energy, technology and geopolitics. Alongside the macro, I'll go into NESR's specific drivers by country to outline key takeaways from an extremely busy industry conference season to start the year. This will hopefully clarify the ample growth runway that we have beyond our original $2 billion target.

First, the macro. As previously discussed, overall, we see a baseline of steady activity growth across the MENA region, driven by oil capacity expansion and strategic domestic gas development. Additionally, what changed is the increased appetite of the IOC to enter into various MOU and exploration awards that are unprecedented in some countries like Iraq, Algeria, Libya, Kuwait and even Syria. Countries like Kuwait continue to lead with robust investment programs, but perhaps the most notable aspect of the current cycle is that every single one of our anchor countries is either growing steadily or is stable at all-time high.

Considering the negative consensus view around global growth and commodity prices, these trends are a stark reminder that there is truly a solid floor of activity on which the MENA service sector can continue to build with any upside to the macro or commodity outlook. There is no other region in the world like this one for persistent upstream growth, capacity expansion and strategic gas development. MENA trends are largely decoupled from oil and gas prices and NESR (sic) [ NESR ] is taking full advantage of it.

Talking about Kuwait in more detail. We recently conducted our Board meeting following the impressive successful COGS Oil and Gas Show in Kuwait City. Our goal was to demonstrate our commitment to the highest level in the country, show our Board firsthand the super cycle that is now entering its second year in addition to the unique opportunities for NESR. As you recall, we started in Kuwait from nothing just few years ago, and it will soon become our second largest country behind Saudi.

During COGS, country leadership reiterated their commitment of $8 billion to $10 billion per year in upstream spending through 2030 to expand oil capacity by an additional 1 million barrel to a total of 4 million barrels per day by 2035. Not only does this lock in continued growth for years to come, but also implies an even higher activity trajectory than previously anticipated.

Additionally, for the first time, as publicly announced, His Highness, the Prime Minister, presided over several agreements and MOUs signing during COGS with IOC, the likes of Total, BP, Shell and several other international companies. The program encompassed both oil and gas, span land and offshore and will truly launch an activity renaissance in a country that has already achieved impressive level of growth over the past year.

For NESR, there is a huge upside in Kuwait with all of our recent in-country investment, high-level engagement with customer leadership and with a proven track record of operational scale and open technology development. The evolution NESR to Kuwait over the coming years will dovetail perfectly with the transformation of the Kuwait energy sector.

We previously announced our Ahmadi Innovation Valley or AIV initiative, which will give NESR first-ever access to technology development in Kuwait. This project will supplement and enhance our core services, which are growing on the back of recent contract wins and upcoming tenders and will also drive new frontier in the areas of decarbonization, water and critical minerals. Considering all of the plans and partnership and ambitions announced at COGS, our leadership in AIV could not be more perfectly timed.

In Abu Dhabi, activity continues to march above all-time high. As publicly announced, in late '25, ADNOC approved a sweeping $150 billion oil and gas investment plan for the '26-2030 time frame, which should keep the growth trajectory intact for years to come. North Africa remains a key growth pillar led by a surge of activity in Libya, which headlined its recent summit in AAA with dual announcement with ConocoPhillips and Total. This collaboration captured $20 billion in investment over 25 years, an unprecedented commitment not just in terms of magnitude, but also longevity as country leadership has truly embraced foreign investment into its world-renowned resource base.

Additional blockbuster bid from Libya last week are the new exploration block awards to Chevron, Repsol, MOL, among others. While activity over the past year has already increased political cohesion in Libya and its highly successful bid round provide a road map to increase oil capacity from 1.4 million barrels per day today to 1.6 million by year-end and 2 million by 2030. Libya is yet another core NESR country that is planning over the multiyear horizon. Based on our recent meeting with Libya NOC and country leadership, NESR will play a key role in this visionary capacity expansion.

Elsewhere in the region, we see stable, good activity levels in Algeria, Oman, Iraq and Egypt. We see some strategic discussion that could supercharge the NESR story primarily through new contract wins and an improving oil outlook over the medium-term. Unsurprisingly, we've been as busy with recent tendering as we've been on the industry conference circuit. And no doubt, there is connection between the 2.

Adding up the budgetary commitment from our 4 largest GCC countries implies nearly $300 billion in general upstream spending through 2030. While not all of that budget is pure services, it's worth noting that the budget only captured a portion of our anchor countries and does not include the wave of IOC spending that is coming with the shifting geopolitical landscape.

Beyond Jafurah, there is still a multibillion -- opportunity for NESR, results from which could be announced soon. We are very excited and optimistic about NESR's position in these tenders, and our nimble operating model has proven effective in the face of fierce tender competition. These potential awards will keep NESR's growth engine running far beyond the time frame that most investors view our stock or sector.

To conclude and before passing on to Stefan, I'd like to discuss what is the most anticipated topic of this call, which, of course, is the start-up of Jafurah frac project. As previously discussed, we initiated operation on time in early November and have worked seamlessly with our highly supportive Aramco partners to ramp operations safely and effectively. HSE and service quality remain our top priority in everything we do and especially in ramping a project with such a massive scale at Jafurah.

All of our careful organization and planning of supply chain, logistic effort, which go all the way back to our initial frac in 2019, are paying off, and we are delivering stages as planned. Cost control across both procurement and operation is evident in the fourth quarter result, and there is much more optimization to achieve.

Our entire process from securing suppliers, hiring crews, moving materials, implementing the best technology from the U.S. shale, maintaining best-in-class uptime and pumping hours, is on plan, even as we triple and aim to quadruple the footprint. Aramco is truly on another leadership level for world-class unconventional development, and we look forward to updating the market on future achievements in the quarters to come.

With that, let me pass the call to Stefan to discuss our equally exciting results on the finance front.

Thank you, Sherif. Good morning to those joining us from the United States, and good afternoon, or good evening to our participants across the Middle East, North Africa, Asia and Europe. We appreciate you taking the time to be with us today. I'm extremely pleased to provide an update on our financial results for the fourth quarter and full year ended December 31, 2025, and to share our perspectives on the outlook for 2026.

Let's start with our fourth quarter 2025 performance. Our fourth quarter revenue was $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. On a year-over-year basis, revenue growth was supported by higher activity levels in Saudi Arabia, Kuwait, Iraq, Egypt and Libya.

Adjusted EBITDA for the fourth quarter of 2025 was $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 our portfolio and the continued benefit of our lean overhead structure.

Adjusted EBITDA for the fourth quarter includes $24.1 million of total charges and credits impacting adjusted EBITDA, primarily related to 4 items: one, $7.1 million of current expected credit loss provisions, primarily in Oman, which the company still feels confident that it will collect; two, $8.1 million of impairment charges related to 2 small legacy technology investments impacted by global change in market focus on ESG in the last year; three, $4.7 million of contract mobilization-related restructuring costs, all related to our recent contract win and the deployment of that contract in Oman; four, $3.7 million of other write-offs with $3.1 million related to property, plant and equipment, particularly a provision recorded for a construction in-process prepayment in Saudi Arabia following a vendor bankruptcy.

To reemphasize, these adjustments are predominantly onetime items, and we fully expect going forward charges and credits to be minimal. We do not expect any material contract mobilization-related restructuring costs in 2026.

Interest expense for the fourth quarter of 2025 was $7.5 million, while income tax expense was $7.2 million. Adjusted diluted earnings per share for the fourth quarter of 2025 was $0.32. Full year 2025 revenue totaled $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 2025 adjusted EBITDA was $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. Full year '25 interest expense was $32.5 million, down $7.4 million year-over-year, reflecting lower average debt levels. Full year '25 income tax expense was $9.3 million or $18.4 million as adjusted for a onetime tax provision release in Q3 '25. Adjusted diluted earnings per share for the full year of '25 was $0.81.

Turning to cash flow and liquidity, which continues to be one of the clearest strengths of our model. Fourth quarter operating cash flow and free cash flow were exceptionally strong, driven by record fourth quarter collections and our lowest year-end DSO ever, reflecting disciplined working capital management across the organization. In line with our countercyclical investment strategy, we proactively deployed capital towards recent contract awards, accelerating operational ramp-up and rapidly positioning the business for the next phase of growth.

For full year '25, cash flow from operations totaled $264.2 million, and free cash flow was $120.8 million, representing approximately 43% conversion from adjusted EBITDA, a level that underscores the quality of our earnings and the scalability of our platform. Total '25 capital expenditures, including both cash and vendor financed amounts were $150.9 million, fully aligned with our previously communicated plans. Importantly, for the third consecutive year, the majority of our free cash flow was directed towards reducing bank debt, further strengthening our balance sheet and positioning the company for its next phase of growth.

As of December 31, '25, gross debt totaled $310 million and net debt was $185.3 million. Our net debt-to-adjusted EBITDA ratio stood at 0.66, well below our target threshold of 1x. On a trailing 12-month basis, return on capital employed or ROCE, was 10.2%, reflecting continued disciplined execution of our growth investment strategy and improving capital efficiency.

Now looking ahead. For the first quarter of 2026, we expect more muted seasonality than previous years due to the continued ramp of recent contract awards and resilient growth in places like Kuwait and North Africa, mainly offsetting the impact of Ramadan falling completely in the first quarter. Similarly, margins are always the weakest in the first quarter and then are expected to increase sequentially through the balance of the year on robust top line growth and operating leverage. Overall, this year should be our best growth year ever, exceeding any previous indication.

As we highlighted last quarter, we continue to see a path to exiting '26 at an annualized revenue run rate of approximately $2 billion, underpinned by our growing contract portfolio and consistent operational delivery. Full year '26 EBITDA margins are expected to remain broadly consistent with '25, supported by disciplined execution and cost control. As mentioned, we expect gradual sequential improvement in margins over the course of the year.

For Q1 '26, interest expense is expected to be approximately $7.5 million with full year '26 interest expense in the $22 million range. We continue to expect full year effective tax rate in the 22.5% range, consistent with prior levels. For the full year '26, we expect capital expenditures of approximately $165 million, consistent with the expanding growth outlook we've outlined and supported by a strong pipeline of recently awarded contracts.

While our customers appreciate our standout countercyclical growth investment, it's worth noting to our shareholders that our CapEx as a percentage of revenue will be down on a year-over-year basis. We expect cash flow from operations in '26 to remain strong. As a result, free cash flow for the full year '26 is projected to comprise approximately 35% to 40% conversion from adjusted EBITDA, representing sector-leading free cash flow growth.

Now on the housekeeping topics. As you can see, the company has entered a new phase of growth. Our contract base is strong. Our balance sheet is solid. Leverage remains low and cash flow generation continues to be robust. As we highlighted on our previous call, we expect to provide update on our formal capital allocation and shareholder return framework during our next earnings call.

The outlook across the Middle East and North Africa remains constructive. We expect the region to lead the next wave of activity growth, underpinned by continued investment in oil capacity and accelerating gas development across our core markets. NESR remains disciplined and focused on driving profitable growth, strengthening operational execution, expanding our technology capabilities, reducing leverage and optimizing working capital, all of which position the company to deliver sustainable long-term value.

On behalf of management, I want to sincerely thank our employees for their commitment and exceptional performance in delivering these results and advancing our strategic priorities. I also extend our appreciation to our shareholders and banking partners for their ongoing confidence in our strategy and execution. NESR is entering 2026 from a position of strength, supported by strong operational momentum, a growing contract base and significant market opportunities ahead.

Now I'll turn the call back to Sherif.

Thanks, Stefan. Let me conclude. The fourth quarter represents a significant milestone for the company not just in terms of hitting ambitious growth targets, but also in proving that we can do so profitably and with strong cash flow generation. For NESR, growth, returns and cash flow are not an either/or, but an all of the above feature of our strategic model that investors are increasingly recognizing, which is why earlier this year, we updated and rolled out our internal strategy to double the size of the company over the next couple of years.

Jafurah and our existing business are not a ceiling, but rather a foundation upon which to win more, commercialize new technologies and evaluate strategic opportunities to enhance our regional position in MENA. This strategic flexibility start with the unmatched quality of the MENA region and our customers. The Middle East represents the lowest cost hydrocarbon production and its reestablishment as the swing producer in oil, combined with secular growth tailwinds in gas and the renewed entry of IOC give the current cycle multiyear durability.

In our view, the first step to maximizing shareholder value is to align our strategy and countercyclical investment with this multiyear view of our NOC and IOC customers. We appreciate our long-term shareholders for their patience in letting this story play out, and we welcome all of the newcomers that recognize the multiyear runway in front of us.

With that, we are ready to take your questions. Sherry, please open the floor for your question.

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

Nice to hear another good quarter here, Sherif. I really want to ask you about Jafurah and kind of where we are today. Obviously, this is sort of setting the stage going forward. But in terms of Jafurah, I think you've talked about getting to about 500,000 horsepower of pressure pumping equipment there. Where are we today in that? And can you kind of walk us through kind of how you kind of get to kind of a full steady state of getting to that kind of $2 billion a year run rate? What needs to get there? Kind of where are we today in terms of the ramp-up at Jafurah?

Thanks, Dave. So we already -- as we tried to explain, we started on time, November 1st. We had the first fleet, second fleet, third fleet. And as we are ramping up in very close coordination with our customer for additional one or 2 fleet depending on their program. But we -- what we said before, we are the countercyclical style. We buy equipment ahead of what they need, right? So whenever they need something or if Aramco decides to add more fleets or to add more stages, we are ready. So if I answer your question more directly, I would say by Q2, I think we would be in that kind of steady state, and then we might add another fleet in Q3, Q4. And the run rate for our stages per quota should be seen very clearly in Q3.

So I was just curious about some of the supply chain concerns you see here. Maybe you just answered the question of just sort of staying in front of the customer of what they need. But that was -- one of the keys to you unlocking Jafurah initially was sort of solving some of these supply chain concerns. What are some of the things that you're really focused on right now? And kind of how do you navigate those?

Okay. I mean, obviously, I mean, without giving away some of the competitive stuff, right? But we planned it from very early beginning to ensure that we have local sand, adequate supplies of trees, plugs, et cetera, et cetera, wireline perforation, et cetera. So all this we aligned with partners, with people here from the U.S., some people locally, and we ensured that we play what we call frac on paper that all this is ready on time and without any block, if you like, on logistics or anything to be delivered on time. So all this is basically solved.

And that's why I keep saying it's just we are at Aramco, our client, whenever they ask for additional stuff, we just require a couple of weeks to be ready. And that's how ready we are with all our partners. And obviously, with the cost control, so everybody play ball with that strategy that this is the new paradigm. There is a lot of stages to be executed and everybody is aligned with us. So I think I'm trying not to give away any of the competitive advantage that they can. But we solved all the issues of any kind of blockade from tariff, supply chain, logistics, whatever. And that's why we feel very confident that we will be able to deliver the stages that Aramco wants with the same profitability that we have in Q4.

It sounds like staying in front of the customer is really crucial here, kind of one of the steps. If I could just squeeze in one last question. You talked about your sites are on much higher activity levels. You talked about moving beyond the $2 billion target. Could you just expand a little bit more on that, maybe kind of the key areas where you think is going to feed into that greater than $2 billion number? You mentioned a number of tenders coming out in Saudi. I'm sure that's part of it. I know Kuwait. But if you could just sort of expand a little bit more on kind of your medium-term targets and your medium-term outlook, please?

So obviously, if I go back to people that are following the story from the beginning, we had originally said our target is to become $2 billion revenue, and we're very happy with that. Obviously, now it's done. So you cannot have a target that is like next -- very simple to achieve. So we looked at all the backlog, the contracts, where we want to be, the investment profile, and we see very easily we can double the company from where it is today in a couple of years.

So with the contracts that we have tendering, today we tender almost $2 billion, $3 billion of tenders across the region. Most of it is submitted. Now we are waiting for the results from the customer. The majority of it is, I would say, outside Saudi, the lion's share. So all this -- when you don't have the business, then it becomes additional to us.

If you have the contract and you are continuing, that's basically what we call must-have, which is basically you continue to have the same backlog that you have. And the additional work, which is the majority of the tenders that we bid for, is we are waiting on the results. And as I said, I'm extremely optimistic that we're going to win more than our fair share, and that's going to make sure that we're going to reach the double the company size in a couple of years.

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

Just a quick follow-up, Sherif, if you don't mind on Jafurah, like Dave was asking. I think in your prepared remarks, you were talking about much more optimization to be achieved. I know you can't disclose everything that you're doing. But to the extent you can, Sherif, just maybe talk to what you are doing as the project ramps up, where are those incremental efficiencies optimization going to come from? And how should we think about just the margin profile on Jafurah as it fully ramps up, normalizes relative to the rest of your business? Just some color on that?

Thanks. So look, I mean, if you look at the evolution of -- the best example, I think, for people to understand is the Permian and the U.S. shale and what happened on some of the cost initiatives and some happen as well with some of the technology advancements. So today, we have a lot of that already in country. But we know that there are more to be done. I'm trying to answer without, again, giving away a lot of what we are doing from our competitive edge.

But we believe that we can do more stages per day, and we believe as well, we can optimize some of what I call the rig up, some of the perforation, some of the trees, some of the -- between stages, et cetera, et cetera. And if we do that, that means that you can get another 20% efficiency and which is -- basically will definitely have an impact on our margins, right? So what we want to have, what I call a cruise control mechanism on that Jafurah, well, you have this huge infrastructure today. We are building our new base in SPARK, and this will have a lot of bells and whistles. I don't want to get with buzzwords, but we're going to have a lot of AI into the maintenance, into the reliability, changing engines.

Once you have that scale and you know you are going to do 80,000 to 100,000 stages over 5 years, and you have inside the Jafurah in the facility itself, that state-of-the-art facility, all our partners as well, we're going to host them into that facility. And that basically gives -- if you are in the U.S. and you know that you have a 3, 4 years contract, you can develop some of the leading reliability and efficiency and maintenance to ensure that you can shave some of these cost items. And if you do that, eventually, it will come to your margins. So we are at the beginning of that journey. I think we will have our facility ready by Q3. And once we have our full fleets running all the time, then you start to have this cruise control, and that will eventually do the margins as well.

Interesting. Okay. No, it's [ really ] fair. And then the second one for me, Sherif, is on the Kuwait side of things. I know you talked about that in your prepared remarks and COGS, it looks like it was a great success for the industry as a whole. The $8 billion to $10 billion upstream spending that you mentioned, obviously, is the official target. How critical is that? I know this was a country that was pretty small for you. You just entered the country, but now it's set to become the second largest. How quickly can Kuwait ramp up for NESR in particular? And then the tenders we are talking about, what's the line of sight to those being awarded? And how quickly can that move the needle for NESR?

So the spend is already done, right? I mean this is something that is -- the leadership in KPC and KOC announced and they are doing it. I mean there is no more wait and see. The rigs are there. We are above 200 rigs in Kuwait today, and the activity is running. Now for us, why it's so exciting because our scale -- we were nothing. We are okay now, but we can easily double the size of our business in Kuwait. Now the key in Kuwait, you need to win contracts because you cannot work without contract.

So we won already a couple of contracts that we announced. We tendered and we are waiting for the results to be announced. And we are tendering another 2. Everything will be awarded this year. So some of it will be awarded in, I would say, end of Q1, some will be in Q2 and some will be Q3. So everything will be known in 2026, and this contract will be for 5 to 7 years. So as soon as you have the contract, and again, depending on how fast you mobilize, and you know our style, we -- I keep calling it countercyclical, meaning that we kind of prepare equipment before we know if we feel that we're going to win. So therefore, we don't have to wait 6 to 8 months to mobilize. We mobilize in a much faster time frame.

Got it. Right. Okay. So it sounds like it's going to be a key part of your doubling ambition, right, which makes sense. Okay, we'll stay tuned on that.

Our next question is from Josh Silverstein with UBS.

It's clear there's a lot of growth potential for NESR across the region. Can you talk about what level of investments you might need to make to support these higher activity levels? You mentioned what the CapEx would be this year, but does this have to keep ramping going forward? Are there new technologies you have to develop? And maybe how do acquisitions play into the strategy?

So look, I mean, CapEx, as we planned it, is we have, as Stefan mentioned, detailed, $150 million, $180 million CapEx time frame. So that's what we plan. And I think we're going to be in that -- within that range over the next couple of years, right? So if we win like much more than what we even think we're going to win, we might get this to $200 million, let's say, right? So we are very confident that the growth story, we can fuel it with taking full advantage of what's happening in the world, right? So as we did with the frac, you can buy equipment at much lower price, you can ship the stuff. You can -- we capitalize on our local presence and making sure that we have the lowest cost equipment and supplies. On the other part of your question?

The small investment?

The small investment. This is a key. And I think what we do and our philosophy since we formed the company is we have the partnership with well-established companies. And we have the VC style, which is basically an equivalent to our, let's say, our R&D, right? So the way we like to do it is we look at all the technology that exists and a startup with a very bright and brilliant people, and we become a shareholder. We take piece of plate on the board. We -- sometimes we direct how to invest and how to do things. And then we commercialize those equipment or those tools, right?

So part of our doubling the company, I think, it's mainly contract wins, is to get to like the $3 billion kind of target ambition, then definitely, like the ROYA platform has to work, which is our direction drilling, our NEDA portfolio, which is a lot of the decarbonization, has to work. We have to unlock it. We have to get some big projects. And all this is something that we have worked very hardly on. And as soon as we commercialize, we're going to announce that. And definitely, the pie -- if you get the piece of the pie, it's huge. And direction drilling today is $2 billion. We have almost nothing. So if you get a piece of that, that adds to your growth story.

Got it. And then I know you provide some additional balance sheet details in the next quarter, but clearly, net debt continues to be worked down and now below $200 million. What's the right level of leverage for the company? And as you're potentially thinking about maybe a shift in some free cash flow allocation to shareholder returns, thoughts on preference of buybacks versus dividends?

So our stated goal is 1. So I would -- from our perspective, having 1 or less is probably the right leverage, right? Right now, we're way below the 1, right? We said last quarter, we're doing a plan right now to work out what the best returns are for shareholder, and we'll announce it next quarter. But everything is on the table, right, dividends, stock buybacks, et cetera, et cetera, right? But we'll announce this formally next quarter in the earnings call.

Our next question is from Derek Podhaizer with Piper Sandler.

Appreciate all the details on Jafurah, obviously, very exciting. But maybe, Sherif, if you could take some time to provide some color just around the state of the union in Saudi, maybe outside of Jafurah, just more of your legacy business, maybe some of the growth drivers there or the return to work that we've been hearing from a lot of your peers over the last couple of weeks? Just maybe some thoughts and color around how we can think about the shape of 2026 in Saudi ex Jafurah?

Yes. I mean I think the commentary from our friends and our partners or our competitors, if you like, our peers, is all spot on, right? So Saudi is ramping up activity. So whatever the trough was Q4 '25 and now the Aramco is adding rigs, the -- all -- I'm sure you hear this from all the rig contractors. There is a lot of bidding and activity is ramping up. And we will take our share basically based on that market share. So I think the -- Aramco is going to definitely provide some more color and maybe their earning. But at the end of the day, rigs are ramping up. Rigs are coming back. There is anywhere between people talking about from 40 to 60 rigs in 2026. And it's something that obviously our clients will decide how and when to do that.

The rig availability is there. So I don't think there is the problem with people activating rigs. It's all going to be timing from Aramco side. And then obviously, there is a huge tender backlog on what we call LSTK, lump sum turnkey, that Aramco is doing. So that takes part as well on that growth story because there is bigger scope for that in the coming cycle on the '26.

So we -- as people -- I'm sure a lot of people understand Saudi well, you have a multi-service companies and multi-contract and multi-segment. So let's say, if you are in cementing and your market share is 10%, they add another 5 rigs, you're expecting to get the same 10% on the additional rigs. You might get less, you might get more depending on your quality and your price, but that's more or less what it is. So we are forecasting the same market growth that whatever rig count increase will happen.

Great. Very helpful. I appreciate that. And then maybe, Stefan, it might be for you, but just hoping to put a [ finer ] point on the 1Q guidance and maybe the margin progression through the year. You talked about more muted seasonality. First quarter margins would represent a bottom and then work higher for the remainder of the year. It sounded like equally similar year-over-year. But if you could help put some guardrails around that, how we should think about the sequential contraction and then how we should think about the progression upwards as we move through the year?

So we don't actually give formal guidance, right? But we've given a lot of directions as you've seen today, right? The Q4 to Q1 revenue decrease due to the normal seasonality, it will just be smaller -- we used the word muted, but smaller than the usual amount, right, and probably smaller than what our peers said in their calls, right? So that's where we stand on Q1, right? And then we said that the full year margins for us in '26 will be similar to '25, and it will just start at the lower level in Q1 and work its way up to a higher level at the end of the year. So if we were 21.3% for the full year, it'll probably be a percentage or so lower at the start and a percentage or so higher at the end.

Our next question is from Sherif Elmaghrabi with BTIG.

So I think we've talked a lot about Saudi and Kuwait. So maybe a couple of questions on the rest of the market. There was not even $5 million of mobilization costs in Oman. Historically, that's one of your core countries. So I'm wondering if you're moving equipment out of the country and how you see opportunities there versus some of its neighbors?

Okay. You're talking about the structure costs. So without obviously going to -- this is a contract we won, which we never had. At the beginning of that contract, there was some legacy, the previous owner or the previous contract holder of that contract had some -- due to the, what I call the legality or system in Oman, you had to carry over that, take it over, it was part of the condition. And then basically, the stuff, most of it, you cannot use. So we just took a onetime write-off of all the stuff. So it is not really -- that's the majority of the cost. But the equipment, everything had to be taken from outside because that was a scope we never had. So it's a scope of business or a segment we never had in Oman over the -- and the company that we bought, the original company, the Gulf Energy in Oman, never had that contract either, right? So this is something -- if you look back and this company started in 1996 -- 2006, sorry, then it is something brand new for us. So this is a onetime, and that's it.

Got it. And then you also mentioned Syria, which was different. Any markets outside of NESR's existing footprint that we could see the company tender into this year or even over the next few years?

Yes. Syria, I think you all saw the announcement with Chevron and other people and the Saudis. So something we monitor very closely. We are invited to go. Some of us, obviously, again, we pride ourselves of being regional champion or national champion. So we know Syria. We have more than 75 Syrian people working with us in different countries. So we are today in discussion with the leadership. And as soon as we feel it is secure from payment and how we are going to set up, I think it's going to set up first with some revitalization of the resort, which was originally people they might know that. It used to produce 500,000 to 600,000 barrels per day. Today it's less than 100,000.

And usually, like Libya, all the -- when you start in a country where it had some production, but due to geopolitics, war, damages, et cetera, the start is kind of easy, meaning usually, you go and to these kind of brownfields, you fix the wells, you have workover, coiled tubing, slickline and try to fix the wells to try to get them back to produce. A lot of it is like a stolen cable damage wellhead. So depending on the scope, we will start. It's not something in our forecast, but it's something that definitely will be very good for us. And again, we know the country, we know the place. The sanction is lifted. So definitely, we will be with -- like with our peers entering Syria.

Libya is very exciting. I mentioned it. Again, it's all public news. They signed with Total. They signed the $25 billion. The bid round last week was announced, very stellar IOCs, all signed the new EPSA or the new PSA agreement, which means there will be a lot of influx of Libya, I was there myself for 1 week with the minister, the NOC Chairman, et cetera. And there is a huge plan, and we are part of that plan. We are revitalizing our base. We have a frac fleet already there. We are doing a lot of work. And we -- for us to triple the company or the size of NESR in Libya is not a big deal, right?

So it is something that we are planning to do and very close with the leadership there to ensure that we can get to the 2 million barrels, which is the target. If you add all this, each one has the capacity expansion. And I think that's part of something that people don't sometimes understand in the U.S. It is not they are doing this because they're going to produce this tomorrow, but they need to be ready with that capacity, so whenever it's needed, they can open and produce that. So Libya is not in the OPEC quota. So they are exonerated from it, so which means that they are going to go full on to try to get to the 2 million barrel.

Our next question is from Tate Sullivan with Maxim Group.

Just a bigger picture question for Saudi Arabia. The Capital Market Authority recently eased restrictions on foreign investment. What are the pros and cons of this change for your business, please?

Well, absolutely nothing. I would say we are not on the Saudi Tadawul today. So the people that traded our stock, they trade on the NASDAQ, obviously. It opens up for a lot of the Saudi companies that you have a lot of foreigners that would love to buy into the market there. The market is extremely well versatile in Saudi. A lot of people want to participate on Tadawul. A lot of people want to buy into the Saudi companies easily. And definitely, as people see, the leadership in Saudi is like on another level on professionalism and scale. And they more and more invite a lot of people. You see BlackRock is always there. You see their FII. They're going to have an FII in Miami in March. So I mean, it's just a very open culture and structure with a lot of investment outside. So for us, it's -- I would say there is no difference. But we are extremely happy with our position in Saudi, and I think it's going to be more and more stronger and better.

And then last one for me is you did in your prepared remarks, I heard you mentioned critical minerals and a lot of news out of Saudi Arabia in the area about developing critical minerals. Do you have opportunities in that sector? Can you expand from OFS to that sector? Can you comment on that a bit?

Thanks. We are already in it. So our NEDA, which is our decarbonization and application -- So during the Future Minerals Forum in -- by his Royal Highness in January, we were very proud that the lithium that was put on the display was NESR lithium. So the first lithium that was out was ours. So we're very happy that we were part of the pilot. So today, we run 2 pilots with Aramco, and we run more. We have plans to do more stuff on the bromine, magnesium, et cetera. Between Aramco and Maaden, which is the mega mineral company in Saudi, there is a lot of things going on. They announced this publicly, so I always go whatever publicly they announce. And we are very happy to take part of that journey.

It's one of the pillars of the company since 4 years now. I am personally very excited about it. Obviously, ESG is taking kind of a backseat. However, the mineral part is extremely exciting. And as you mentioned, Saudi announced a huge ambition on lithium, critical minerals, and they do this with -- from aquifer and from produced water. So we are part of both. We have our water strategy that is working on the produced water. So just imagine if you get the produced water and you are able to extract not only water, but you extract all the minerals from it, it pays off from a lot of the energy that you need to produce that water. So it's a 3 birds with one stone actually, right? So super excited about it. And again, first mover in -- with -- in that business. So I still believe that this is going to be a huge part of our business going forward.

Our next question is from Jeff Robertson with Water Tower Research.

Sherif, can you share any color on the margin profile of the pipeline tender that you referenced? I think you said you have about $2 billion to $3 billion worth of tenders outstanding?

We don't obviously say that. I would say the best example is the company will remain with the same margin level that it is today.

And is -- would most of those awards be 2027, 2028 and beyond? Or would you see -- would you expect to see much of an impact in 2026?

All the awards will be '26. So everything will be awarded this year. I -- So some of these contracts, I mean, as I said, most of those pipeline have been -- the price is already submitted. So we are waiting for the customer to announce the results. The customer in Middle East are -- like they are super professional, extremely, extremely thorough in their evaluation model. They look at the technical part. They put score on the technical, how you perform. They know the capacity of each company. So if somebody like what they call low ball the price or do something, not realistic, they kind of take this into account. They look at how many awards they're going to do.

I mean all these contracts are multi-award, meaning, again, I repeat that. So you have a, let's say, cementing contract in UAE. So they're going to award 4 or 5 winners, and there is 15 bidders. So 4 of those will be taken. And based on the price, the ICV, which is in-country value, your score, your technical, your quality, then they will award a percentage. So the #1 might get 25%, #2, get 20% and #3 get 15%, et cetera, et cetera. And the rest leave. So you have to be within that 5 winners. Otherwise, you don't have business for 5 years in that particular segment. That's how all the contracts are awarded.

Definitely, the local position makes a huge difference. Your local investment makes a huge difference and how you are committed to ensure that you play that long-term view, not like what I call hit and run. So most of these contracts will be awarded in, I would say, Q1, Q2 and some will be Q3, Q4, so which means that some of the business will start in effect in the second half, you will see the effect of the revenue. And some of the effect, if it's awarded Q3, Q4, you will see the effect in Q4 or Q1 2027. That's why when I call the multi-year growth for us is very evident. And that's why I said we should be able to double the company by '27, for example, we should be able to, because if you win these contracts and you start them, then you would be able to exit with a much higher run rate than previously anticipated.

In light of your comments about spending across the region to support production capacity goals, do you see the pipeline or maybe the tender volume increasing from where it is today over the next several years?

Yes. I would say '25, '26 would be one of the highest tender value ever in the Middle East. And again, the way most of the clients, and I repeat, the NOC are very smart clients. So the way they do it is they want to secure their capacity and they know they take advantage of what's happening. So '25 was soft in the U.S. They tendered a lot of stuff. So they know that they're going to get a much better price and they lock this for 5 years, right? So most of the contract that we got in '25 are for 5 years, so they are into 2030. The contract that we bid and we are going to get awarded or -- and the others as well in '26 will be for 5 to 7 years.

So meaning that we see -- we know where we're going to be until 2030, 2031. There is no doubt there. The backlog is there. If you get the backlog properly, you get that. And again, the client are very smart. Why wouldn't you bid. When you know that the service industry is soft, you get a better price, you get the capacity that you want and you get the work that you need, right? You don't bid when the whole market is in the upside mode. So I think the Middle East is taking full advantage, and they're smart about it. And we're very happy to be there. And I think all the peers as well, the same. So the pipeline will be solid until, I would say, 2031, 2032.

This will now conclude our question-and-answer session. I would like to turn the floor back over to Sherif for closing remarks.

Thank you very much. Thanks for everybody for listening. Very excited time. As Stefan said, '26 will be the best year ever from a growth and from numbers. So we're extremely, extremely happy to be there. Thank you so much for listening. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Greetings, and welcome to the NESR Reports Third Quarter 2025 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Blake Gendron. You may begin.

Thank you, Kate. Hello, and welcome to NESR's Third Quarter 2025 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.

Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. Today's call comes at a pivotal moment in the history of our firm as our crews mobilized to deliver one of the largest projects in sector history and company growth hits a new gear.

Despite the transition of key contracts in the third quarter, I'm proud of the NESR team for strong execution and cost control with an unwavering focus on safety. As recently announced, NESR has secured the winning position for the massive frac tender in Jafurah. This multiyear, multibillion-dollar award is a cornerstone achievement for the company, upon which we will continue to build beyond our revenue target we set ourselves. At the same time, we are also seeing a positive activity inflection beyond Jafurah with continued growth in Kuwait, return of additional rigs in Saudi and increased activities in the majority of our countries.

Our countercyclical investment strategy is allowing NESR to capitalize on global weakness and boosting the company into a position of strength and operational readiness. While others are cutting, we are playing offense.

I will dig into both Jafurah and our broader strategy later in the call. But first, I want to take a slightly different angle and discuss 2, what I call, mega themes that have emerged from the recent FII event in Riyadh, followed by ADIPEC in Abu Dhabi. FII, or Future Investment Initiative, known as Davis of the Desert, is one of the largest macro conference and leadership gatherings in the world. And ADIPEC is the largest oil and gas conference globally. Our participation was both timely with the Jafurah award and also crucial with the GCC at the epicenter of these 2 mega themes.

From these events, the message was clear and crisp. Theme 1, energy demand and GCC leadership in the AI revolution. Traditional energy is here to stay and demand growth will be supercharged by the huge power demand of AI, data centers and cybersecurity. The AI power demand commentary was nothing new, but the signals from both Saudi and UAE during this event suggest that the Middle East AI race is on and significant investment is coming. Both countries presented a vision of becoming #3 globally for AI after the U.S. and China. What this means is that, the region has moved beyond the concept of energy transition and is now focused on energy addition in all forms, including more oil, more renewables and in particular, more natural gas and solar. For NESR, this means that established leadership in unconventional aligned completely with the upcoming AI race in the region. In fact, our largest customer formally increased its sales gas growth target from 60% to 80% by 2030. This gas capacity for internal consumption will be critical to support AI ambition in the country, a strategy that is being discussed across MENA.

Theme 2, the Gulf region geopolitically. The relationship between the U.S. and Gulf states is clearly very strong. This has positive implication for both energy market as OPEC expand production with an eye on materially higher demand in the 2030 time horizon, and also foreign investment as multiple IOC make moves across the MENA region. Knowledge is power and now power is knowledge. Cross-border cooperation on AI is all-time high between the U.S. and the Gulf with bilateral investment deals already announced.

As the national champion of the Middle East, but also U.S. NASDAQ listed, NESR is a company made for the current political moment. We have a role to play in the bridge building between the U.S. energy sector and the MENA national oil companies. We can point to Jafurah as a case study of how we can help U.S. expertise navigate the region, leveraging technology and efficiency while empowering local content and human capital. We've talked about how this benefits our NOC partners, but it's worth noting that this also helps our IOC partners feel right at home in MENA, which is a good segue to discuss our newfound position as the largest frac company in the Middle East.

The Jafurah tender represents the single largest single service contract in sector history. And as the outright winner of the committed scope, our NESR team has clearly earned its reputation for pushing the envelope on efficiency. It is a remarkable achievement, and we thank our derisked customer for their trust, having started from 0 in frac just 5 years ago. Jafurah is now as efficient as any leading Permian operation, a world-class case of science and data-driven shale development orchestrated by Aramco. In the early days of NESR involvement, this included our open technology platform approach. More recently, this has involved huge investment in infrastructure, logistics, best-in-class supply chain across sand, water, chemicals, maintenance and other dimensions across multiple product lines within this integrated frac project.

We've driven substantial cost out of the system, initially on integration, efficiency gains and agnostically the use of leading technology from around the world. We challenged the status quo and brought fit-for-purpose and sometimes made in the Kingdom technology to have the best locally made that includes site preparation, local sand, chemicals, coiled tubing, perforation, well testing, flowback. Now we are on a path to fully embed AI into our operation, predicting failures and ensure flawless delivery and another level of efficiency breaking world record. But cracking the code on unconventional does not stop at Saudi. The service delivery model that we've developed alongside our partners at Aramco is a blueprint that we can take across the MENA region to unlock additional unconventional development, particularly for natural gas.

There are huge ambition and potential for unconventional in several countries that we operate in. And all of our top customers are coming to NESR to fully understand how we can unlock their resources, which brings me back to our broader growth strategy because NESR success in Jafurah and across the region would not be possible without our aggressive countercyclical investment playbook. For decades, the oil service industry has matched investment, hiring and R&D with the activity cycle. But now that the global cycle has accelerated and shortened, the traditional waiting out the storm strategy no longer works. By the time the cycle turns, many companies are left behind, which is why we've taken a different approach, invest during the downturn. It's been easier said than done, but as the only public MENA pure play, we benefit from the relative stability of activity in the region and agility of decision-making. Rig activity is largely decoupled from commodity price on oil because of focus on capacity building and in gas because of domestic needs. If any company is well positioned to break from the pack and establish a countercyclical investment market position, it's NESR. And our customers value our broad approach, particularly since our NOC partner themselves are taking a longer-term view of oil fundamentals. As a company, NESR is small enough to be agile but large enough to scale. That is our window. While downturn expose weakness in our industry, they also reveal who's actually planning for the future.

Our operation readiness is unmatched among our peers, and it's only possible because we are growing and investing while others are shrinking. To be honest, it's no walk in the park trying to convince some shareholders, Board members of the strategy. Public company in our sector often suffer from short-term pressure. Everyone wants results, cash, dividend, and they want them now. It is understandable, particularly in a lower oil price environment and with tight risk mandates in public markets. We spent the last 7 years since the founding of the company trying to convince the market that MENA upstream fundamentals are inherently derisked, and our financial results over the past few years have borne this out. Even in the current lower oil environment, the NESR outlook only continues to improve.

To be sure, we aren't growing for growth's sake. Our countercyclical investment strategy speaks to the fact that there is ample return accretive expansion still out there for NESR. This strategy perhaps isn't available for others with the most established and mature market position.

And with that, I'll pass the call to Stefan to discuss the financials in detail.

Thank you, Sherif. Good morning to our audience joining from the United States, and good afternoon or good evening to those joining us from the Middle East, North Africa, Asia and Europe. We are delighted to have you with us today. I am pleased to present an update on our financial results for the third quarter of 2025 and to share perspectives on our outlook for the fourth quarter and the full year.

In the 3 months since we last spoke, global macroeconomic volatility has persisted. Factors such as ongoing trade uncertainty, inflationary pressures, reduced subsidies in developing economies, fully supplied oil markets and additional OPEC+ supply releases have collectively contributed to range-bound oil prices and lower reactivity in certain countries. As we also heard from our peers, these dynamics have weighed on the third quarter 2025 results across the broader oilfield service sector, making short-term forecasting increasingly challenging. Despite these headwinds, and as Sherif highlighted in his market overview, we continue to invest heavily and look at our long-term vision with contract awards and getting ready for the years to come.

Now shifting to Q3 2025. Our overall third quarter revenue was $295.3 million, down 9.8% sequentially and 12.2% year-over-year. Sequentially, revenue declined primarily due to the transition between the major contract in Saudi Arabia, partially offset by solid growth in Kuwait, Qatar and Iraq. Year-over-year revenue declined due to the transition between the major contract in Saudi Arabia, timing and lumpiness of product sales and partially offset by steady growth in Kuwait, Oman, Egypt, Algeria, Iraq and Libya.

Adjusted EBITDA for the third quarter of 2025 was $64 million, representing a margin of 21.7%, which was in line with the second quarter '25 levels despite lower revenues. Margins remained steady on strong cost discipline and improved execution across our portfolio. Adjusted EBITDA includes adjustments for certain charges and credits impacting adjusted EBITDA totaling $6.9 million, primarily relating to a loss on inventory in a fire, credit loss provisions, costs tied to the remediation of material weakness controls, which is expected to decline dramatically going forward.

Interest expense for the third quarter of '25 was $8.1 million, and the tax expense was $3.7 million after normalizing for a net release of uncertain tax positions and unrecognized tax benefits in 2 geographies totaling $9.2 million. As normalized, this corresponds to an effective tax rate of 29.9% for Q3 '25 and 24.8% year-to-date.

Adjusted EPS for the third quarter of '25 was $0.16. Adjusted EPS includes adjustments for certain charges and credits impacting adjusted EPS totaling $2.3 million, including the net release of uncertain tax positions and unrecognized tax benefits in 2 geographies described previously.

Turning to cash flow and liquidity, areas that have consistently been among our most positive over the past several years. Third quarter cash flow from operations and free cash flow came in below expectations, reflecting lower working capital efficiency driven by delayed collections, much of which was received in early Q4 '25. Consistent with our countercyclical approach, we continue to deploy CapEx tied to recent contract wins to enable rapid operational ramp-up.

As of September 30, our gross debt totaled $332.9 million and net debt was $263.3 million. Our net debt-to-adjusted EBITDA ratio stood at 0.93x, remaining below our target threshold of 1x.

On a trailing 12-month basis, our return on capital employed, or ROCE, was 10.1%, reflecting the continued execution of our robust growth investment strategy.

Now looking ahead, we expect full year '25 revenues to be broadly in line with full year '24 levels. Based on this outlook, one can infer our Q4 '25 revenue expectation, which represents a record performance, consistent with the start-up of the recently awarded contracts discussed earlier by Sherif.

Both Q4 '25 EBITDA and full year '25 EBITDA margin percentages are expected to be in line with Q3 '25 and year-to-date adjusted EBITDA margin percentages, reflecting continued operational discipline and execution consistency.

Implied in our outlook is the expectation that we'll exit full year '25 at a revenue record run rate, positioning us for continued growth in 2026. We anticipate ending full year 2026 with a revenue run rate of approximately $2 billion, supported by our expanding contract base and sustained execution momentum.

For Q4 '25, we expect interest expense to be approximately $8 million and our normalized full year '25 ETR to remain in the mid-20% range, consistent with prior guidance.

Capital expenditures, or CapEx for the full year are anticipated to be in the range of $140 million to $150 million, in line with the previous guidance and reflecting the positive outcomes of the recent tenders. We expect Q4 '25 cash flow from operations to be very healthy, driven by the seasonally high fourth quarter collections. As a result, free cash flow for full year '25 is projected to be in the range of $70 million to $80 million, which we view as robust given the significant CapEx investments made during the year to support our recent contract wins. These investments are expected to position us for a very positive free cash flow trajectory in 2026. Finally, we do not expect to be materially impacted by changes in global tariff policy.

Now on to housekeeping topics. As noted last quarter, we have remediated all previously identified material weaknesses and this update has been formally disclosed to the SEC. We continue to strengthen our internal processes and controls, which have played a vital role in supporting our financial health and operational discipline. The company is currently in the process of refinancing its debt facility and remains on track to complete the refinancing by the end of the year '25 or early January '26. This initiative is expected to further enhance financial flexibility.

For the remainder of '25 and the first half of '26, given the continued market volatility, the ongoing debt refinancing and the capital expenditure commitments tied to new contract awards, including the start-up of the largest frac contract in the world, the company intends to deploy all excess cash flow exclusively towards debt reduction. This approach reinforces our commitment to balance sheet strength and financial discipline during this period of strategic investment growth. Once these initiatives have stabilized by mid-2026, we will reevaluate our capital allocation program to maximize value for our shareholders.

The outlook across the Middle East and North Africa region remains favorable. We expect these markets will lead to activity recovery as market fundamentals move towards equilibrium, supported by sustained investment in oil capacity and ongoing gas expansion projects across several of our core geographies. NESR remains focused on its core strategic priorities, delivering profitable revenue growth, enhancing execution efficiency, expanding our technology portfolio, maintaining disciplined debt reduction and improving working capital efficiency, all of which are expected to drive sustainable financial performance going forward.

On behalf of management, I'd like to thank our entire workforce for their outstanding efforts in delivering these results and contract awards as well as our shareholders and banking consortium for their continued trust and support. The outlook for NESR remains highly favorable, supported by our consistent execution on our major contract wins, strategic investments and growing market opportunities.

Now I'll turn the call back to Sherif.

Thanks, Stefan. Let me conclude. In short, a confluence of macro and industry trends are aligning to supercharge the NESR story. A wave of AI investment and fruitful geopolitical collaboration in the Gulf is fundamentally positive for NESR as a key player in the unconventional gas renaissance. NESR' bold decision to invest and have solid long-term strategy is working. As our unique position as the national champion of MENA and U.S. NASDAQ listed, we are in the best position more than ever to build on the appetite of the GCC capacity growth while securing long-term contracts.

The Jafurah award elevates our profile significantly and puts the future firmly in our hands. And there are more awards to come and will be announced very soon. With oil activity inflection outside of Jafurah, continued growth in Kuwait and North Africa and all-time high activity across most of our countries, translating into positive region fundamentals that match the equally positive position we have in the region, and we will capitalize on all those tailwinds.

I'd like to close by thanking all of our employees and their families. They broke records, delivered flawlessly and secured several billions of dollars of contracts. We still have big ambition for the future, not only in more contract awards, but in innovation, sustainability and technologies. Our success would not be possible without the steadfast support of our beloved customers who we know very well and honored to be their trusted partner.

With that, we are ready to take your questions. Kate, please open the floor.

[Operator Instructions] Our first question comes from the line of David Anderson with Barclays.

Obviously, congratulations on the big contract win in Jafurah. It's a long road to get here. Great to see you guys rewarded for all the efforts you've been -- you've done there on the unconventional field. Not surprisingly, those who didn't win the contract are, of course, saying you wanted at a price that no one else is willing to go to. Can you please respond to that and just sort of tell us how you're able to price this more competitively than others, but you're still able to keep these margins at these great levels? How much of this is being a local player? What else is in this mix?

Thanks, Dave. Thanks for the congratulation. And obviously, I wouldn't comment on others. But I just can tell you very clearly, as we tried to explain in great detail, we've been in this journey now for several years with our dear customer, Aramco. And as we've been part of it and we've been performing and I would say, beating all the records in that domain, we understand exactly how the structure works as very -- we are very locally embedded with all the ecosystem. And as I tried to explain, we knew how to take the cost out of the system and look at the future of that project being 3x at least what it was before.

So how you are going to operate in that new paradigm? Your cost control, your new supplier and partners, a lot of it is for the people that do not know, this is an integrated project. So basically, we look at the sites, the water, the sand, the coiled tubing, the plugs, the flowback, the testing in addition to frac. We knew exactly how to acquire equipment and use of the weakness, if you like, of the U.S. to take a full advantage of that. We brought everything to the Kingdom already. So we invested, as I say, countercyclically because we knew the downturn could play a very big benefit for us. And this will translate in maintaining our margins in this project going forward.

So as we tried to explain, this is going to be much bigger and significantly bigger. So our target is to maintain the same profitability as we had today and as we had before. And the best thing to say is people have just to watch the results and the margins going forward, and that would be the best answer.

Well, we've seen it so far. So it's great to see you continue on this journey here. So could you provide us a bit of a road map on the pace of development at Jafurah? How many crews are you going to have in this coming fourth quarter? Where do you hope to be at the end of '26? And just kind of ultimately, how many kind of wells or stages per month are you targeting? Any kind of details around that you could provide, please?

Yes. So, obviously, I mean, I know all the details and great details, but I will always leave this to my dear customer to say it. But I can tell you, we prepared to send all the extra equipment and crews in this quarter. So then we are ready in Q4. So we started the contract 1st of November. So we didn't have to wait. Obviously, we had the transition and in the business. And we started executing using our today, 2 fleets that are running as we speak from November 1. And our plan is to deliver those stages that Aramco wants us to deliver using the crews and the additional crew that we -- the equipment that we already bought as well and it's shipping to the Kingdom. They will be there in end of November. So we will be ready with the additional crew.

So our plan after that is, in '26, how to execute the number of stages with the least amount of crews based on the efficiency gain we get, right, which is very similar to what you have in the U.S. So we believe that we can make north of 1,000 stages per month every month. And Aramco wants us to increase to all the way to 1,500, we are ready to do it, right? So that is our plan is to execute with the flexibility up and down as they like. And we have all the crews, we have all the people. Everybody is already there. So as I said, as we planned this extremely well, we did not release people. We did not shut down. So we kept investing. We hired our people. We had a very good cost control. And if you do that and you have that flexibility, we'll be able to deliver.

So really, Aramco plan is very aggressive. I think you heard their earnings call very clearly. They added the gas to 80%. They are really world-class in terms of planning. So they know exactly what to do. And we work very, very close with them. We have a full team in their office. So we can be as flexible as they want us to be.

Sherif, if I could squeeze in one last question. You've been -- you've had at least a crew or even working on Jafurah, I think, as you said about 5 years or even more now. But now Jafurah has taken this next step up and your company has taken up the next step of growth. Can you help us provide a little bit of a sense of the incremental EBITDA here?

Stefan, I think you said -- can you just repeat what you said? I think you said $2 billion run rate by the end of '26. And if that's sort of the number incrementally, I come up with something like $100 million incremental EBITDA, something in that neighborhood. Is that low? Is that high? Am I in the range? Just trying to get a sense in kind of '26.

On the incremental, that's approximately correct, right? For the full year of '26, I would use the same margin as the full year of '25, right, as a total, right, total corporate. But the $100 million you're quoting is approximately correct.

Our next question comes from the line of Jeff Robertson with Water Tower Research.

Sherif and Jafurah, can you talk about the ramp-up in activity over the next couple of years?

Yes. I mean if you look at, I would say, from the big picture, right, you have a first gas in end of this year, and you have 1 Bcf in '27, 2 Bcf in 2030 with the condensate and NGLs, right, which means -- and you have all the rigs running in Jafurah and the other 2, South Ghawar and North Arabia, which is all the unconventional in Saudi, right? So if you take that up and you think about the ramp-up and the number of stages, anything between 2x to 3x what we used to do now. So it's a very significant project, a very significant number of wells, number of stages to be delivered.

And as I tried to reply again, there is a flexibility in the system. And Saudi will definitely decide if they want to do, let's say, 15,000 stages, 20,000 stages, 25,000 stages per year, and you have the flexibility and ability to go up and down with that based on their demand and obviously, based on productivity and the national agenda, right? So our role is to ensure that we have that flexibility ready and ensure as well that we can add crew, release crew or decrease crew or update as they like. To date, our plan is to have full 4 crews running all the time in a very, I would say, efficient way to ensure that you can deliver those number of stages that are required with the number of wells because now the wells are drilled extremely much faster than before. Obviously, again, they did, as I said, the science-driven approach to deliver those wells much faster than before, but in a very efficient way, very professional way. So now there is an inventory of wells. And most of the unconventional project for people around the world to know, it's really about do you have the inventory of wells and the pads ready. So then you can plan your frac crews to get ready on those pads, right? So you pre-intervene, you prepare those wells and then you frac them and then they put them online when they are ready, right?

So this project is -- again, it's -- I keep saying it's a blueprint because it's very differently made than others, right, because it's well planned, very high in advance. There was an exploration phase. And then, obviously, these wells were not hooked, right? So they were fracked, but stopped, but then they are all hooked and then now they are all in production, right? So we plan to have at least 3 to 4x what we used to have before. And again, we are ready for the variability up and down as our client wants us to do.

In the context of a blueprint, can you share some perspective on unconventional development over the next couple of years in other markets in the Middle East and North Africa and how NESR is positioned to take advantage of that? And then alongside that, is there any color you could share over the contract value of tenders that you all are working on that might have an impact in 2026 and '27?

So let me try to separate. So the unconventional, I mean, again, I'm talking here as well for the wider audience. If you look today on the Middle East, obviously, it's extremely rich in conventional resources, right? So you will never go and develop something that is expensive if you have something very easy to produce. Now because of the success of Saudi, unlocking that unconventional play in a very cost-efficient and very professional manner, now people open up and say, "Wow, why can't I do the same in -- because obviously, if you have all these reserves, that means your source rock exists, but is it economical and you need it. And that's why it's a bit opposite to the U.S. It's actually because they have a lot of oil, but they want a lot of gas, again, for what [indiscernible] for their AI revolution, for internal consumption, et cetera. So now they are looking at all these plays and where are they?

So, obviously, you know that Abu Dhabi as well is doing exactly the same, and they started this already. They have a development already on the unconventional play very successfully. Two clients already or you have EOG and PETRONAS already there doing the same. So you have as well 2 separate international oil company looking at unlocking this unconventional in UAE. And then -- so the others are looking at it. So if you look at the basin, Algeria has an amazing unconventional resource, Ahnet Basin. And it's very similar to actually Vaca Muerta in Argentina. You have Lithya that have resources. You have Egypt with Abu Rawash and Apollonia. So you have Kuwait now is even looking at it, Qatar as well. So there will be -- that's why I call it the renaissance. Basically, people will look into all these plays and see is it conventional -- unconventional, how much does it cost to produce a barrel of gas? How much is -- or a unit of gas and how much is to produce oil? If it is economical, they will do it and then they will develop it because, again, the whole narrative changed totally in the world where you need a lot of traditional energy in addition to the others, which means gives me to the point that you have to look into the unconventional. And I believe you are going to see this more and more in the coming years.

Now on your other question was -- no, you had another question.

Just can you share any color on the value of contracts that NESR is currently working on or looking to secure that could impact '26 and '27?

So look, I mean, we are tendering huge contract. Obviously, the biggest by far on a scale with Jafurah and this is done. We are bidding a lot of tenders in Kuwait and in other countries. And I would say it's $2 billion, $3 billion additional tenders we are running. So we are going to announce as we know the results of those. And obviously, that will translate into all the additional revenue we were saying. So if you -- that's why we keep saying -- I mean, I used to always say we're going to double the growth of MENA. Now this is irrelevant because if MENA is going to be 5%, let's say, we are going to grow at least 30%, right, minimum. So definitely now our growth profile and our additional is much higher scale than what the market is going to grow.

Our next question comes from the line of Sherif Elmaghrabi with BTIG.

I want to ask about the uncommitted work at Jafurah. Just to make it a 2-parter, when could Aramco tender for that, I guess? And what are they looking for? And then also on your side, what's it going to take from an investment point of view over and beyond what you've already been able to build countercyclically?

So okay, let me clarify. This contract is already done, right? So the Jafurah, the way it works is there is a tender, and we all participated. They have what we call a winner for the 100% of the committed work, which is us. And then everybody else signed that contract, right, or a similar contract. And that is what we call uncommitted. So that piece of the pie for Aramco, they decide as they like when to start, who takes it, they want to diversify. Everybody can operate in that. So this is not going to be -- this is already done, finished. And we -- basically, all the service companies, what they call, they signed these contracts.

And very similar to, by the way, what happened in the last one. So that scope could be big and people would work anyone who were approved in that list and they were qualified and signed the contract, can operate and execute that piece of the contract.

And again, Aramco always keeps that flexibility for them as a very professional client. So they can invite, they can add, they can cancel. So it's -- when we call it uncommitted, it's uncommitted from both parties, right? So you don't have to do it, and Aramco can call it and not call it. And obviously, us have a very good opportunity to execute that scope as well.

Got it. That's pretty helpful.

And what was the other part, investment needed?

I was asking about if there's any other rigs or equipment that you need to buy over and beyond what you've already got for this contract.

Yes. I mean, obviously, what we did ourselves is we purchased -- it's in our CapEx number already that Stefan explained. We purchased all the additional equipment that we need to execute on this contract. That's why we managed to start immediately the contract, November 1. Now as we go along, we will definitely keep adding equipment, right? Because this, for example, let's say, we are already now with 3 fleets. We need a fourth fleet. We need additional equipment because this has surface well testing, coiled tubing, perforation, wireline, so be it. So we will definitely keep investing in that to make sure that we can execute the contract professionally.

The key for us, and I guess the key for you and the investment community is, we said we are going to maintain our CapEx the same. So if we spend $140 million, $150 million in '25, we're going to spend exactly the same in '26 with 30%, 40% growth in revenue, which gives you that stability that we know exactly how much CapEx we need to spend and how much cash flow we're going to get because we are again taking the full advantage of the weakness of the outside market, right?

So the project, I would say it's very well designed. From our side, we did a very good job and a very detailed work exactly what we need and what we don't need. And we already front-loaded that in '25 to ensure that we can execute flawlessly and deliver to the client without any hiccups in the future.

Our next question comes from the line of Jeff Robertson with Water Tower Research.

Sherif, can you share any updates on some of the NEDA projects you're working on, especially with some of the water initiatives in Saudi Arabia?

Look, we are doing so much in that, but obviously, because of the, I would say, the significance we decided to speak about it in the next one when we know the results as well. So as we said last time, we are on pilots, several pilots on water, mineral recovery, lithium. Those projects are in the pilot phase now. They are physically in the country. We are doing the test with our customer in several locations. We will be able to really give you a bit more color based on the results of all those pilots.

So we're very excited about it. I am personally love the story because I believe that this can I make something so different in the world that nobody did in the entire industry in the universe actually, where basically you're going to start to say, I can produce oil and gas and I can produce a lot of other material that is good for the world, for the earth, for the climate. I am cleaning the water economically. I am bringing minerals and I'm selling it to other industry. And the best would be if I can get lithium at economical scale, make batteries and the narrative of the industry becomes extremely positive, regardless if the ESG is out of flavor now or in. But I think our commitment is a long-term sustainability of our industry. And as I say, if the world needs all this oil and gas and energy, we have to make sure that we can do this sustainably. So we will be able to give you a bit more color in our next call based on the results of all those pilots.

[Operator Instructions] Our next question comes from John Ajay with Occam Crest.

Curious on a couple of things. Can you give us a sense for the visibility and the confidence that you have in hitting the $2 billion exit run rate for 2026? What you think the growth rate for NESR looks like over the year or 2 that follow that and the level of visibility and confidence you would have in that growth rate? And maybe what like an 80% confidence level might be for a 2027 and/or 2028 exit run rate based on that trajectory?

Thanks, Ajay. So if I will tell you on the 2026 level of confidence, 99%, I would say. So those contracts are awarded and those contracts are signed. The work started. So I would say the level of confidence we have on the delivery and barring anything happened in the world, it should be kind of very, very steady and very, very sure.

Now if I look at our growth profile '27, '28, definitely, it's going to still growing because this contract, for example, and others are all 5 years. We have a backlog of tenders that are very, very solid. So if we believe we win our fair market share on that, at least with the growth that we see in Libya, in Kuwait that is more than the average of the 5% growth rate that the region will see, definitely, we will have the continuation of that growth rate. It will not be obviously 30%, 40% like we're going to have in '26 over '25, but you will have a very good at least 10%, 15% growth rate following that.

Now if we are more successful in the tenders that are coming, which obviously that's our plan, and we ensure that we can secure those and deliver on them in the same way flawlessly that we're planning to do the Jafurah, then definitely we can opt for much higher growth rate in '27 and '28.

In addition to that, we have obviously our technology and kind of out-of-the-box portfolio that the market that we're trying to create. So we have NEDA, which is our decarbonization arm. There is plenty of pilots, plenty of investment, a venture capital style as we have on water, on emission and definitely on the lithium story. If this cracks, I keep saying this -- our target is to have this segment as $500 million. So now you need to make sure it's economical. So we don't have this in our plan. This is what I call all the add-on if we crack the code. And then you have obviously our technology on Roya, which is the rotary steerable, MWD, LWD. Again, we need to commercialize it professionally. We are doing all the extensive testing. And we have a plan or our target internally for a much bigger market share. We don't have this again in the numbers. All this is add-on to our growth profile. And this will all translate, I would say, as revenue growth that is significant would be, to answer your question, '27, '28, '29, '30, right? Because now you know that these projects are economical, commercial, bigger in size and can translate to significant revenue and margins.

Yes, that sounds great. Curious also, what type of margins do you have high confidence in for the next few years, just without the water and just kind of on what your high confidence baked in growth is from existing contracts, what would you see as a multiyear margin evolution?

I'll take that. For '26, as I said to Dave in a few questions before, we see the margin for '26 being the same as '25. So it will be somewhere between 21% and 22%, right, plus or minus 1% on that, it's probably in the high 90% confidence levels, right? Going forward, in the -- going forward into '27 and '28, right? We want to try -- we will use the same margins for our own internal model, but we'll try as efficiencies come, more supply chain, greater revenues, so you have revenue efficiencies, overhead efficiencies, supply chain savings. We'll endeavor to try and get margin improvement. And over time, we want to try and get back to the 23% to 25% level, right? That's our goal.

And how is Roya progressing relative to what we might have thought at the beginning of the year? And what type of growth is embedded in that $2 billion exit run rate? And is this an area that could contribute above it, the $2 billion if it goes really well? Or is it kind of success there baked into that $2 billion exit run rate?

So we -- yes. So our numbers straight is a very limited Roya in 2026. It's going from '27 onwards, right, as a number, again, as a significant number to that ecosystem. Why? Because Roya, rotary steerable, LWD, all this, what we call it, we do an extensive testing to the technology to ensure it is working and I commercialize it when we are happy. So actually, it's a push-pull. So the clients are pushing us to do more work, and we are resisting that because we want to make sure it works perfectly, right?

So I would say it will contribute, and you will see it in the numbers in '27, '28. There will -- it will be there in '26, but it's not a significant number, and it is included in our $2 billion exit rate.

This now concludes our question-and-answer session. I would like to turn the floor back over to Mr. Sherif Foda for closing comments.

Thank you very much. We don't want to take any more of your time. I appreciate all the support. And we thank again all our shareholders, employees, customers for their trust and looking forward for an amazing 2026. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Okay. Guys, we'll keep moving on. We are saving the best for the last, and we've got perhaps one of the most unique companies in oilfield services. We got NESR with us. We got Sherif Foda, the Chairman and CEO of the company. For those of you who might not know NESR, Sherif founded the company in 2017 as a SPAC. The company has since grown to around $1.3 billion in revenue run rate with a clear path to $2 billion and more. Beyond that, I'm hoping we'll discuss that in our discussion. But Sherif, thanks a lot for coming.

Thank you.

Sherif, while we get settled, I think the first question I have in mind for investors is, as a U.S. listed NASDAQ-listed OFS company, you are also the MENA national champion. How do you thread the needle between the 2?

I mean that was the whole purpose of forming the company is a lot of people wanted to invest in the -- if you like, in the OPEC or the GCC, but there is nothing public there, right? So the idea came in mind, why don't we form the first company that is really focused on the Middle East with the growth that is very stable.

There is no cycles really. And -- but they can still buy the stock of that company on the U.S. exchange. And that's why I formed the SPAC and then got a lot of very high net worth in the Middle East altogether and then fused 2 companies, then bought another 2 companies. And today, we are the largest OFS national company after the big 3. So the big 3 are the international, and we are the largest national company.

Right. So anybody looking for a pure-play way to invest in the Middle East, right, from an oilfield service perspective, maybe NESR is your only option. Sherif, just talking about the Middle East. Like you said, it's been a region that's big. It's stable, it's relatively steady, but now it's also growing a lot, right? A lot of countries are expanding. Their oil production capacity unconventionals are coming up. Gas is a big part of the story. So maybe just walk us through what's going on in the Middle East right now?

So look, I mean, the Middle East is for people who do not know, it's a national oil company that controls most of the basin and the resource, right? So their target and their agenda is usually very aligned to the country itself. It is very different than the U.S. independent or Shell, where there is a cash flow and short term. This is very long term. And that's why the national oil companies plan for very long.

What changed, obviously, as well is the gas story, right? So the gas story was not a big story, let's say, a decade ago. And now it's a very big story because internal consumption is increasing dramatically, and they want to have their own gas and renewable. So if you look at the agenda, UAE, Saudi, they all want to be 50% renewable and 50% gas. And the oil is really spared to export.

So if you understand that macro, then you can see the behavior of most of them. So Saudi obviously has the capacity, which nobody has a tap except them. And they want to maintain always the MSC, which is 12 million barrels. The definition of it is 12 million barrels for 6 months, stable without any excess if they don't have to. And everybody else now is trying to have capacity. And that's why you have a lot of activity increasing with that mindset that energy is there for long.

So you need to make sure that all of them have capacity. So if you look at that, Saudi Arabia had a lot of cut in 2025 rig releases because they had -- again, they had the 12 million barrel. They were producing at 8 million, 9 million. So they don't need to drill more. If you are in the U.S., they would have half of the rigs they would have released, but they released modestly. So the jack-up was released first because they didn't need to go to 13. And again, for people who do not know, that was they wanted to add 30 rigs for that increment, they released it. And a lot of land for oil they didn't have to and some of the gas.

Now they decided to pick up to ensure that they maintain the capacity, the sustainable capacity, they're going to add a lot of rigs in Q1 and over the year. So this is confirmed. And obviously, the way you do it, they do it as all of the clients in the Middle East, they do what we call a tender and the tender is everybody is invited. If they are qualified, they put the price and they check the rig.

So to Saudi, '26 over '25 will be an increase of rig. Kuwait is going on a very steady 4 million barrel capacity by 2035 or 2040. And therefore, they added a lot of rigs over the last couple of years. And now people will be like surprised, but today, Kuwait passed the 200 rigs. And this was only like 70 to 80 rigs just 4 years ago. So Kuwait will be as well a positive '26 over '25. '25 was a lot, but '26 over '25 will be positive. '27 would be another increase. So that they will keep increasing like this.

UAE is very steady, and they keep increasing because they're going to the 5 million barrel target. They just brought it forward from 2030 to 2027. And they have a huge as well aspiration on gas because they want to stop importing gas by 2030, which means they're going to develop a lot of gas, and they obviously, they are as well on the unconventional. Everybody else is nicely steady, growing, I would say you can have as well a positive because you have Iraq that moved back to American companies, and they were very close to majority Chinese, the latest acreage they were all won by Chinese.

And lately, they give Exxon signed [indiscernible] field, which is huge, the one that was with Shell before, which means, again, that's very positive. It's very positive for us because usually Chinese operator work with Chinese service company.

So when it goes to the international IOC, that means that we will have as well capacity. So Iraq will be a positive. And North Africa is positive. Libya is getting very good, actually. The leadership was here. We met them as well in ETC, and they were in Washington, Same they are signing MOU with Chevron, with Exxon. So if these guys start as well to come, you're going to have as well an increase. Algeria is the same. Algeria actually has capacity and has access to Europe because they have a pipe. So if they can put more gas, they can actually replace some of the Russian gas to Europe.

So if you look at the whole ecosystem, it's something that is going to grow and keep growing for the next at least decade.

Right, right. So combining all of that, it seems like when Saudi comes back on the growth trajectory next year, every other country is flat to operate. So Middle East as a whole -- Middle East, North Africa as a whole is something that should be growing nicely next year.

Yes. It will be at least 7% to 10% year-on-year growth. Middle East will grow, yes. And I think the activity in some places will be higher and some places will be a bit lower. But overall, it will be that much. Obviously, the growth that is going to be very significant is the unconventional, especially Jafurah.

Right, right. And then from an oilfield service perspective, Sherif [indiscernible], all the countries in the region are trying to promote more in-country value add, right? Saudi has it to our in-country total value-add program. All the other countries are coming up with similar programs. How does that fit into what NESR is doing? And how does that put you at an advantage?

So obviously, NESR is, that's why we call it national champion, right? So whatever we have to do, others have to do double basically, right? So it's very important that we are local, perceived very strongly local. We have obviously have to qualify on all these programs.

So some of these programs are very different from one to another. So you have -- some of it is the spend. Some of it is very based on hiring. But it's a very clear audited, if you like, parameters that you have to comply with. So today, if you are not in Middle East, it's almost impossible to set in Middle East, almost, right? Because you'll have to, first of all, know how to operate there, and you have to comply with all the stuff. So for example, if you are -- you never work there and you are manufacturing, you'll have to manufacture there.

So your initial cost would be so prohibitive that it becomes tough for you to set up. And that's why it used to be always a place for the -- only the big guys. And the local -- because the local were good, but not in everything. So now if you have someone that can do everything and local, and -- that's why our position is very strong everywhere. It's exactly like ADNOC Drilling position in Abu Dhabi, right? They are the national champion of Abu Dhabi. Obviously, they belong as well to the same owner, but they are very strong, and they can do everything. And then on top of it as well, they owned by the same people, right? So definitely, the growth in Abu Dhabi will always be captured. Majority of it with ADNOC Drilling.

Right, right, right. And then as part of that, you have been investing into the local oil and gas ecosystem, right? You started your NORI R&D facility in 2023. Then earlier this year, I think you are investing in Kuwait -- Ahmedi Innovation Valley, right? So all of that is making you even more tightly right, be a part of the local ecosystem. How is all of that going to lead to growth?

I mean if you look at, for example, NORI, which is a good example, right? I mean this Dhahran Techno Valley was obviously started by KFEPM, the University in Aramco back in 2006, and they built and all the huge company build the facility there. When we put ours and people were shocked, right, like a local company or a national company or a small company. And we build a facility that is better than anyone. And then we integrate it with some new stuff that they don't have.

So first of all, it elevates the company at the same level. So the clients see, okay. So I have, again, national company, but they are at the same spend and same level of the big guys. And on top of it as well, you will be able to do a lot of the exchange with the R&D of the client, which is very important, again, because there is a perception always that local companies are like small, cheap, not very good.

So now if you do an R&D project jointly with the client, so for example, we did one with [indiscernible] for the zero liquid discharge, it was presented to the Board of Directors of Saudi Aramco, right? As the unique project. So who did this? NESR. And then, really, okay? So that's why you get to a totally different level of prestige acceptance and you get qualified on all the big tenders.

Kuwait, we are doing the same thing with the leadership there. We decided -- we took them actually to Dhahran Techno Valley. We went together to some places here, and we discussed together that why don't we do something similar, which they call AIV, Ahmedi Innovation Valley. And we were the first to sign, then the other guys came and signed, right? So now 4 of us are there and -- or 5 now, and we will build that as the first innovation and research center, right? So again, it's part of what -- you work in the country, you cannot just do some work and run away.

You have to give back to the community and part of it is research and technology. Part of it is manufacturing. We did the manufacturing as we first put the company in 2019 in Oman and we manufacture CSI hardware, we do the machine shop.

Now you find everybody, for example, is manufacturing that, right? You have FMC, have Schlumberger, everybody has a wellhead center, you have -- everybody has bits, the manufacturing there. It's part of the local content, right? No secret, started in the olden days in Norway. Brazil had a huge event on that Malaysia. So everybody has to do that, and it's part of the sustainability of your business.

Right, right. Now look, nobody wants to see a foreign company just come in and make the dollars and go away, right? You got to invest in the country, invest in the people and you're doing that.

Yes, right.

Just continuing down that path on the technology side of things, Sherif. How should investors think of you from a technology suite, right? Like you said, a lot of people think of small companies, they would not be doing the best of things from a technology standpoint. How would you position NESR's technology portfolio?

So obviously, now we are not small anymore. So that's easy because we grew quite well. But look, the technology has been in the OFS space over 20, 25 years, where I used to always call it the biggest issue would be the availability for people to buy the technology off the shelf, right? And that's exactly what happened. And we knew that is going to happen. I mean, people have been around in the industry, right?

So now the stuff that is very unique that is like without the branding part that is like someone can do that, nobody else can do is very limited, right? Now it becomes a lot of it is you have the technology, can you execute properly and you don't have service quality issue. And that's the biggest part, like the frac, like the cement, like the coil and all the stuff. Then you have some little technology part that where we decided that there is no available good technology, so we're going to do our own.

And that was on the ROA, which is basically what I call the advanced drilling or that's RSS, MWD, LWD and a lot on the decarbonization arm of the company, right?

So we decided that we're going to team up with an innovator like a venture capital style and give them money. We have the infrastructure, but we bring that technology and get it approved and then be able to commercialize it. So our journey now has been going on 4, 5 years on the ROA platform. We have already tools that is in 3 countries. We are testing what we call extensive testing in Oman and Saudi for our RSS, MWD, LWD. We should be able to commercialize our MWD tool this year.

So in a couple of months, we will announce the commercialization. So the tool works very well. We passed all the parameters of the client, and we make sure that the client approves it and sign off, right? And the RSS, we are going to keep running to get more jobs and more footage because we understand very well, obviously, again, from my previous life, how the RSS could be -- you think it's good, but reliability is a key, right? And even from our peers, some of them deployed tools, then they pulled them and had to do another one. And the journey is long.

So we are patient. We know that, and we put ourselves 5 to 7 years for these tools to be commercial and strong and reliable. And I think next year, we will have some breakthrough in both LWD and RSS. And then the tool is hopefully fully commercial and making revenue like good revenue from the year after. And that will be a very success because it's a $2 billion market that is really run by 3 players. There is nothing off the shelf that you can buy and make it happen, right? And that's why we decided that's the only thing we're going to deploy. The rest is the same, right? It's -- again, it's the execution that makes a difference.

So today, we are top 3 in Middle East in all the majority of the segment. We are top 3 in slick line, top 3 in surface well testing, top 3 in cementing, top 3 in coiled tubing, #1 in frac. So it's basically you get the equipment, you know how to run it well. You have a nonproductive time that gets to minimum. And today, we do this quarterly meeting with our clients like Aramco, like PTO, like ADNOC. And we give ourselves that we need to be scoring top 3 in every service from their metrics.

So for example, Aramco calculate your NPT, right, and then the efficiency and the number between jobs, et cetera. So we scored 99.8%, 99.7%, 98.6%. And then we make this public and we tell the people, okay, guys, great. We need you to be #1 next month, next quarter. And that's how really you become what you call it technology and service delivery leadership. By the way, it's exactly like North America. Nothing changed, right? If you look back in North America 30 years ago, we used -- like the big guys, Schlumberger, Halliburton used to have like 70% market share.

Now they have, what, 10% market share, right? Because, again, it depends on how the quality is the execution of that basin, for example, with the service company that exists. It's not that we cannot do, and we know it's going to cost us, for example, a fortune to deploy, but the market is very small, we don't even touch, like intelligent completion.

Thank you very much. Thank you. No, we are not going to go there. I'm not going to spend $100 million for a market that is half of that. So -- and we say this publicly, and we tell our customers that we are not good in that or somebody else is better in that or reservoir monitoring, downhole tool at high temperature. Why? I'm not going to spend with MIT this, and I know how -- what it takes to build tools like that.

But the size of the price is not big enough, right? Why spend...

$20 billion all this is $1 billion, right? So okay, I'll focus on the $19 billion.

Right. Right. Right. And like Sherif, you said right in your prior life, you spent a lot of time in the Middle East, but you also spent a lot of time in the U.S., right? And you said you're the #1 company in frac now, but I remember, I think this was pre-COVID 2019, I think, right? You partnered with NexTier, you took the first fleet to the Middle East, but frac in 2019 was very different in the Middle East versus what you're doing now, right? From an operational execution, lessons learned perspective, maybe talk to that a little bit over the last 8, 10 years, what has changed?

So obviously, the Jafurah is very unique because that's the only basin today in Middle East that is equivalent to the Permian, Eagle Ford, et cetera, right? So this is multi-pad horizontal wells, multistage huge jobs, right? So the rest of the frac in the Middle East is conventional frac, what we call.

So we do a stage per well. So -- and you flow it back for 2 weeks. It's totally different. It will not change. Even if your efficiency, this is the way they do these wells, right? So the unconventional journey, obviously, by Aramco is they call it a blueprint or state-of-the-art because they started as an exploration. They spend a lot of money. They wanted to put science and technology and data to ensure that they can develop that field in a very professional manner, right? And obviously, in every step of the way, they changed the strategy on tendering, right, because of the size.

So once the size becomes bigger and becomes more of a factory, they make a bigger tender. And this one, the last one was obviously huge, right? Because now they know exactly where they're going to drill the wells. There is no more logging to see where -- they know exactly delineation, they're going to put the first gas before end of the year. And the efficiency now of Saudi Arabia is exactly equivalent to the Permian. And 5 years ago, as we said, when I took Aramco and we went around here, the infrastructure was not there. We were still pumping proppant ceramic. The pads were majority 2-well pad and sometimes single wells. So the efficiency was different. When we broke -- when we came to that project, our peers were -- the maximum they can do is 3, 4 stage a day. And when we did 9, they were shocked, right? Aramco was like, what? -- how did you guys do 9, right? And obviously, at that time, I did with my friend, Robert Drummond, and we brought the team and we told them, we need to do what we do in the Permian from the efficiency, from discipline, from the work scope. And then over those years, we developed the infrastructure.

So obviously, again, as I know the place inside out, I know what works in the U.S. and what doesn't work in Saudi. We developed supply chain to make that happen. So we're not going to go and make mining but I got like very big family with a lot of money in these places to build mining, right? So then they build sand. So then I have access to sand. Then we did with Aramco, the water storage. So how can we compensate with the seawater and make sure that we can have access so we don't wait on water. And then we developed as well a lot of companies to get the plugs to get everything. So as I think part of the success that we were agnostic from -- I don't need to use my own. If there is another plug provider that is better, let's test them.

And then the Aramco setup that they had was very smart because they made the unit that is doing that with us. So then Aramco became so agile, and they don't have to go through like an Exxon or Chevron, which is a huge company and Aramco is huge. But they made that unit to be agile and to approve things fast. And if you approve it that you say this -- for example, this plug works in the Permian and we have 20,000 runs with it, why do I need to run 500 in Saudi? I need to run like 10 and then it's approved. And so that gap, I think, as we, again, understand the system very well, we knew how to do it and that we broke the code, then we got the cost efficiency to a fraction of what it was.

And I mean, I quote my dear friend, the CEO of Aramco said completion cost of Jafurah is 90% down from the initial phase.

90% is shocking, right?

Which is very smart because obviously, again, we used to plan everything at 2, 3 stage a day. Now we do 32 stage a day, right? So the volume, the efficiency, again, similar to the U.S., but they made it at a much shorter period because they said, let's start from where people ended, let's not go and...

No, that makes sense, right? We saw how in the early stages of U.S. shale development, a lot of European majors came in, conglomerates came in and they're nowhere in the field now, right? They've all sold out and went away. The ones who were winning were the independent DMPs, right? So I'm glad Aramco learned that early. You are benefiting out of that. They are benefiting out of that. But again, Jafurah, let's come back to Jafurah. You had that big press release, multibillion dollar tender that you won, right? So that's massive. But just put that into context from a NESR perspective, how much does it move the needle?

Moves it a lot. So I mean, basically, this contract now as we have 100%, meaning that we are going to deploy at least 3x to 4x what we have. We have a commitment to do -- for our client. We going to have to deploy and work as we call it, flawlessly to make sure that we perform as they want with all the pads that they have.

They have the backlog now of wells, which is great because that's the biggest -- usually, that's the biggest obstacle for you to grow is are there enough inventory of wells and pads. Now as the rigs are so efficient, they drill these wells in 14, 15 days, which means that with the amount of rigs they have around 40 rigs over the 3 play, we will be able to do that.

So overall, NESR easy grew 30%, 40% year-on-year, right? So if the market overall is only 5%, then we're really going to be something different, right? So -- and it's committed on both sides, so -- which is great because you know exactly what you need to do. And we are doing the same thing with our partners and suppliers. We're making sure that they are beefing up the resources to be able to deliver on that, right? For example, like Caterpillar in Saudi, we told them, it doesn't work the structure you have. We need double the structure. You need another line because we're going to have a lot of engine. All this Garden Denver.

All these people, now we are actually giving them heads up to get ready for the scale. And us, as we are always, as I call it, countercyclical investing, we invested before. So that's why when Aramco said, when can you start? I said, tomorrow, we start tomorrow. I have the fleet. So we bought the fleet, we shipped it. We prepared it. Now we have another one going as well in December. So we prepared ahead of time, and that's why we started the project already.

Right. And this is a 5-year contract, right?

5-year contract.

Is there a ramp-up period, Sherif, we should think of? Or can you pretty quickly get to that plateau?

Aramco will ramp up, right? Because as you know, the target 200, 1 Bcf and 2 Bcf. How they're going to make it with the year, yet to be seen. But I think '27, '28 will be their peak in terms of stages. And we are preparing, as I said, ahead of the game, right? So we bought equipment already for a third fleet, right? It's there. It's going to be -- I mean, it's going to be there on 27th of November. So we are always going to be ready. And obviously, we're very close. We are every day there. We have a full team now embedded with them because if you are the only one, so you have to be really working very, very close together to ensure that you can deliver that and you don't have any delay.

In addition to that, there is a lot of what you call additional work that you have to do because this is an integrated frac project. This is not a frac that I'm going to frac. No, I prepare the site, I get the sand, I perforate, explosives, coiled tubing, plugs, flow back, testing the wells, all the stuff.

So sometimes I tell you, oh, we need to test, for example, for extended well test for 3 months, for 6 months, we need an additional 10 flowback and testing equipment. So we do that. And sometimes we manage even some work for others, right? So that's how you have to think about it. So it's going to be a huge, huge project, but we want to make sure that we make this as an iconic project as well from even everything from sustainability, from -- now we are doing some research with them to pump the sand next door from the Jafurah sand, but even from Riyadh sand.

Like we did here in Wisconsin and then you went to the Permian. And we are looking even in some delivery method that is different. We are embedding AI in all this to do predictive maintenance because now we know there will be so many pumps running. What's the best rate. We're getting some new trees, grease list that can be like faster rig up or rig down. Can you mobilize faster so you can finish even.

So the best example of that, if you look at the original project when -- again, my previous life, and we looked at that, this was supposed to be 18 fleets to be able to do the same number of stages. And now we think it's 4 to 6. So that's how efficient the project is.

In terms of number of rigs, I thought it was 100 rigs. Now they have 40, because the rigs are so good, so efficient. They go drill the kickoff to 3D with 1 even our friends and the big guys, they modified their RSS to be able to do. I mean it's a lot of work around that project.

Right, right. And then the one other topic that comes up, Sherif, is broadly on the pricing situation next year in the Middle East or Middle East market, Saudi Arab, whatever you want to touch on. But how should investors think about the margins you would be making on this revenue, right, 30%, 40% growth that you talked about for next year?

What we're planning to do is to maintain the same margin as a company, right? So we are -- we want to do whatever we did in '25, we want to maintain margin with that growth. We are not targeting more margin, but we are targeting to maintain margin, right?

So we're on 2020 with 20%, 22%, that range. We want to do the same. That range should be the same. So the first quarter, for example, you drop a couple of hundred basis points because you're investing and then you pick it up again after that, right? But overall, when people look at year, it should be the same margin.

The pricing in the Middle East has always been on big tenders very competitive. And some like the drilling LSTK, it becomes very competitive, right? The risk on the rigs is a bit worse because you have to eat all the standby of the rig. And the rig is 70% of the project, right? So on -- but again, you have risks if they shut down, for example, right? But that's the Middle East old margins, 40%, 50% with the [ ski ] now being not -- it will not happen, right? But healthy -- the new healthy number is this 20% to 25%, right?

So, and hat's our target is to maintain within that window of our profitability. If you look at the company when we first formed it, it was 35%. When we took this company together, but they were very small. I could have stayed 35%, but I would have stayed small [indiscernible] billion at 30% or $2 billion at 22% is okay.

Right. No, you've got to be a win-win for you. It's got to be a win-win for the customer, right?

Yes.

It can't be just one winning and the other not winning.

No way. And they are not naive and they are not -- they know everything. And they know the pricing, they know how much you pay in the U.S. So they make the math, right? So no, I think we are very happy with the project, and we are extremely confident that we are going to maintain our margins.

Right. From a CapEx standpoint, do you have to deploy any significant amount of capital? And does it do anything to your go-forward, call it, base level of maintenance CapEx, whatever you want to call it?

So what we said we are going to increase our CapEx from previous, but modestly, right? So as we announced in our earnings call last time, we said we're going to be $120 million. We might -- if we win the big, big portion, we might go to $150 million, right? And we're going to maintain that $150 million.

So that's what we believe we will be. So if you are $150 million, but you are $2 billion instead of $1.3 billion, it's actually as a percentage, it is much lower, right? But we are planning to invest that much. Because we take the advantage of the U.S. weakness, right?

So it's the best part. I mean we are lucky in a way, right? It's not -- we are not smart. We're just lucky basically because U.S. is doing so bad, which is the best thing for us because now we can buy all this equipment here at fraction of the cost and send it over there and operate with it. And all these units, anyway, you need to upgrade them all the time because no engine and no fluid end and no power end last for the 8 years, right? So you always have to overhaul and all the stuff. But we -- again, we perfected that very, very well. And that's why when we get that scale, again, as the largest truck company in the Middle East, we will be able to do that very professionally and take that to the other places.

Right. So that $2 billion revenue target that I was talking about, it sounds like this contract would take you very close to that target. And then where do we go from here? Because you continue to grow, we discussed the Ahmedi Innovation Valley in Kuwait, right, and those markets are growing, what's the path beyond that $2 billion?

So if we win what we want to win and make sure that we can execute on them, we will be on the path to $3 billion. And that's basically what we -- then we become #3 in Middle East, right? And that's basically our target, our ambition. After that, there is a lot of things to do, but we need to make sure that we can deliver on that and deliver consistently and again, with the same margin and cash flow. There will be some more strategic stuff to do later and yet to be seen.

Right. And you've talked about opportunities outside of your core Middle East region, right? North Africa looks like there are opportunities. You've talked about Indonesia, right? First thing, maybe just talk to how big those markets can get?

North Africa is -- for us is Middle East, right? -- because that's all call MENA. We are very, very good in North Africa. We put a very good strategy to grow a lot in Libya. But we need to make sure that we collect. So that strategy is working. So we don't jump until we get the proper collection. But Libya is very promising, as I said at the beginning, Algeria as well, Egypt.

So we are in all the countries. We are in a very strong position in the 3 countries. So each one should be north of $100 million very soon. We -- and then we made, as I call it, a risk or a gamble outside, outside our comfort zone, right?

So we are in Indonesia, India, Malaysia, in Asia, we are in Chad, Gabon, Congo. We're going to maintain that to see, but we don't want to thread ourselves too thin, but we want to keep that and see the progress. If we crack and get to a certain scale good, if we don't, we shut it down, it doesn't hurt. I mean those countries together don't even make all of them, not North Africa, all this not even 1%, 2%, right?

So we're going to keep going. If we don't become a differentiator or we are not getting any value, then we will not continue, right? But some of the projects were very good. I mean, Indonesia, for example, we did the geothermal. We did the carbon sequestration, we injected.

So it actually gives us as well a flavor of knowledge and technology. And that part is important for people that don't know the industry. You cannot be a service company in 2 countries. It doesn't work. First of all, you're not be able to keep the people. You won't get the knowledge sharing. So you need to have that kind of excitement as well for your team.

But no, I mean, I get the scale point is so critical, right? You got to make money, not just revenue, but profit and cash, right? So you've got to identify which countries can scale up and which countries cannot scale up.

Yes, absolutely. And we will have a lot of cash, right? So then, yes, there will be a lot of strategic thinking. I mean we had a lot of M&A. Now we don't because we grew so well without any M&A organically, which is the best. Now we spend on technology. We have this venture capital arm that we use our -- I mean, it's basically 2 guys to do that. But we are investing in 12 start-up or 12 companies. And we need to see how this would work, right?

Some of it will crack, some of it will not work. It's a bit similar to what we -- some other companies -- Halliburton does this Halliburton Lab. That's what we do. And I think we like our decarbonization arm. I know now it's not the flavor of the world, but it's going to come back. I mean, sustainability, sensor, injecting water, lithium, all these things, one of them scale becomes very nice. And the investment is small.

Right, right. You talked about cash. That's a key topic for investors, right? Maybe let's just talk about your free cash flow power either from a conversion angle or however you want to touch on that, right? And then what do you do with that cash?

So we should be able to more or less average 40% conversion EBITDA cash. And obviously, we have less than onetime debt. We will be 0.7, 0.6 soon. And after that, depending what do we want to do, we will, like second half of '26, we'll decide M&A opportunity is not there because we're growing very well.

I mean, giving a little dividend who cares, right? You buy a big dividend company. But we are a growth story that is very clear. So if there is no clear on M&A or something, then we will think about returning some versus dividend or stock buyback at that time we'll decide. But we'll be able to have easy and very soon $150 million, $200 million of cash.

Right. So that gives you a lot of flexibility and if you see the growth opportunities, that's what you like to do.

We go into new stuff.

Right, right, right. No, that makes a lot of sense. Sherif, if I'm looking at the clock, we are out of time. Is there any one last thing, Sherif, if you'd like to leave investors with who don't know in one line.

Still cheap. Go buy it.

No, that's true. Okay Sherif, Thank you. Thanks a lot.