National Energy Services Reunited Corp (NESR) 2018 Q2 法說會逐字稿

Good day, and welcome to the National Energy Services Second Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to our host, Mr. Steve Calk. Please go ahead, sir.

Good day, thank you, operator. And welcome to NESR Corp. Second Quarter 2018 Earnings Call. Today's call is being hosted from Houston, Texas. And with me today are Sherif Foda, Chairman and Chief Executive Officer; and Melissa Cougle, Chief Financial Officer. After our prepared remarks, we will open the call to questions.

On today's call, Sherif will comment on our second quarter results and overall performance. In addition, as this is our first earnings call, Sherif will provide additional information on NESR, the industry and growth opportunity in the MENA region.

Before we begin, I'd like to remind our participants that some of the statements we'll be making today are forward-looking statements. These matters involve risks and uncertainties that could cause our actual results to differ materially from those projected in these statements. And therefore we'll refer you to our latest 10-K and other SEC filings.

Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our second quarter press release, which is on our website.

Finally, as this is our first earnings call and given the nature of the presentation of the results in initial SPAC earnings, please feel free to contact us after the call with any additional questions. Our Investor Relations contact information is available at nesr.com.

Now I'll hand the call over to Sherif Foda. Sherif?

Thank you, Steve. Ladies and gentlemen, thank you for participating in this conference call. Before I start with my remarks on the results and talk about the future, I want to take a few minutes to reflect on our journey till now as well as the work done in the 2 months since our closing. As you may know, NESR started its life only a year ago as a SPAC. And in the subsequent 12 months, we acquired and consummated a business combination with NPS and Gulf Energy, two market-leading oilfield service companies in the MENA region. This transaction closed in early June, and NESR is now operating in 14 countries, has about 3,200 employees and service approximately 25 clients across the MENA region and the Asia Pacific.

As we begin, let me give you a quick overview of each of our operating companies. Gulf Energy, or GES, is one of the major service providers in Oman, with a significant market share in its main business lines. 2/3 of their portfolio focuses on drilling technologies and 1/3 on production services. The structure of contracts in Oman generally are longer term, ranging from 5 to 7 years, providing NESR a stable revenue base and long-term relationships.

National Petroleum Services, or NPS, is highly diversified in terms of geography and is larger than Gulf Energy in terms of revenue and headcount. NPS nicely complements Gulf Energy in its portfolio and geographical footprint. More than 2/3 of its business are concentrated in production completions and the remaining is in evaluation services. NPS is strong in Saudi, Qatar, Iraq, Algeria and other countries in the region, and is recognized as one of the premier service provider who can compete with the major suppliers in these countries. They have continually gained market share over the last few years and have a healthy portfolio of contracts.

Both of these companies were formed as we know them today, in the middle of the last decade, and have significant, long-standing relationships in the region that, in some cases, date back 30 years. As a combined company, they complement each other in the portfolio of services they provide, and the geographies where they operate. This, along with the technology we are bringing to bear in both companies, will serve as a springboard for our future growth.

NESR Corporate has offices in Houston, and we will have a strong presence in each country where we operate. Since closing, we have organized the company under 2 reporting segments: Production, Drilling and Evaluation. Production includes primarily cementing, coiled tubing, filtration, completions, stimulation, fracturing and nitrogen services. Drilling and Evaluation will have drilling down-hole tools, directional drilling, switching tools, testing services, wireline, slickline, fluids and rig services. Excepting the large integrated service providers and rig companies, NESR is now the largest, indigenous, integrated oilfield service provider in the MENA region. And we are the only U.S.-listed national service provider.

Now let's talk about the work that has been done since we completed the Business Combination. In the 2 months since we closed, we have aggressively pursued our integration goals and I'm pleased to say, that we are progressing at the faster rate than expected, and what I have witnessed in the industry through my period. This reflects the high-caliber team we have assembled and the value proposition for our operations team on the ground who see genuine benefits from what we have created. As an example, in this very short period, we have relocated the Gulf Energy drilling tool shop and the team in Saudi to our NPS base. Consequently, this move and NPS position in the market has led to a recent award of these services to Gulf Energy. Another example, we have exited the NPS operation in Oman where -- which were diluted to its results as we already have the Gulf Energy footprint for that market space. Similar phase 1 integration efforts is in Algeria, Kuwait and Iraq are underway. In this short period, we have already affected most of the organization changes and harmonized the structure across the company, which I will talk about later.

The focus here is on rationalizing our resource base, increasing the efficiency of assets and capital without compromising our service quality and customer footprint. Beyond phase 1, we expect the integration effort to continue into 2019 and build on what has been achieved and targeted for the rest of the year. This integration effort will focus on reducing the underlying cost of certain departments such as supply chain, HR training, IT infrastructure, and we are integrating our integrated software platform across both companies. After we close this transaction, one of the first thing we did was define our identity and those goals to which we aspire.

We have defined 3 pillars for our values. The first is our customer-centric ethos, who we are, what we are, is directly linked to what our customer perceive of us. Customer satisfaction is at the center of everything we do, we understand the local operation and setup and will always strive to exceed the expectation in every aspect of our work.

Secondly, we focus on our people, their development, their overall well-being. This extends to every level in the company, and we aligned our bonus structure at all levels to reflect the delivery of our services. In other words, we want every person and not only senior management, to be rewarded based on the success of the company and its financial results.

Lastly, we want to be a company that stands out for its contribution to countries where we operate. This entails a commitment to developing local talent, contributing to the local economies, driving In-Country Value, enhancing communities, protecting the environment and operating with the highest standard of integrity. In line with this, the majority of our country directors are from the same country in which they operate. We have very aggressive plans to focus on adding value by investing in local manufacturing. An example, we are embarking on plans to manufacture down-hole tools in Oman and expand the existing Gulf Energy facilities. Similarly, we have significant plans for starting manufacturing and design facility for targeted products in Saudi, and other regional countries.

Coming back to our structure. NESR now has a geographical country management to run the day-to-day operations, which is the focal point for our clients, with product drove verticals leading technology introduction and implementation. We believe that this structure allows NESR to best leverage its size, allows us to scale our support structure to the needs of each country, and it allows the country management to focus on running the business in the most efficient manner. This is reflected in our performance in Saudi, where year-on-year revenue growth has been 60%, compared to rig growth of about 5%. This growth has been driven by larger contract awards in business segment like testing, and we have increased our market share in our coiled-tubing segment. Additionally, about 3/4 of the growth over the last 2 years for NPS has come from markets like Iraq and Algeria. And going forward, we will see this trend continuing, driving the importance for having a solid, on-the-ground organization.

Supporting our newly establish organization and operation, we have also brought in exceptional talent to lead our product and service offerings with the Production and Drilling and Evaluation groups. These leaders have deep expertise in their respective areas and will be focused on expanding our product and service offering in the future by utilizing new technology and building new core competencies.

NESR is following a distributed network model to build its technology portfolio. By this, I mean that NESR does not have a conventional R&D setup like most of the large integrated players. Rather, we are leveraging our North American presence to source fit-for-purpose and cutting-edge technologies to the MENA region. This is already in effect, and we have either signed partnerships or have begun the process to sign with approximately 10 technology providers in the last 2 months.

One may ask, what is the value proposition for NESR as well as for these technology providers? Well, for one, these providers who have exceptional technologies have been unable to build any decent scale in the MENA region. This is because until now, there were only traditional agent-type relationships available for them or they had to align with the large service company, which eventually developed the competing products. Agent don't run the services, and can't help improve the technologies. We can. So for these technology or companies, NESR is the optimal partner. We are the end user of their services, provide scale across the region, and we quantify and qualify those technologies. Given our position and understanding of the region, we would have the ability to look at all innovative new products that our customers are looking for.

In terms of business model, we have developed and are open to discussing engagement levels across the spectrum. For example, we can team up at an early stage, invest in the company, work alongside them to develop fit-for-purpose products or if the technology is mature and we understand where it is best deployed, then we team up and add value with the execution of the services. We believe this distributed network strategy for technology will provide us with the agility to respond to our customer needs as well as being very capital efficient in the long term. As we shift from technology and visit our geography opportunities, there are several countries where we could add critical scale or beef up our presence by acquiring smaller regional companies who have distinguished themselves or have built a particular business line that is additive for us. We are actively working today on several opportunities and will complete them at the right valuations in due course.

We are also actively looking at opportunities to grow our core of -- out of our core MENA region. NPS consummated an acquisition in Indonesia just before NESR closing, which we believe will give us further scale to grow in the Far East.

Similarly, we have been expanding our footprint in India with new contract awards. Although these operations are still small, we believe they provide us with a solid foundation to leverage and grow our non-MENA operations. NESR is also seeking opportunities to grow in Sub-Saharan Africa and is actively engaged with customers who are extremely keen to see NESR as a viable integrated service provider in their respective geographies. We expect that over the next few quarters, we will be able to make substantial inroads in couple of countries.

Having discussed our present status and what we are doing, I would now like to spend some time on the overall macro picture in the MENA region, and how NESR is positioned to benefit from it. As most of you are aware, rig counts in the Middle East and North Africa did not see the levels of volatility that occurred in North America during the last downturn. In fact, if you compare to the fourth quarter of 2014, every major market where we operate has either higher or similar rig count. This resiliency is a result of the longer-term capital spending plans for the NOC in the region that comprise approximately 80% of our client base. An example is Saudi announcement to spend roughly $400 billion over the next 5 years. Other countries have big plans to enter into newer reservoirs, like unconventional and heavy oil, which in turn increased the service intensity and the need for innovative service providers.

This further translates to our customer having contract cycle which span from a few years to as long as 7 or 8 years. This inherent stability allows us to build critical capacity in these product lines. This is one of the main reasons that all of the service providers in the region perform better than anywhere else. This quarter, we signed new contracts worth approximately $360 million, which was on the higher side of what we normally do.

In line with research estimate, we believe that the Middle East market will grow at an average CAGR of 6% for the next 4 to 5 years. Just to put numbers into perspective, if we look at the market side of the region, it is about $20 billion. So if we are looking at about $1 billion in growth every year over that period. Hence NESR objectives to grow at the higher teens, CAGR is certainly achievable given the tailwinds that support our growth. Actually, we are looking at more significant growth, given the added businesses to the combined entity. NESR saw year-over-year revenue growth in the mid-teens during the first half of 2018. And we expect to sequentially materially expand and build on this trend going forward.

I hope with these remarks, I have been able to share our excitement at this great opportunity to grow our company into something special. I would now pass the call to Melissa, to review the financials for Q2.

Thank you, Sherif. Let me start by congratulating the NESR team on a successful transaction and express my appreciation for the warm welcome and all the hard work that has created the first and only U.S.-listed national services provider in the MENA region. It's truly an honor for me to be here and I'm excited about what the future has in-store for NESR.

As you can see from our 6-K file today, we have made an FPI election, designating us as a foreign private issuer. We want to reinforce to our investor base that we are committed to sharing regular reporting results as evidenced by today's filing. The FPI election was made to provide the company with flexibility and relieving the administrative burden, time constraints and cost that can be encountered as a U.S. issuer. We are reporting in a Predecessor/Successor format as required by SEC requirements and necessitated by the 3-way business combination undertaken. In NESR's case, as the acquiring company was a SPAC, NPS was treated as the Predecessor entity and all historical information, up to the combination date, is presented for NPS on a standalone basis.

All 3 entities are represented as part of the Successor NESR entity. This presentation format is required and so I wanted to provide some additional background. Our second quarter financials include both Successor and Predecessor financial information. The combined post-combination Successor period, including 1-month of results, totaled a loss of $4 million, which is influenced by significant transaction cost triggered at the time of combination, as well as amortization associated with our acquired intangible assets. The NPS Predecessor accounting period includes net income of $6.7 million through May of 2018, and we would like to note that due to the unique accounting treatment involved, neither the NESR parent company nor the GES results of operations for April and May are reflected in the statement of operations. Going forward, Successor period reporting will reflect these results of the combined organization.

Our goal is to give you our best read on the fundamental performance of the business during this transition period and the overall financial performance of NESR. What is clear within the financials is that NESR continues to grow on the top line. Overall revenues have demonstrated double-digit growth, and we intend to expand on this trend in future quarters. We have had significant growth in key markets and our NPS subsidiary grew revenues by approximately 38% year-over-year, from a $123 million in H1 of 2017 to $169 million in H1 of 2018. On a combined basis, the company grew revenues by 12% between Q1 and Q2 of 2018 and 14% when comparing the 6-month period ending June 30 with the same period in 2017.

We have posted combined revenue of $249 million for the first half of 2018, as compared to $219 million in the same period of 2017. The growth described was achieved exclusive of synergies and generated by the standalone companies, with only 3 weeks of combined company performance reflected. We anticipate future NESR quarters will build upon this growth and reflect recent contract awards, translating into positive EBITDA fall through. Both our subsidiary companies posted solid performance on adjusted EBITDA coming in at a combined $66 million for the first half of 2018, as compared to $63 million in the first half of 2017.

Although already mentioned, it is worth reinforcing that MENA business has historically experienced a stronger second half of this year. We believe the same holds true for NESR, as we continue to build upon the growth already achieved, making the back-half effect even more pronounced for us.

Switching gears a bit, after operating as a combined company for 2 months, we remain steadfast in the pursuit of our growth strategy, while creating integration cost synergies. We intend to achieve these synergies through streamlining of business processes, elimination of inefficiencies and leveraging new pricing power with our vendors. Our balance sheet profile has changed considerably as well through the combination. We continue to have conservative leverage, with an economical cost of debt averaging 550 basis points as of June 30. During July, we completed a refinancing of our bridge facility to term it out and entered into a new credit facility giving us an additional $50 million of liquidity to better manage business operations during our integration period and provide dry powder for opportunities. We drew down $25 million of this facility, and have an additional $25 million available to us. We ended the quarter with total borrowings of $306 million inclusive of a convertible loan from one of our largest investors. On the tax side, we are expecting some changes based on a new NESR ownership structure. We are currently evaluating this new structure and will fully explore our optionality in this area.

Our effective tax rate for the quarter was 20.6% and is exclusive of any corporate restructuring that is under evaluation post-business combination. As part of our integration activities, we do intend to look for tax efficiencies created as a combined company. NPS and Gulf Energy CapEx commitments as of June 30 were $25 million.

As we improve equipment utilization, asset sharing between countries and achieve full integrates and synergies, we expect the full year 2018 CapEx commitments to be approximately $50 million.

As mentioned by Sherif, NESR will be focused on top line growth, and we will look toward providing our operations with the resources needed to effect this growth as efficiently and opportunistically as possible.

In closing, I'm very excited about the financial opportunities we're creating here at NESR. We believe we are well positioned in the marketplace, have strong momentum, and enjoy a solid financial foundation from which to grow. With this, I would like to pass back to Sherif from some final comments.

Thanks, Melissa. We at NESR have a vision of creating something extraordinary, which will not only provide superior returns to our investors, but would also have a lasting impact on the region with In-Country Value creation and employment opportunities. We also have strong ethic to help our clients achieve their goals.

As I mentioned earlier, we have very aggressive growth plans, both organically and inorganically. NESR has grown from just an idea to a multicountry, multiproduct line integrated company in the span of one year and we intend to keep on growing at this attractive pace going forward.

The existing market fundamentals over the last couple of years support us and if the existing oil price environment improves or holds, as it is the consensus estimate, then we believe we will further benefit from tightening of the demand-supply curve for our services. I would like to list for you some of the key objectives that will be our focus throughout the rest of 2018. Number one, we want to build on the integration gains and complete the majority of tasks needed to fully integrate by end of this year.

Number two, we want to build on the momentum of H1, and accelerate our revenue growth in H2 to deliver revenue growth year-over-year in markets like Iraq, where we have approximately 75% growth year-over-year until now, we want revenue growth to significantly outpace rig growth. We want all our business and geography to experience growth in 2018 and beyond.

Number three, we believe we have a very low cost of debt, but having said that, we want to work on optimizing our capital structure and start the process on optimizing our tax planning, which we believe has room to improve.

Number four, I would put this in the ambition column that we would like to start operation in 1 new country in the second half and continue to strengthen our geographical footprint in the MENA region.

Number five, we will introduce 2 new technologies, which will feed future growth.

With this, I would like to take this opportunity to thank everybody for joining our first earning call and if there are any questions, we'll be very happy to address them now. Thank you. Operator?

(Operator Instructions) And we'll take our first question from the queue with Greg Colman from National Bank Financial.

Just I wanted to start -- wanted to start with question about the full year. In your proxy, you talked about $170 million in full year 2018 EBITDA that was filed earlier this year. How's your confidence in that number now after reporting Q2 versus what you were expecting in February, March? Is achieving about $100 million or so in the second half of EBITDA a realistic goal in the context of the $66 million we saw in the first year -- in the first half rather?

Thanks, Greg. Very good question. So if you look at fundamentally, as we stated in our remarks, H2, in traditionally in the Middle East, Q3 and Q4 are very strong and much stronger than H1. If you look at our growth rates with the activity, especially in countries like Saudi, like Iraq, you're talking about a rig growth of the company into the 50%, 60%, which is much, much significant higher than the rig growth. So saying that and being in charge of the company now, as I said in the quarter, we only had the 3 weeks and in H2 we are -- I was very confident in our ability to deliver on the numbers we estimated earlier.

In keeping on that theme, you mentioned a couple of comments about a limited amount of time to have the 2 companies together in the reporting period, which ended at June 30. What kind of synergy impact did we see in Q2? Was there any, or was it really just, kind of, put the 2 businesses together and we won't be expecting to see any synergy impact, either cost or revenue, until Q3 and beyond? I'm basically looking to see if we should be expecting margin expansion here, especially on the cost side, into the back part of the year.

Yes, so as we explained, so with the synergy we started with the companies, as you may know, obviously, as I tried as well to explain, we -- the main focus for us is revenue and cross-selling. So the biggest item was to ensure that the portfolio of Gulf Energy and the drilling arena is mapped or is split into NPS geographical footprint. And that is the key for our integration team, as the number one. We, in a span of, as I said, in weeks, we managed to build the new shop in NPS facility, move the entire Gulf Energy into that facility, improve the machine shops, et cetera and then we demonstrated this to our clients and they had very -- they were very comfortable with our strategy and enhanced actually, we're awarded a large contract in Saudi based on that. Right? So that's based on NPS', obviously, strength, name, brand and ability to be able to service that contract from that solid base.

If you look at the entire region, we are doing exactly the same thing. We visited all the locations since we started and we put integration plan for each one of them. So a lot of the integration will be in the cross-selling, but the big part of it, which is on the financial team, is how to remove all, I would say, the fab, remove all the supply chain. How can you leverage the size of the company to reduce the price with the suppliers, the IT, the HR, et cetera? So all this is happening, and if you want to put a number on the cost, is as we explained before, we believe that $8 million to $10 million is achievable in 2018.

Makes sense, okay. On the contract spend, the $360 million you got in the second quarter, you mentioned that exceeding even your expectations, which were probably pretty aggressive expectations to begin with. Are there any other whales out there, any other potential big wins that we should be watching for in the third or fourth quarter, either by country or by company?

So the tendering activity is obviously now, we are in 14, 15 countries, is very active. You will see a lot of tendering coming, we are engaged in several of them. We believe that we're going to get our fair share of this awards and the $360 million was definitely on, as we said, on the high side and it was extremely, extremely well perceived. And again, you have new businesses, you are needing new product line, you are making sure that you are strong, your strong presence in front of the clients, engaged with them and that gives them comfort that we will be able to deliver. And on the couple of contracts where we recently were awarded, a large contract, the clients is extremely, extremely pleased with our performance. As a matter of fact, we -- I attended personally a service quality meeting with the clients, and I was very pleased that we scored #1 in front of everybody else. So our efficiency and delivery, that is what is going to make us -- making sure that we can get more of these contracts and get more awards going forward.

That make sense but from -- just from a scale and intensity perspective, was the $360 million in wins in the quarter sort of a big boggy we're focusing on and there's still opportunities in the future, but potentially not of that scale in the immediate term? Or is this indicative of the kind of magnitude of contracts which you are looking to achieve over the subsequent 6 to 9 months as well?

I cannot give you exact numbers, but I can give you that this scale will be similar in the coming quarter. Not every quarter will be the same, but we have -- we are engaged now in a large, large mega contract that is even bigger. The award of that will depend on the timing. I cannot tell you it will close in Q3 or Q4, however, we -- you will see some significant contracts or mega tenders going on in the different countries. And again, remember, we -- before NPS and Gulf Energy, each one was on its own, now they are combined, and we have now, bigger pool of tenders we are going after. Because you have now a drilling portfolio in countries where NPS existed that did not bid for before. For example, Algeria, we did not bid for drilling business and now we are drilling, bidding for those businesses. You need to qualify, obviously, in those countries to ensure that the customer believes that you can deliver. Then they will approve you to be in the tender list, and then you go after the tender, but now you have a chance to win, right? So if I talk about tendering itself in the region is very different than what you -- what people experience in North America and this every contract in the MENA region, you have to have a tender, you have to get an award, and you have to have a contract, right? So it's nothing like -- it's not a quotation for job. So once you have that contract, some of the clients prefer a model where they award 6 to 8 suppliers, and based on your technology and your service quality, you get a percentage of that award. So yes, first you have to have a price that qualify you and make -- puts you into the pool, and then based on your delivery, you can capture more work than your assigned rigs. And then you have other type of contracts where it's more of a binary approach. So either you are in or out, right? So we have both types of contracts in the region where we are operating in. And again, we are targeting much bigger pool of these tenders, so the expectation of awards and our ambition is to have similar scale to what we have awarded before.

All right. Just from a country perspective. We think your single biggest contributor is Saudi Arabia, and we saw Schlumberger site some, that country is actually being a bit of a drag in the second quarter due to some delays and logistics challenges. Wondering, did you experience the same? Was Saudi a bit of a drag for you? It doesn't seem like it, based on the NPS growth rates, but just wanted to get any color as the -- any friction in one of your major operating region.

So obviously, I cannot comment on others. And I would just comment on our company. So Saudi has been more than outstanding, I would say. As I mentioned, we grow in the 50%, 60% year-on-year, sequentially is the 30%. So it's a very, very, very strong achievement. Again, we had new contracts awards, so definitely this contributed to large part of this because we didn't have that contract before, so we added a big space of it. We gained market share against others, and again, this is mainly due to our service delivery and our technology provider. Again, Saudi has been -- Saudi and Iraq has been very, very strong for us, we did extremely well. You have to remember as well, we are not involved in some of the large integrated LSTK-type contract, and we are mainly on the services side. So this has been going very, very steady. If you look at the macro picture, definitely Saudi is the main engine of oil production for the OPEC and they have a sustainable capacity to gain and they have adding capacity, so you'll have a lot of rig-less operation that adds up to this and this is where NPS is very strong. So not all the revenue is based on the rigs, a lot of rig-less activity, which is basically the testing type of work, testing slicklines, coiled tubing, acidizing and again, where we are very strong in that arena. Working in Saudi is actually absolutely, I would say, outstanding. The customer is extremely, extremely strong; very, very hungry with technology; and they really appreciate and value service quality and local content In-Country Value and service delivery and we are in a very good shape there.

I just have 1 more last one. You mentioned in your prepared remarks, the expansion opportunities in India and Indonesia. If you, as a management team, reflect forward as to what your revenue mix looks like in say, whatever you want to define it, 1, 3, 5 years, what do you see the non-MENA, the non-Middle East North Africa revenue slice being, is this a 5%, 10%, 15% of the business or could this be 1/4 or 1/3 of your business?

So again, I mean, obviously, it's very, very, very small today. It's almost, I mean, you can say, it's almost irrelevant in the revenue for the company. However, if you look at it, and our ambition is to grow profitably into the market where we think we can make a difference. So that's why we identified some of those countries where we can make a difference. If I look today on what we're doing in Indonesia, it is extremely, extremely well done. It gives you not only of revenue, but it gives you that diversity of being able to operate in different environments, gaining scale, gaining different type of operations, this is only -- this is important as well for your employees. You get that diversity, you get the people expose to different setup, it's good for them. So they can move from 1 country to another, and that's, again, very healthy. But again, we do not want to start somewhere where we are going to have non-profitable growth in this country. So if you look at between Sub-Sahara, once we are successful in the entry and Asia, our ambition is that this will represent a good part of what we're doing, versus what we do today. And when I say good part, yes, it might be 10%, 15% and this is the beauty of being small because everything you do is a very, very accretive to what you do, right? Because we do not exist, so if you add -- I would say, $50 million, $60 million of revenue in a country, that's significant to what you have as overall.

Got it. But you wouldn't see the non-MENA contribution being, at any point, the majority of the business in your forecast period?

No, no. Definitely not. This is just going to be a good addition and you -- if you target 10%, 15% of the total, we will be glad.

And now we can take our next question from the queue with Mike Cahill from the Crispin Capital.

I know this might be hard to quantify, but in terms of the $360 million of new contracts, how much would you say were influenced by you and the team, and then the new combined entity, versus just NPS or Gulf Energy, kind of, operating on their own and just getting these contracts in the normal cycle? I'm just trying to get a sense of as you take over more control of this thing, what you think the acceleration and benefit of the combined companies will be in terms of winning new contracts.

Thanks, Mike. And I would say, if you -- yes, it's going to be hard to quantify as a percentage because there is, in these standards, there is always like the normal, just pricing and delivery, et cetera and then there is the soft skills from the clients of perceiving the company being able to deliver on a larger scale contracts and being more comfortable that you are strong now from just -- not just a relationship, mainly for the client is, are you strong to be able to deliver, you have the capital backing, you can buy the CapEx, can I award you this type of work, right? So the contracts, to be quite frank, that they felt that we are now much better positioned to win or to be able to deliver on those, I would say in the 30%, 40% from -- for this kind of, if I give you a rough number. And the rest was purely the guys were solid, they had this contract, they had this standard before and it's based on their performance.

So if this kind of answers your question around the 40%, I would say, I would qualify that this could be the answer.

And we have a follow-up question from Greg Colman from National Bank Financial.

Mike jogged my memory as to something I meant to ask. Sherif, of the $360 million of wins, how much of that is additive new wins that would be expanding the business and how much of it would be renewals of just existing contracts that are being carried on?

I would say from the $360 million, 80% is the new contract.

Okay.

Additive.

Thanks very much. So as there are no further questions at this time, I would like to hand the call back to Mr. Sherif Foda for any additional or closing remarks.

Thank you very much. Thank you for joining us. We're very, very excited on our journey and we look forward to updating you on all our progress in next quarter. Thank you.

Thank you, ladies and gentlemen. That will conclude today's conference call. Thank you for your participation. You may now disconnect.