National Energy Services Reunited Corp (NESR) 2025 Q3 法說會逐字稿

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 two, 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 two 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 number 3 globally for AI after the US 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 US 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 US.

and the Gulf with bilateral investment deals already announced. As the national champion of the Middle East, but also US NASDAQ listed, NESR is a company made for the current political moment. We have a role to play in the bridge building between the US energy sector and the MENA national oil companies.

We can point to Jafurah as a case study of how we can help US 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 zero in frac just five 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 seven 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 three 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 two 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 two 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 US 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)

David Anderson, 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 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 US 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, ultimately, how many wells or stages per month are you targeting? Any details around that you could provide, please?

Yes. So, obviously, 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 November 1.

So we didn't have to wait. Obviously, we had the transition and in the business. And we started executing using our today, two 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 US.

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 five 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 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 '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.

Jeff Robertson, Water Tower Research.

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

Yes. 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 two, 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 four 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 3x 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, 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 US. It's actually because they have a lot of oil, but they want a lot of gas, again, for what (inaudible) 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 two 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, 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 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.

Sherif Elmaghrabi, BTIG.

I want to ask about the uncommitted work at Jafurah. Just to make it a two-parter, when could Aramco tender for that? 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. 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 three 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 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.

Jeff Robertson, 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)

John Ajay, 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 two 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 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 five 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 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 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 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. Have a wonderful day.