National Energy Services Reunited (NESR) Q2 FY26 earnings call: guidance and Q&A

What were the primary drivers of the strong Q2 revenue growth, particularly regarding Jafurah and the outlook for the second half, given the $2 billion minimum revenue target?

Jafurah was the main highlight, with the fourth frac fleet fully utilized in Q2. Strong support also came from Oman and North Africa. The company's countercyclical investment and readiness to replace competitors who evacuated helped capture market share. The fifth Jafurah fleet will be deployed based on client timing. The $2 billion revenue target is now a minimum, indicating strong momentum.

“As we had started the project back in November, we said we are going to ramp up faster. We decided to counter cyclical, as we call it, the investment. So we bought the fleet 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. In the second quarter, the fourth fleet was working.”

asked by Arun Jayaram · answered by Sherif Foda

Can management provide more details on the timing for achieving the $3 billion revenue run rate target, considering the current tender activity?

The '3B3' strategy means $3 billion in 3 years from its launch late last year. Management believes they can achieve this run rate faster than 3 years, depending on contract wins, expansion into new countries like Syria, and success in advanced directional drilling and decarbonization ventures. The company's readiness and local workforce position it to capture growth quickly.

“So the idea, 3B3 mean 3 billion in 3 years. That's the definition of that. 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 contracts, 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.”

asked by Arun Jayaram · answered by Sherif Foda

What is the current assessment of the Middle East market on the ground, especially regarding customer sentiment for the next 6 months and the status of the $3 billion tender pipeline?

The macro situation is unchanged; countries are preparing for post-conflict readiness, keeping rigs warm-stacked. Activity is decoupled from production/exports, with operators maintaining ecosystems. The region is ready to resume full production quickly once geopolitical issues resolve and export routes like Hormuz reopen. Tender awards are being pushed to Q3/Q4 due to geopolitical uncertainty, as clients prioritize reliable suppliers who did not evacuate.

“So the activity -- and I repeat this many times to investors, you have to decouple the activity and production and exports. 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, but I keep the rigs running because I need the ecosystem to maintain the same.”

asked by David Anderson · answered by Sherif Foda

Could you elaborate on the significance of the Kuwait Master Technology Agreement (AIV) and when revenue or contracts are expected to flow from it?

The AIV is a visionary initiative by Kuwaiti leadership to create a 'Techno Valley' with a research center for fit-for-purpose technology. NESR is one of four inaugural partners. The agreement allows for immediate application and commercialization of proven technologies, leading to multi-year contracts without traditional tenders. This 'single source' approach for differentiated technology is highly significant, with an official inauguration expected around ADIPEC/WPC.

“But the way they did it very smartly, you have a contract with the value, and you are going to open and build the research center, but you 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.”

asked by David Anderson · answered by Sherif Foda

How has NESR ensured uninterrupted operations and supply chain resilience during the regional conflict, especially when larger service providers have been impacted?

NESR treated the situation like COVID, engaging main suppliers as partners to diversify the supply chain and store materials in different locations. Proactive measures included air freighting critical materials to ensure availability. The company absorbed these additional costs as part of its duty to clients. NESR's national workforce, particularly in Iraq, remained on the ground, allowing the company to capture work from competitors who evacuated.

“And we diversified our supply chain. We put stored things in a different spot. And we ensure that once we get back if this stops, I have an alternative. If this stop, I have an alternative. And as Stefan has mentioned, we decided in some of them, there is no way they can do anything. So we took that initiative to air freight, right?”

asked by Derek Podhaizer · answered by Sherif Foda

How should investors think about the margin profile as NESR approaches the $3 billion revenue target, and can margins be accretive due to operational scale?

For short-term models, use current margins (21.5%-22%). However, as revenue grows towards the $3 billion target, the company aims to return to historical margin rates. With increased activity, improved efficiencies, and a lean overhead structure, margins are expected to improve over the coming years, potentially becoming accretive due to operational leverage.

“So there's 2 bits to that, right? In the short term, for your own models and that used 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 -- you'll have activity efficiencies. We've got low overheads, right? So the margin should improve over the years to come, right?”

asked by Saurabh Pant · answered by Stefan Angeli