NESR Reports Third Quarter 2026 Financial Results - NATIONAL ENERGY SERVICES REUNITED CORP

Explicit Guidance:

• FY2026 Revenue: Reaffirmed goal of $2 billion (plus or minus $5 million).
• FY2026 EBITDA Margins: Full-year adjusted EBITDA margins expected at approximately 20%, inclusive of freight/logistics costs.
• FY2026 Capital Expenditures: Capex guidance increased to $220–$225 million (up from prior expectations) to support contract execution and the 3B3 strategy.
• FY2026 Financial Metrics: Net interest expense of $28 million; effective tax rate of 22.5%; net income margin of ~8%; free cash flow conversion of 30–35% of adjusted EBITDA.
• Dividends: Initiation of a quarterly dividend of $0.10 per share; first payment scheduled for December 10, 2026 (record date: December 3); subject to ongoing Board approval.
• FY2027 Outlook (Qualitative): Revenue expected to grow over FY2026 levels regardless of geopolitical status quo; if conflict resolves, post-conflict restoration work will drive additional growth.
• FY2027 Margins (Qualitative): Anticipated to remain near 20%; if geopolitical conflicts end, potential to recover to prior levels of ~21.3%; subject to mix and pricing pressures on new contracts.

Business-Segment Outlook:

• Jafura Project: Continued acceleration with four active hydraulic fracturing fleets; backlog of completion stages expected to drive volume; potential for 20% efficiency gains via AI-driven non-productive time reduction by mid-2027.
• Intervention & Completion: Identified as the primary "post-conflict box" activity (well workovers, re-entry, slick line, casing-to-hole logging) expected to surge ahead of new drilling once security stabilizes.
• Frontier Businesses:
  • Lithium: $200 million contract awarded; target to deliver first 2,000 tons of battery-grade lithium by end of 2027; business model aims for potential $1 billion revenue opportunity over the next five years as demand scales.
  • Water: Moving to demo scale with a new pilot in Oman; targeting commercialization in 2027 pending economic validation.
• Geographic Expansion:
  • North Africa: Expected to unlock significant activity in 2027, targeting 20–30% YoY growth if security issues in Algeria and Libya are resolved; Egypt brownfield restoration projects in progress.
  • Kuwait: Rigs kept in warm standby; ecosystem maintained for rapid restart; high exposure to defense and growth tenders (tubulars, fishing, coiled tubing) currently under negotiation.
  • Oman: Continued expansion with new pilot projects and integration into the 3B3 roadmap.

Market and Competitive Outlook:

• Post-Conflict Demand: Anticipate a "rebuild inventories" and "refill strategic reserves" phase post-Hormuz reopening, requiring significant Middle East supply restoration.
• Spending Trends: Region expected to invest more in redundancy, gas infrastructure, and localized capacity rather than cutting spend; underinvestment outside the region creates a supply gap that favors Middle East producers.
• Market Share: NESS expects to win more than its fair share of upcoming tenders due to reliability during the crisis and readiness to deploy equipment (e.g., 5th fleet in Saudi Arabia) faster than competitors.
• Capacity Addition: Expectation of 80% increase in Saudi gas production by 2030 (vs. 2021 levels); UAE targeting 5 million barrels/day capacity increase; Kuwait maintaining 4 million rig count.

Macro / Industry Outlook:

• Geopolitics: Consensus expectation of de-escalation; management views the region as having "decades-long" planning horizons with no retreat in confidence despite short-term disruptions.
• Supply Chain: Regional energy leaders emphasizing security and redundancy; "insurance policy" mindset driving budget allocation for alternative export routes and storage.
• Pricing: Anticipated tighter supply chain and higher prices needed to stimulate short-cycle land/shale response outside the Middle East, reinforcing the competitive advantage of Middle East low-cost/lower-carbon reserves.
• FX/Costs: Freight and logistics costs are a key variable; management does not expect incremental costs to exceed Q2/Q3 levels unless regional situation deteriorates materially.

Strategic Initiatives:

• 3B3 Strategy: Roadmap to achieve $3 billion in annual revenue by end of 2028, driven by current backlog, new tenders, and commercialization of frontier businesses (lithium, water).
• Infrastructure Readiness: $50 million inventory buildup (30-60-90 day contingency planning) implemented in H1/H2 2026 to ensure zero interruption; 5th hydraulic fracturing fleet arrived in Saudi Arabia and ready for deployment (potentially late Q4 2026/2027).
• Refinancing: Completed $747 million syndicated facility (including $449 million uncommitted working capital) with an accordion feature for up to $153 million additional; net leverage target <1.0x.
• Technology: Deployment of AI-enabled systems to improve stage efficiency and reduce non-productive time (NPT) by 20% in the Jafura project.

Risks and Headwinds to Outlook:

• Geopolitical Escalation: Further deterioration in security could delay the "post-conflict box" restoration, impact collections, and increase freight/logistics costs.
• Iraq/Qatar: Prolonged conflict or force majeure in Iraq (specifically Kirkuk/IOM areas) and Qatar could delay restart of major IOC projects and related service work.
• Customer Delays: Major IOCs may delay contract awards until security is 100% certain; potential for rig suspensions or "work-over" deferrals if storage limits persist.
• Working Capital: Negative free cash flow in Q3 due to defensive inventory builds and delayed collections; requires recovery in Q4 to meet 30–35% conversion target.
• Pricing Pressure: Ongoing pricing pressure on new contracts despite margin improvements from efficiencies.

Management Tone on the Future:

• Confidence Level: Extremely high; management describes the outlook as "not paused, but reinforced," stating "never been more confident in the value we are building."
• Strategic Narrative: Framed as a "region that rallied," with leadership emphasizing resilience, readiness, and a "post-conflict box" opportunity that is now a budget line item rather than a slogan.
• Commitment: Reiterated commitment to "decoupling activity from export" and keeping the ecosystem warm; expressed strong belief in the long-term value of being the "national champion" and the only pure-play listed entity in the MENA oilfield services space.
• Shareholder Return: Dividend initiation cited as a definitive signal of confidence in future cash flows and financial stability.

Miscellaneous:

• Dividend Details: First dividend of $0.10/share payable Dec 10, 2026; future dividends subject to Board approval and financial position.
• Lithium Timeline: Firm obligation to deliver first 2,000 tons by December 2027; commercial scaling expected immediately after successful pilot/commercial launch.
• Capital Structure: Net leverage of 0.44x as of Sept 30, 2026, providing flexibility for organic growth and counter-cyclical investments.