What National Energy Services Reunited (NESR) Said on Its Q3 Earnings Call

Key Points

• Third-quarter revenue climbed 70.9% year over year to $504.7 million, led by Saudi Arabia’s Jafurah contract and activity in other markets, though revenue declined 3.1% sequentially amid regional disruptions. NESR maintained its 2026 targets of about $2 billion in revenue and a 20% adjusted EBITDA margin.
• The board approved NESR’s first dividend of $0.10 per share, payable Dec. 10, and the company expects to continue quarterly dividends subject to board approval. Free cash flow was negative $45.9 million in Q3, but management expects improved cash flow as collections recover.
• NESR reaffirmed its goal of reaching $3 billion in annual revenue by the end of 2028 and is advancing a $200 million lithium contract, with first delivery due by the end of 2027. Management sees the lithium business as a potential $1 billion opportunity over five years if the project succeeds and similar brines are identified.

National Energy Services Reunited NASDAQ: NESR reported a 70.9% increase in third-quarter revenue and announced its first dividend, as the oilfield services company maintained its growth outlook despite regional geopolitical disruptions.

Revenue rose to $504.7 million from a year earlier, driven primarily by the Jafurah contract in Saudi Arabia and higher activity in Kuwait, Oman, Abu Dhabi and Algeria, Chief Financial Officer Stefan Angeli said. Revenue fell 3.1% from the second quarter, partly because of disruptions in the Gulf Cooperation Council region and Iraq.

The company maintained four active hydraulic fracturing fleets at Jafurah throughout the quarter. Chairman and Chief Executive Officer Sherif Foda said a fifth fleet had arrived in Saudi Arabia and could be called into service toward the end of the fourth quarter, although the timing is up to customer Aramco.

Margins and cash flow

Third-quarter adjusted EBITDA was $95.9 million, with a margin of 19%. Angeli said the company incurred approximately $5.5 million in incremental freight and logistics costs, primarily for special charters and other contingency measures. Excluding those costs, the adjusted EBITDA margin would have been approximately 20.1%, he said.

Adjusted net income rose 156.8% year over year to $39.6 million, though it fell 12.8% sequentially. Adjusted diluted earnings per share were $0.38.

Free cash flow was negative $45.9 million in the third quarter, reflecting increased working capital needs, capital spending and temporarily slower customer collections. Angeli said a significant portion of the delayed receivables was collected early in the fourth quarter.

NESR also increased inventory by approximately $45 million to $50 million over six months as part of contingency sourcing plans. Capital spending was $42.7 million in the third quarter and $152.8 million for the first nine months. Year-to-date operating cash flow totaled $201.5 million, producing free cash flow of $48.7 million.

Outlook and dividend

Angeli said NESR now views approximately $2 billion, plus or minus, as its full-year 2026 revenue goal. The company expects an adjusted EBITDA margin of approximately 20%, including additional freight and logistics costs, and capital spending of approximately $220 million to $225 million.

NESR expects full-year free cash flow conversion of approximately 30% to 35% of adjusted EBITDA. Angeli said fourth-quarter cash flow should improve with stronger collections, more efficient working capital management and normal year-end seasonal trends.

The board approved a first dividend of $0.10 per share, payable Dec. 10 to shareholders of record as of Dec. 3. Angeli said the company expects to continue quarterly dividends, subject to board approval and consideration of its financial position and liquidity needs.

NESR also completed a refinancing providing approximately $747 million in aggregate facilities, including approximately $298 million in term financing and $449 million in uncommitted working capital and credit facilities. The arrangements provide $219 million in additional financing capacity, Angeli said. At Sept. 30, the company had $267.3 million in gross debt and $160.5 million in net debt.

Growth plans and post-conflict demand

Foda reaffirmed NESR’s longer-term “3B3” strategy targeting $3 billion in annual revenue. He said the company was on track to reach that level by the end of 2028, citing projects in hand, potential contract awards, lithium and its ROYA technology platform. NESR expects to begin announcing ROYA commercialization next quarter, he said.

Asked about 2027, Foda said he expected the broader Middle East market to be roughly flat if conditions in the Strait of Hormuz remained unchanged, but anticipated NESR would grow because of its project portfolio and exposure to areas where investment is continuing.

Angeli said 2027 margins could be similar to or slightly above current levels if the conflict persists. If it ends, he said margins could approach the roughly 21.3% level he discussed a year earlier, while cautioning that results would depend on factors including country mix and pricing pressure.

Foda expects a resolution or significant easing of the conflict to create demand first for intervention and completion services, including coiled tubing, slickline and workover activity, before new drilling accelerates. He said customers could also invest in longer-term capacity and infrastructure projects.

Lithium project advances

Beyond its core oilfield services business, NESR announced a $200 million lithium contract. Foda said the company is moving from a successful pilot to demonstration scale and is obligated to deliver its first lithium by the end of 2027. He said NESR is working with suppliers and partners to deliver 2,000 tons in December of that year.

Foda estimated that the lithium business could represent a potential $1 billion opportunity over five years if the project succeeds and similar brines are found elsewhere. He also said NESR is moving ahead with water pilots in Oman, while acknowledging that those projects will take time to develop.

About National Energy Services Reunited (NASDAQ:NESR)

National Energy Services Reunited Corp. (NESR) provides oilfield services to exploration and production companies. Its offerings support drilling, well construction and the production and maintenance of oil and gas wells.

The company's services include drilling and evaluation work, such as directional drilling and wireline services, as well as production services including well intervention, stimulation and artificial lift. Its work is designed to help customers develop and operate energy resources throughout the life of a well.

Formed in 2017 through the combination of National Petroleum Services and Gulf Energy, NESR serves customers across the Middle East, North Africa and Asia.

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