Half Year 2024 National Energy Services Reunited Corp Earnings Call
Greetings.
Greetings welcome to Nessa reports first half 'twenty 'twenty four financial results at this time all participants are in a listen only mode. A question and answer session will follow the floor about presentation.
Operator: Welcome to Nestor Report's First Half, 2024 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Blake Gendron, Vice President of Investor Relations. Thank you you may begin.
Blake Gendron: I will now turn the conference over to Blake Gendron, Vice President of Invest Relations.
Blake Gendron: Thank you, you may begin. Thank you, Sherry.
Speaker Change: Thank you Sheri good day and welcome to <unk> second quarter 2024 earnings call with me today are Sharif, OTA, Chairman and Chief Executive Officer of Ness, and Stephane <unk> Chief Financial Officer on today's call. We will comment on our second quarter and first half results and overall performance. After our prepared remarks, we will open the call to <unk>.
Blake Gendron: Good day and welcome to Nestor's second quarter, 2024 earnings call. With me today are Sherif Foda, Chairman and Chief Executive Officer of Ness, and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our second quarter and first half results and overall performance.
Blake Gendron: After our prepared remarks, we will open 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 the 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 reconciliation to the most directly comparable GAAP financial measures can be found in the press release, which is on our website.
Speaker Change: 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.
Speaker Change: 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 the 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.
Blake Gendron: 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.
Blake Gendron: Now, I'll hand the call over to Sherif.
Oliver to Sheree.
Sherif Foda: Thanks, Blake.
Sheree: Thanks Blake.
Sherif Foda: Ladies and gentlemen, good morning, and thank you for participating in this conference call. We are pleased to report continued momentum in the first half of 2024, following a solid 2023 and ahead of further expansion for the foreseeable future. Despite the uncertainty caused by ongoing geopolitical events in the region, as of today, I am pleased to relay that the multi-year outlook remains robust, driven by historically high activity levels and rig counts across the Meena region.
Sheree: Ladies and gentlemen, good morning, and thank you for participating in this conference call.
Sheree: We are pleased to report continued momentum in the first half of 2024 following a solid 2023 and ahead of further expansion for the foreseeable future.
Speaker Change: Despite the uncertainty caused by ongoing geopolitical events in the region as of today I am pleased to relay that the multi year outlook remains robust.
Speaker Change: Driven by historically high activity levels and rig counts across the Mena region.
Sherif Foda: Before I hand over the call to Stefan to discuss the financials and progress on our remediation plan, I want to first provide the business overview and an update on our geographic footprint and portfolio positioning. I am proud of our entire team for successfully managing the business over the past couple of years in close collaboration with our supportive customers to achieve remarkable growth and technology gains, as seen in our strong results. Over the past year and a half, we've made progress in the two key areas of our growth strategy, core and frontier, focusing on our geographical footprint with the establishment of additional anchor countries outside of our original position of Saudi Arabia and Oman.
Speaker Change: Before I handover the call to Stephane to discuss the financials and progress on our remediation plan I want to first provide a business overview and an update on our geographic footprint and portfolio positioning.
Operator: Welcome to Nestor Report's first half, 2024 financial results. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: I'm proud of our entire team for successfully managing the business over the past couple of years in close collaboration with our supportive customers to achieve remarkable growth and technology gains as seen in our strong results.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
Blake Genron: I will now turn the conference over to Blake Genron, Vice President of Invest relations. Thank you. You may begin. Thank you, Sherry.
Speaker Change: Over the past year and a half we've made progress in two key areas of our growth strategy core and frontier.
Blake Genron: Good day, and welcome to Nestor's second quarter, 2024 earnings call.
Blake Genron: With me today, our Sharifota, Chairman and Chief Executive Officer of Nest, and Stepanangely, Chief Financial Officer. On today's call, we will comment on our second quarter and first half results and overall performance. After our prepared remarks, we will open the call to questions.
Focusing on our geographical footprint with the establishment of additional anchor countries outside of our original position of Saudi Arabia and Oman.
Sherif Foda: And also expanding our technological reach in our drilling portfolio and our decarbonization segment, Nida. Geographically, over the past six quarters, we saw substantial progress and benefits from our recently established anchor countries. We define anchor countries as those in which Ness has prominent market share in multiple core projects and service lines. A foundation from which we can build our share in poor technologies and pull through other segments to broaden our service scope. In addition to Saudi Arabian Oman, we've grown substantially in Kuwait, UAE, Iraq, Egypt, and Algeria. Having established our vision and core services capability to become a leader in cementing, called Juving, fracturing and stimulation services, well-testing, slick line, case hole logging, fishing and downhole tools, and juving running services.
And also expanding our technological reach and our drilling portfolio and our decarbonization segment mid day.
Blake Genron: 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 the 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-gap financial measures. Additional details on reconciliation to the most directly comparable gap financial measures can be found in the press release, which is on our website. Finally, feel free to contact us after the call with any additional questions you may have. Our industrial relations contact information is available on our website.
Speaker Change: Geographically over the past six quarters, we saw substantial progress and benefits from our recently established anchored countries.
Speaker Change: We define anchor countries as those in which NES has prominent market share in multiple core product and service lines.
Speaker Change: Nation from which we can build our share in both technologies and pull through other segment to broaden our service scope.
Speaker Change: In addition to Saudi Arabia in Annan, we've grown substantially in Kuwait, UAE, Iraq, Egypt and Algeria.
Sharifota: Now, I'll hand the call over to Sharif. Thanks, Blake.
Sharifota: Ladies and gentlemen, good morning and thank you for participating in this conference call. We are pleased to report continued momentum in the first half of 2024, following a solid 2023 and ahead of further expansion for the foreseeable future. Despite the uncertainty caused by ongoing geopolitical events in the region, as of today, I am pleased to relay that the multi-year outlook remains robust, driven by historically high activity levels and rigged counts across the Meena region.
Having established our vision and core services capability to become a leader in cementing coiled tubing fracturing and stimulation services, well testing slick line cased hole logging fishing and downhole tools and tubing running services.
Sherif Foda: In other words, for the majority of those product lines, we want to have a top five market share position in anchor countries. This allows us to better leverage our supply chain, infrastructure, improve operating leverage, and grow other segments with plenty of runway and existing service and new technology in each country. In Kuwait, which remains a notable driver of growth in 2024, we continue to integrate and work diligently to qualify additional segments, which laid the groundwork for pivotal, long-term contract awards that make room for additional service and technology introduction over time, such as drilling segments. In UAE, we greatly expanded our footprint organically with key multi-year contract wins in core segments such as, called Juving, cementing, and well-testing.
Speaker Change: In other words for the majority of those product line, we want to have a top five market share position and anchored countries.
Speaker Change: This allows us to better leverage our supply chain infrastructure.
Sharifota: Before I hand over the call to Stephen to discuss the financials and progress on our remediation plan, I want to first provide the business overview and an update on our geographic footprint and portfolio positioning. I am proud of our entire team for successfully managing the business over the past couple of years in close collaboration with our supportive customers to achieve remarkable growth and technology gains as seen in our strong results. Over the past year and a half, we've made progress in the two key areas of our growth strategy, core and frontier.
Speaker Change: Improve operating leverage and grow other segment with plenty of runway in existing service in new technology in each country.
Speaker Change: In Kuwait, which remains a notable driver of growth in 2024, we continue to integrate and work diligently to qualify additional segments, which laid the groundwork for pivotal long term contract awards that make room for additional servicing technology introduction over time.
Speaker Change: Such as drilling segments.
Speaker Change: And UAE, we greatly expanded our footprint organically with key multiyear contract wins in core segments, such as coiled tubing, cementing and well testing.
Sharifota: Focusing on our geographical footprint with the establishment of additional anchor countries outside of our original position of Saudi Arabianoman and also expanding our technological reach in our drilling portfolio and our decarbonization segment Nida. Geographically over the past six quarters, we saw substantial progress and benefits from our recently established anchor countries. We define anchor countries as those in which Ness has prominent market share in multiple core product and service lines. A foundation from which we can build our share in poor technologies and pull through other segments to broaden our service scope.
Sherif Foda: In Iraq and Algeria, we've achieved strong segment pull-through, capitalizing on working relationships with both national and multinational IOC in both countries. In Egypt, we've established ourselves as leader in several segments and entered the production chemical industry, along with our leadership in Kuwait, Juving, case hole logging, testing, slick line, and recent fracturing activity, especially with the success of the first pure play on conventional resource in the country. Our growth strategy begins with our anchor countries and core service lines, and we are all pleased with the progress made on this front and the opportunities to continue these games into the future.
Speaker Change: In Iraq in Algeria, we achieved strong segment pull through capitalizing on working relationship with both national and multinational IOC in both countries.
Speaker Change: In Egypt, we've established ourselves as leader in separate segment and entered the production chemical industry, along with our leadership in coiled tubing cased hole logging testing slick line and recent fracturing activity, especially with the success of the first pure play unconventional.
Speaker Change: Resource in the country.
Speaker Change: Our growth strategy begins with our anchor countries and core service lines and we are all pleased with the progress made on this front and the opportunity to continue with these gains into the future.
Sharifota: In addition to Saudi Arabianoman, we've grown substantially in Kuwait, UAE, Iraq, Egypt and Algeria. Having established our vision and core services capability to become a leader in cementing, called Juving, fracturing and stimulation services, well-testing, slick line, case hole logging, fishing and downhole tools, and Juving running services. In other words, for the majority of those product lines, we want to have a top five market share position in anchor countries. This allows us to better leverage our supply chain, infrastructure, improve operating leverage and grow other segments with plenty of runway and existing service and new technology in each country.
Sherif Foda: Speaking of technology and the future, we've also made progress on the second pillar of our growth strategy in the frontier area of new innovation. In this domain, we've both invested in long-term research and development and collaborative technology partnership. Since the founding of the company, we've identified the need to invest in the next generation of downhill technologies to compete in the sophisticated, high-end, high-return direction drilling services. We've committed to the investment thesis in the pursuit of a rotary steerable tool and a company measurement while drilling and logging while drilling technology. While the development of these tools has historically, in our sector, been a long and painful journey of repeated field testing and reliability improvement, we remain steadfast in our development program and are pleased with the progress that we've achieved thus far.
Speaker Change: Speaking of technology in the future. We've also made progress on the second pillar of our growth strategy.
Speaker Change: And the frontier area of new innovation in this domain with both invest in the long term research and development and collaborative technology partnership.
Speaker Change: Since the founding of the company, we've identified the need to invest in the next generation of downhole technologies to compete in the sophisticated high end high return direction drilling services.
Speaker Change: With committed to the investment thesis and the pursuit of our rotary <unk> tool and accompanying measurement, while drilling and logging while drilling technology.
Speaker Change: While development of these tools has historically in our sector has been a long and painful journey of repeated field testing and reliability improvement we remain steadfast in our development program and are pleased with the progress that we've achieved thus far.
Sharifota: In Kuwait, which remains a notable driver of growth in 2024, we continue to integrate and work diligently to qualify additional segments which laid the groundwork for pivotal, long-term contract awards that make room for additional service and technology introduction over time, such as drilling segments. In UAE, we greatly expanded our footprint organically with key multi-year contract wins in core segments such as, called Juving, cementing and well-testing. In Iraq and Algeria, we've achieved strong segment pull-through capitalizing on working relationships with both national and multinational IOC in both countries.
Sherif Foda: Over the past couple of years, a combination of collaborative engineering, meticulous planning, and continuous improvement have yielded to a total of more than 70,000 feet of field-testing experience across multiple countries globally. This progress culminated in the official commercial launch of our Rovia downhaul drilling platform this year in February, and we were thrilled to announce and feature our Rovia family of tools at the leading IPTC industry event in Saudi Arabia, followed by the recent office in Oman. With the recent award of multiple contracts in the region, we have secured the long-term platform to execute our strategy and commercialization plans.
Speaker Change: Over the past couple of years, a combination of collaborative engineering meticulous planning and continuous improvement have yielded to a total of more than 70000 feet of field testing experience across multiple countries globally.
Speaker Change: This progress culminated in the official commercial launch of our downhole.
Speaker Change: Downhole drilling platform. This year in February and we were thrilled to announce and featured our <unk> family of tools at the leading IPCC industry event in Saudi Arabia, followed by the recent office in on that.
Sharifota: In Egypt, we've established ourselves as leader in several segments and entered the production chemical industry along with our leadership in Kuwait, Juving, case hole logging, testing, slick line and recent fracturing activity, especially with the success of the first pure play on conventional resource in the country.
Speaker Change: With the recent award of multiple contracts in the region. We have secured a long term platform to execute our strategy and commercialization plans.
Sherif Foda: Now let me shift to another key area of new technology development, our recently announced NIDA segment, which encompasses a portfolio of solutions in the area of water, methane, heat, and new energies. NIDA stands for NEST Environmental and Decarbonization Application, and translates to Arabic as called to action, reflecting the imperative of the upstream sector to lead in creating more sustainable oil and gas supply with minimal emission and carbon footprint. We originally launched the segment as ESG Impact back in 2021, centered around several early stage investments and partnerships in areas such as flare gas, produced water, and heat.
Speaker Change: Now, let me shift to another key area of New technology development, Our recently announced mid that segment, which encompasses a portfolio of solution in the area of water methane.
Sharifota: Our growth strategy begins with our anchor countries and core service lines and we are all pleased with the progress made on this front and the opportunities to continue these games into the future. Speaking of technology and the future, we've also made progress on the second pillar of our growth strategy in the frontier area of new innovation. In this domain, we've both invested in long-term research and development and collaborative technology partnership. Since the founding of the company, we've identified the need to invest in the next generation of downhill technologies to compete in the sophisticated high-end, high-return direction drilling services.
Speaker Change: And new entities.
Speaker Change: Net debt stands for NES, environmental and Decarbonization application.
Speaker Change: And translate to Arabic call to action.
Speaker Change: Reflecting the imperative of the upstream sector to lead and creating more sustainable oil and gas supply with minimal emissions and carbon footprint.
Speaker Change: We originally launched the segment as ESG impact back in 2021 centered around several early stage investments and partnership in areas such as flare gas produced water and heat.
Sherif Foda: Produced water treatment technology and the broader circular water concept are key focuses within NIDA. Given the dual challenge in NIDA of rising produced wastewater volumes and lack of renewable fresh water resources. In the last 18 months, we successfully completed the second pilot of our zero liquid discharge technology with Aramco. In this application, we can essentially treat high salinity produced reservoir water for reuse in subsequent stimulation operations. thereby eliminating the consumption of precious fresh water from the aquifer. Our goal is to now scale up the ZLD technology, potentially in combination with other applications for carbon-circular economy, ensuring we can deliver with our customer a unique solution to the world.
Produced water treatment technology, and the broader circuit water concept are a key focus within Nevada given.
Sharifota: We've committed to the investment thesis in the pursuit of a rotary steerable tool and accompanying measurement while drilling and logging while drilling technology. While the development of these tools has historically in our sector been a long and painful journey of repeated field testing and reliability improvement, we remain steadfast in our development program and are pleased with the progress that we've achieved thus far. Over the past couple of years, a combination of collaborative engineering, meticulous planning, and continuous improvement have yielded to a total of more than 70,000 feet of field testing experience across multiple countries globally.
Speaker Change: Given the dual challenge in Mena of rising produce wastewater volumes and lack of renewable freshwater resources.
Sharifota: This progress culminated in the official commercial launch of our Rovia downhole drilling platform from this year in February, and we were thrilled to announce and feature our Rovia family of tools at the leading IPTC industry event in Saudi Arabia, followed by the recent office in Oman. With the recent award of multiple contracts in the region, we have secured the long-term platform to execute our strategy and commercialization plans.
Speaker Change: And the last 18 months, we successfully completed the second pilot of our zero liquid discharge technology with Aramco.
Speaker Change: In this application we can essentially three tie salinity produce reservoir water for reuse and subsequent stimulation operation.
Speaker Change: Thereby eliminating the consumption of breakfast fresh water from the aquifer.
Speaker Change: Our goal is to now scale up the DLD technology potentially in combination with other application for carbon circle economy, ensuring we can deliver with our customer a unique solution to the word.
Sherif Foda: Also in recent quarters, we completed the continuous methane-monitor project with a multi-national oil and gas provider in the GCC, and we continue to evaluate a full implementation within this customer field and demonstrate those results to other clients in the region. Using CUBE technology's latest monitoring and cloud-based modeling, we know we can detect from zero to 100 kilograms per hour of greenhouse gases, which is essential to provide the baseline for the CUP-28 pledge of the top ENP companies of totally eliminating methane by 2030. In order to do that and provide assurance to the world that reported emissions are based on science and re-measurement and not just modeling.
Speaker Change: Also in recent quarters, we completed the continuous methane monitored project with a multinational oil and gas provider in the GCC and we're continuing to evaluate a full implementation within this customer for you and demonstrate those result to other clients in the region.
Speaker Change: Using cube technology lead this monitoring and cloud based modeling we know we can detect from zero to 100 kilogram per hour greenhouse gases, which is essential to provide the baseline for the 20th pledge.
Sharifota: Now, let me shift to another key area of new technology development. Our recently announced NIDA segment, which encompass a portfolio of solutions in the area of water, methane, heat, and new energies. NIDA stands for NEST environmental and decarbonization application, and translates to Arabic as called to action, reflecting the imperative of the upstream sector to lead in creating more sustainable oil and gas supply with minimal emission and carbon footprint. We originally launched the segment as ESG Impact, back in 2021, centered around several early stage investments and partnerships in areas such as flare gas, produce water, and heat.
Speaker Change: The top E&P companies of totally eliminating missing by 2030.
Speaker Change: In order to do that and provide assurance to the word that reported admission are based on science and re measurement and not just modeling.
Sherif Foda: As the industry in North America has by deploying thousands of continuous monitoring sensors, the same approach is applicable to Nina. In Asia, we expanded our CCUS offering with a successful second-phase pilot injection and monitoring project. This is a great example of how NEDA can also adapt existing service capability to new energy opportunities. Overall, our strategy in NEDA is to leverage core competencies and cutting-edge technologies. Sometime outside technology, native to non-oil and gas sector, to attack completely new market opportunities. It is worth noting that, like with any new solution in production, our sector, the technology development and sales become very considerable.
Speaker Change: As the industry in North America had by deploying thousands of continuous monitoring sensors. The team approach is applicable to neenah.
Speaker Change: In Asia, we expanded our <unk> offering with the successful second phase pilot injection and monitoring project. This is a great example of how <unk> can also adapt existing service capability to new energy opportunities.
Speaker Change: Overall, our strategy and Nida is to leverage core competencies and cutting edge technologies.
Sharifota: Produce water treatment technology and the broader circle of water concept are key focus within NIDA, given the dual challenge and mean of rising produce with water volumes and lack of renewable fresh water resources. In the last 18 months, we successfully completed the second pilot of our zero-liquid discharge technology with Aramco. In this application, we can essentially treat high salinity produced reservoir water for reuse in subsequent stimulation operation, thereby eliminating the consumption of precious fresh water from the aquifer.
Speaker Change: Sometime outside technology native to non oil and gas sector.
Speaker Change: Attack completely new market opportunities.
Speaker Change: It is worth noting that like with any new solution introduction, our sector, the technology development and sales become very considerably.
Sherif Foda: And we therefore take a long-term view of the growth potential for NEDA.
Nevada: And we therefore take a long term view of the growth potential for Nevada.
Sherif Foda: To capitalize on all our technology roll-outs, we continue to expand on the high-power understanding of the subsurface, in which we made the substantial investment in our research facility, Nori. And we continue to invest and bring new partners to the region, similar to our investment approach in Vilvengotten, when we brought his unique lab from Houston to Dahran, the heart of Saudi Arabia. This enables full cycle understanding from subsurface to pipeline, including the decarbonization aspect of every piece of the puzzle.
Nevada: To capitalize on all our technology Rollouts, we continue to expand on the high power understanding of the subsurface in which we made a substantial investment in our research facility Norrie.
Sharifota: Our goal is to now scale up the CLD technology, potentially in combination with other applications for carbon-circular economy, ensuring we can deliver with our customer a unique solution to the world. Also in recent quarters, we completed the continuous methane-monitor project with a multinational oil and gas provider in the GCC, and we continue to evaluate a full implementation within this customer field and demonstrate those results to other clients in the region. Using CUBE technology latest monitoring and cloud-based modeling, we know we can detect from 0-100 kilogram per hour greenhouse gases, which is essential to provide the baseline for the COP28 pledge of the top ENP companies of totally eliminating methane by 2030.
Nevada: And we continue to invest and bring new partners to the region similar to our investment approach and built and gotten when we brought his unique lab from Houston to Diuron, the heart of Saudi Arabia.
This enables full cycle understanding from subsurface to pipeline included the decarbonization aspect of every piece of the puzzle.
Stefan Angeli: With that, I pass it over to Stefan to discuss the financials in detail.
Nevada: With that I pass it over to Stephane to discuss the financials in detail.
Stephane: Okay. Thank you Sherri.
Stephane: Turning to our audience in the U S and good morning, good afternoon to our audience in the Middle East North Africa.
Stephane: With the completion of the restatement late last year and the remedial milestones achieved this year. It is good to finally be vacuum gauging the market directly.
Stefan Angeli: Last year, in the remedial milestones achieved this year, it is good to finally be back engaging the market directly in this earnings call. In the future, we look forward to normal quarterly earnings reporting. I am very, very pleased with our half-124 financial performance and our overall results. Sequentially, half-124 revenue grew 15.5% against half-123 revenue, with exceptionally strong activity in the Gulf countries. Adjusted EBTA grew 27.6% to 142.9 million, with 37% fall through a year-on-year, and adjusted EBTA margins expanding 218 basis points to 23%. Despite macroeconomic volatility and geopolitical conflicts, the meaner landscape remains very favorable to growth across most countries, as you just heard from Sharif.
Sharifota: In order to do that and provide assurance to the world that reported emissions are based on science and re-measurement and not just modeling. As the industry in North America has, by deploying thousands of continuous monitoring sensors, the same approach is applicable to Nina. In Asia, we expanded our CCUS offering with a successful second-phase pilot injection and monitoring project. This is a great example of how NEDA can also adapt existing service capability to new energy opportunities.
Stephane: Earnings call in the future, we look forward to normal quarterly earnings reporting.
Speaker Change: I am very very pleased with our half one 'twenty four financial performance and our overall results sequentially off $1 24 revenue grew 15, 5% against half one 'twenty three revenue with exceptionally strong activity in the Gulf countries.
Speaker Change: <unk> EBITA grew 27, 6% to $142 9 million with 37% pull through year on year and adjusted EBITDA margins.
Speaker Change: <unk> 219 basis points to 23%.
Sharifota: Overall our strategy in NEDA is to leverage core competencies and cutting edge technologies. Sometime outside technology, native to non-oil and gas sector, to attack completely new market opportunities. It is worth noting that like with any new solution and reduction our sector, the technology development and sales become very considerable. And we therefore take a long-term view of the growth potential for NEDA. To capitalize on all our technology rollouts, we continue to expand on the high-power understanding of the subsurface, in which we made the substantial investment in our research facility, Norey.
Speaker Change: Despite macroeconomic economic volatility and geopolitical conflicts the meda landscape remains very growth across most countries as you just heard from Sharif.
Stefan Angeli: So, all this translates into half-one earnings, excluding charges and credits of $0.44 per share.
Speaker Change: So all of this translates into half one earnings excluding charges and credits of <unk> 44 cents per share.
Stefan Angeli: The charges and credits were approximately 14 cents, principally made up of two items. Firstly, the cost associated with the combination of the restatement of 18-21 accounts, the SEC investigation of the restatement, and the ongoing remediation of material weaknesses in relation to our internal controls; and secondly, the credit-loss provision in relation to a particular North African country. Furthermore, throughout 2024 so far, activity has continued to expand, with revenues for Q2, 24, up 9.5% sequentially versus Q1, 24, to $325 million. Adjusted EBTA margin also expanded sequentially, expanding 257 basis points to 24.2% in Q2, 24. Interest expense for half $124 was $20 million dollars, with $10.6 million in Q124 and $9.4 million in Q224.
Speaker Change: <unk> and credits were approximately 14.
Speaker Change: Principally made up of two items firstly, the cost associated with the combination of the restatement.
Speaker Change: 21 accounts, the FCC investigation of the restatement.
Speaker Change: <unk> remediation of material weaknesses in relation to our internal controls and secondly, the credit loss provision in relation to a particular north African country.
Sharifota: And we continue to invest and bring new partners to the region, similar to our investment approach in Vilvengotten, when we brought his unique lab from Houston to Dahran, the heart of Saudi Arabia. This enables full cycle understanding from subsurface to pipeline, including the decarbonization aspect of every piece of the puzzle.
Speaker Change: Furthermore throughout 2024, so far activity has continued to expand with revenues for Q2, 24 up nine 5% sequentially versus Q1 $24 million to $325 million.
Speaker Change: Adjusted EBITDA margin also expanded sequentially, expanding 257 basis points to 24, 2% in Q2 24.
Stefanangely: With that, I pass it over to Stefan to discuss the financials in details. Last year, in the remedial milestones achieved this year, it is good to finally be back engaging the market directly in this earnings call.
Speaker Change: Interest expense for half one 'twenty four was $20 million with $10 6 million in Q1, 'twenty four and $9 4 million in Q2, 'twenty four we expect half to interest expense to be around $17 million in line with lower debt half 124%.
Stefan Angeli: We expect half to interest expense to be around $17 million in line with lower debt. Half $124 effective tax rate was 26.8%; the H2 rate should be the same or slightly lower or improved income before tax. Now turning to our liquidity, our cash flow was strong as we generated $112.3 million from operations during half $124. We expect our operating cash flow to continually strong during the rest of the year. We generated free cash flow totally $59.6 million, which was principally used to pay down debt. Gross debt as at the earnings of June 24 was $407 million dollars, which is a reduction of $128 million over the last 18 months.
Speaker Change: Effective tax rate was 26, 8%.
Stefanangely: In the future, we look forward to normal quarterly earnings reporting. I am very, very pleased with our half-124 financial performance and our overall results. Sequentially, half-124 revenue grew 15.5 percent against half-123 revenue, with exceptionally strong activity in the Gulf countries. Adjusted EBTA grew 27.6 percent to 142.9 million, with 37 percent fall through year-on-year, and adjusted EBTA margins, expanding 218 basis points to 23 percent. Despite macroeconomic volatility and geopolitical conflicts, the meaner landscape remains very favorable to growth across most countries, as you just heard from Sharif.
Speaker Change: <unk> II rates should be the same or slightly lower or improved income before tax.
Now turning to our liquidity our cash flow was strong as we generated $112 3 million from operations during half $1 24, we expect the operating cash flow to continue to be strong during the rest of the year, we generated free cash flow totaled $59 6 million, which was principally used to pay down debt.
Speaker Change: Gross debt as a percentage of June 24 was $407 million.
Speaker Change: Which is a reduction of $128 million over the last 18 months.
Stefan Angeli: Net debt to trailing the justice of beta was 1.13 as of June 30, 24 versus 1.47 at December 23 and 2.8 at December 22, which is an encouraging trend. Working capital levels have remained almost flat despite revenue growth, which in 23 was 26% and in H124 was 15.5% versus the prior periods. This has been principally driven by a decrease in DSO over the last 18 months of seven days and the reduction in infantry levels by just over 10% as our process improvements have made us more efficient. And now the capital investment for H124 was 52.7 million.
Speaker Change: Net debt to trailing adjusted the data was 113 as of June 30, 24 versus $1 47 at December 23, and $2 eight at December 'twenty, two which is an encouraging trend.
Stefanangely: So all this translates into half-one earnings, excluding charges and credits of $0.44 per share. The charges and credits were approximately 14 cents, principally made up of two items. Firstly, the cost associated with the combination of the restatement of $18.21 accounts, the SEC investigation of the restatement and the ongoing remediation of material weaknesses in relation to our internal controls, and secondly, the credit-loss provision in relation to a particular North African country. Furthermore, throughout 2024 so far, activity has continued to expand with revenues for Q2, 24, up 9.5 percent sequentially versus Q1, 24, to $325 million.
Speaker Change: Working capital levels have remained almost flat despite revenue growth 23 was 26% and an H 124 was 15, 5% versus the prior periods. This has been principally driven by a decrease in DSO DSO over the last 18 months of seven days and a reduction in.
Speaker Change: And inventory levels by just over 10% is a.
Speaker Change: Process improvements have made us more efficient.
Speaker Change: And now the Capex capital investment for <unk> hundred 24 was $52 7 million, we expect full year 'twenty four capex to be in the facility of 120 billion slightly higher than what than we initially.
Stefan Angeli: We expect full year 24 caps to be in the vicinity of 120 million, slightly higher than what then we initially anticipated, due to the award of two large directional drilling projects, which is exceptionally good news and supportive of our strategy that Sharif has just discussed.
Speaker Change: As we anticipated due to the award of two large directional drilling projects, which is exceptionally good news and supportive of our strategy that <unk> just discussed but this requires depreciable upfront investment.
Stefanangely: Adjusted EBTA margin also expanded sequentially, expanding 257 basis points to 24.2 percent Interest expense for half 1.24 was 20 million dollars with 10.6 million in Q1.24 and 9.4 million in Q2.24. We expect half to interest expense to be around 17 million in line with lower debt. Half 1.24 effective tax rate was 26.8%. The H2 rate should be the same or slightly lower or improved income before tax.
Stefan Angeli: But this requires appreciable upfront investment. All what I've said so far has concluded in our return on capital employees percentage going into double digit figures as of June 30, 24, and it should only improve going forward.
Speaker Change: All of what I've said, so far is concluded and our return on capital employed percentage going into double digit figures as of June 30, 'twenty four and it should only improve going forward.
Stefan Angeli: Now on to some health keeping topics. As you may have seen last night with the SEC announcement, after roughly a year we have concluded our inquiry by the Security Exchange Commission into the restatement about 18 to 20 accounts and the reasons for this restatement. The SEC press release is very clear. In summary, there was no finding of fraud on the restatement. We accepted a fine of $400,000 for the restatement internal control failings. And we have one year to remediate our internal control weaknesses from yesterday. We have spent the last 18 months restructuring our back office with new and updated processes and procedures combined with the latest software upgrades.
Speaker Change: Now onto some housekeeping topics as you may have seen last night with the FCC announcements.
Speaker Change: Roughly a year, we have concluded that our inquiry by the Securities Exchange Commission is the restatement of elevator into 'twenty accounts and the reasons for this restatement.
Speaker Change: <unk> press release is very clear in summary, there was no findings of fraud on the restatement, we accepted a $5 $400000 for the restatement of internal control filings and we have one year to remediate the internal control weaknesses from yesterday.
Stefanangely: Now turning to our liquidity. Our cash flow was strong as we generated 112.3 million from operations during half 1.24. We expect our operating cash flow to continue being strong during the rest of the year. We generated free cash flow totally 59.6 million which was principally used to pay down debt. Gross debt as at the turning price of June 24 was $407 million which is a reduction of $128 million over the last 18 months.
Speaker Change: We have spent the last 18 months restructuring our back office with new and updated processes and procedures combined with the latest software upgrades and we are confident that we'll be able to demonstrate the remediation of our internal control weaknesses.
Stefan Angeli: And we are confident that we will be able to demonstrate the remediation of our internal control weaknesses. This conclusion is very positive to use for the company after the last 30 months of restatements, investigation inquiries, and remediation efforts.
Stefanangely: Net debt to trailing the just as a beta was 1.13 as of June 30, 24 versus 1.47 at December 23 and 2.8 at December 22 which is an encouraging trend. Working capital levels have remained almost flat despite revenue growth which in 23 was 26% and in H1.24 was 15.5% versus the prior periods. This has been principally driven by a decrease in DSO over the last 18 months of seven days and the reduction in infantry levels by just over 10% as our process improvements have made us more efficient.
Speaker Change: This conclusion is very positive for the company. After the last 30 months restatements investigations inquiries and remediation efforts.
Stefan Angeli: Now regards to Nasdaq release. Now, as the conclusion of the SEC investigation in the filing of our half-124 accounts with the SEC today, we'll engage with the data immediately to see what our position is and will update you on the status once we know. So in summary, half-24 was solid financially, with very strong revenue growth, stronger justice and data, and healthy cash flow conversion, which has been used to pay down debt and strengthen our balance sheet. We believe that most of the past disruption from the restatement is now materially over. Therefore, on behalf of management, I'd like to thank our entire workforce, firstly for not financed and supply chain employees and consultants for their efforts in the restatement and remediation and changing our back-office systems, processes and procedures; and secondly to operations for delivering great execution performance; and thirdly, our loyal customers, our directors, our shareholders, and our banking consortium for their continued support.
Speaker Change: Now with regards to NASDAQ listing now with the conclusion of the SEC site SEC investigation and the <unk>.
Speaker Change: Half 124 accounts with the SEC today will engage with those that could meaningfully to see what our position is and we'll update you on the status once we know.
Speaker Change: So in summary.
Speaker Change: 84 was solid financially with very strong revenue growth strong adjusted data and healthy cash flow conversion, which has been used to pay down debt and strengthening our balance sheet. We believe that most of the past disruption from the restatement is now materially over therefore on behalf of management I'd like to thank our entire workforce.
Stefanangely: And now the capital investment for H1.24 was 52.7 million. We expect full year 24 caps to be in the vicinity of 120 million slightly higher than what then we initially anticipated due to the award of two large directional drilling projects which is exceptionally good news and supportive of our strategy that Sharif has just discussed. But this requires appreciable upfront investment. All what I've said so far has concluded in our return on capital employees percentage going into double digit figures as of June 30, 24 and it should only improve going forward.
Speaker Change: Firstly for finance and supply chain employees and consultants for their efforts in the restatement and remediation and changing our back office systems processes and procedures.
Speaker Change: <unk> two operations for delivering great execution performance and thirdly, our loyal customers, our directors, our shareholders and our banking consortium for their continued support.
Stefan Angeli: We expect normal quality and reporting moving forward, and we look forward to exiting 24 as a far larger and stronger corporation. Now I turn the call back to Sherif.
Speaker Change: We expect normal quarterly reporting moving forward and we look forward to exiting 'twenty for us.
Speaker Change: Turning stronger Corporation.
Stefanangely: Now on to some health keeping topics. As you may have seen last night with the SEC announcement, after roughly a year we have concluded our inquiry by the Security Exchange Commission into the restatement about 18 to 20 accounts and the reasons for this restatement. The SEC press release is very clear. In summary there was no finding to fraud on the restatement. We accepted a fine of $400,000 for the restatement internal control failings and we have one year to remediate our internal control weaknesses from yesterday.
Speaker Change: Now I'll turn the call back to Jerry.
Stefanangely: We have spent the last 18 months restructuring our back office with new and updated processes and procedures combined with the latest software upgrades and we are confident that we'll be able to demonstrate the remediation of our internal control weaknesses. This conclusion is very positive to use for the company after the last 30 months of restatements, investigation inquiries and remediation efforts.
Sherif Foda: Thanks, Stefan. Let me conclude by quickly commenting on the strong macro-environment and our similarly solid 2024 outlook. As you all know, geopolitical tension in the region has dominated headlines in recent months. While the future is impossible to predict precisely, I am pleased to relay that the countries in which we operate, particularly our core GCC countries, remain business as usual from an activity standpoint. Rick counts in natural four largest countries are at all time high and growing steadily. In Saudi Arabia, we are favorably positioned for the CapEx plan currently in place, and expect the kingdom to continue to be a growth driver for the company, both on the oil site and particularly in the unconventional gas development.
Jerry: Thanks Stefan.
Jerry: Let me conclude by quickly commenting on the strong macro environment and our similarly solid 2020 for outlook.
Speaker Change: As you all know geopolitical tension in the region have dominated headlines in recent months.
Speaker Change: While the future is impossible to predict precisely.
Speaker Change: I'm pleased to relate the countries in which we operate particularly our core GCC countries remains business as usual from an activity standpoint rig counts and Netsuite are four largest countries are at all time high and growing steadily.
In Saudi Arabia, we are favorably positioned for the Capex plan currently in place and expect the kingdom to continue to be a growth driver for the company both on the oil side and particularly in the unconventional gas development.
Sherif Foda: Despite the recent announcement of limiting the NSC to 12 million barrels and the release of the Jakub rigs, the overall activities remain higher than in 2023 as the gas program accelerates, in which our position is stronger. UE will continue on their increased capacity plans and will be a growth driver over the near and medium term, with plans moving ahead for both oil and gas expansion. Quaid is expected to have the biggest growth year on year, with solid expansion of oil capacity, offshore discovery, and massive infrastructure projects. It is announced lately by their senior management, KOC plans to drill over 6000 wells until 2030, and they continue with their successful rig tendering exercise and activating multiple rigs in the country.
Stefanangely: Now regards to Nasdaq release. Now, as the conclusion of the SEC investigation in the filing of our half-124 accounts with the SEC today, we'll engage with the data immediately to see what our position is and will update to you on the status once we know. So in summary, half-24 was solid financially, with very strong revenue growth, stronger justice and data, and healthy cash flow conversion, which has been used to pay down debt and strengthen our balance sheet.
Speaker Change: Despite the recent announcement of limiting the NSC to 12 million barrel and the release of the Jackup rigs. The overall activities remained higher than in 2023 as the gas program accelerate in which our position is stronger.
Speaker Change: UAE will continue on their increased capacity plans and will be a growth driver over the near and medium term with plans moving ahead for both oil and gas expansion.
Speaker Change: Kuwait is expected to have the biggest growth year on year with solid expansion of old capacity offshore discovery and massive infrastructure project.
Stefanangely: We believe that most of the past disruption from the restatement is now materially over. Therefore, on behalf of management, I'd like to thank our entire workforce, firstly for not financed and supply chain employees and consultants for their efforts in the restatement and remediation and changing our back-office systems, processes and procedures, and secondly to operations for delivering great execution performance, and thirdly, our loyal customers, our directors, our shareholders, and our banking consortium for their continued support.
Speaker Change: As announced lately by their senior management Kols see plans to drill over 6000 wells until 'twenty three and they continue with their successful rig tendering exercise and activating multiple rigs in the country.
Sherif Foda: We expect our men and the rest of the GCC to have stable activity with opportunity for nest to outgrow the market, with mainly ROIA deployment and NEDA adopt. Apsid geopolitical disruption or unrest in Iraq and the North Africa region would have seen moderate growth, as the ambition is there to increase capacity and activity. However, in the short-term, regional stability will remain a headwind for the start of several of the big projects. As an example, there remains significant upside in Libya once the financial budget is released and new projects are sanctioned. Therefore, overall, we expect another year of strong market growth in 2024, followed by consistent and measured market growth through 2027, where countries plan to increase their oil and gas capacity.
Speaker Change: We expect demand in the rest of the GCC to have stable activity with opportunity for neste to outgrow the market with mainly rural deployment and Nida adoption.
Stefanangely: We expect normal quality and reporting moving forward, and we look forward to exiting 24 as a far larger and stronger corporation.
Speaker Change: Absent geopolitical disruption or unrest.
Sharifota: Now I turn the call back to Shereef. Thanks, Stefan.
Speaker Change: Iraq and the North Africa region would have seen moderate growth as the ambition is there to increase capacity and activity. However in the short term regional stability will remain a headwind for the start of several of the Big project. As an example, there remains significant upside in Libya.
Sharifota: Let me conclude by quickly commenting on the strong macro-environment and our similarly solid 2024 outlook. As you all know, geopolitical tension in the region have dominated headlines in recent months. While the future is impossible to predict precisely, I am pleased to relay that the countries in which we operate, particularly our core GCC countries, remain business as usual, from an activity standpoint. Rick counts in next to four largest countries are at all-time highs and growing steadily.
Speaker Change: Once the financial budget is released and new projects are sanctioned.
Speaker Change: Therefore overall, we expect another year of strong market growth in 2024, followed by consistent and measured market growth through 2027, where countries plan to increase their oil and gas capacity.
Sharifota: In Saudi Arabia, we are favorably positioned for the CapEx plan currently in place, and expect the kingdom to continue to be a growth driver for the company, both on the oil side and particularly in the unconventional gas development. Despite the recent announcement of limiting the NSC to 12 million barrels and the release of the Jakub rigs, the overall activities remain higher than in 2023 as the gas program accelerate in which our position is stronger.
Sherif Foda: Within this market growth framework, we anticipate NESR will outperform the broader sector and mean driven by drilling technology rollout success and the pace of adoption of decarbonization solution in this sector.
Speaker Change: Within this market growth framework, we anticipate net will outperform the broader sector amina driven by drilling technology rollout success and the pace of adoption of decarbonization solution and <unk>.
Sherif Foda: We are extremely excited about the future, as we are uniquely positioned in the best growth area globally for oil and gas.
Speaker Change: We are extremely excited about the future as we are uniquely positioned in the best growth area globally for oil and gas.
Operator: I'd like to thank you, and with that, I pass over the call to the operator for your questions.
Speaker Change: I'd like to thank you and with that I'll pass over the call to the operator for your questions.
Sharifota: UE will continue on their increased capacity plans and will be a growth driver over the near and medium term, with plans moving ahead for both oil and gas expansion. Quaid is expected to have the biggest growth year on year, with solid expansion of oil capacity, offshore discovery and massive infrastructure projects. It is announced lately by their senior management, KOC plans to drill over 6000 wells until 2030, and they continue with their successful rig tendering exercise and activating multiple rigs in the country.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker Change: Thank you and we would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: For me should tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Operator: And for participants using speaker equipment, maybe necessary to pick up your handset before pressing the star keys.
Speaker Change: For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
David Anderson: Our first question is from David Anderson with Barclays. Please proceed.
Speaker Change: Our first question is from David Anderson with Barclays. Please proceed.
David Anderson: Hey, good morning, Sheree. How are you? Good morning, Sir. How are you? I'm doing great.
David Anderson: Hey, good morning curious how are you good morning, Sir how are you.
David Anderson: I'm doing great.
Sherif Foda: So, I don't want to give up too many of my questions before I come for next week. But let me just ask the one question. Probably it's on everybody's mind right now. Saudi. You highlighted some of the rigs offshore being dropped. We also saw some on shore rigs dropped. Yesterday, there was an announcement that they were pushing down day rates, and even there was some talk about service pricing being pushed out. Can you just let us give us some insight into what's happening on the margin right now in Saudi? Are they, in fact, slowing here?
Speaker Change: So I don't want to give up too many of my questions before our conference next week, but let me just ask the one question problems on everybody's mind right now.
Sharifota: We expect our men and the rest of the GCC to have stable activity with opportunity for nest to outgrow the market, with mainly Roya deployment and Neda adopt. Absent geopolitical disruption or unrest Iraq and the North Africa region would have seen moderate growth as the ambition is there to increase capacity and activity. However, in the short-term regional stability will remain a headwind for the start of several of the big projects. As an example, there remains significant upside in Libya once the financial budget is released and new projects are sanctioned.
David Anderson: Saudi.
Speaker Change: You highlighted some of the rigs offshore being dropped we also saw some onshore rigs dropped yesterday. There was an announcement that they are pushing down day rates and even there was some talk about service pricing being pushed out can you just let us give us some insight into what's happening on the margin right now in Saudi are they in fact slowing here.
Sherif Foda: And King, do you think that Saudi grows 25 over 24 from the best case scenario right here? Or kind of your best view from here right now? Thanks. Thanks, David. I think I think as Saudi Aramco announced clearly when they cut the 12 million barrel to, I mean, they limited the MST to 12 million barrel. Is there are additional rigs that were all marked for the increase from 12 to 13 that have been released. And they did this extremely professionally, actually, with looking at all the rig count they had because they went all the way to 90 or 92 rigs.
Speaker Change: And Kim do you think that Saudi grows 25 over 24 from your best case scenario here.
Speaker Change: Your best view from here right now.
Kim: Thanks, Dave I think I think as.
Speaker Change: Saudi Aramco announced clearly when they when they cut the 12 million barrel to I mean, the limited the MSC to 12 million barrel is there are additional rigs that were all.
Sharifota: Therefore, overall, we expect another year of strong market growth in 2024, followed by consistent and measured market growth through 2027, where countries plan to increase their oil and gas capacity. Within this market growth framework, we anticipate NESR will outperform the broader sector and mean driven by drilling technology rollout success and the pace of adoption of decarbonization solution in this sector. We are extremely excited about the future, as we are uniquely positioned in the best growth area globally for oil and gas.
Kim: Marked for the increase from 12% to 13 that have been released and they did this.
Kim: Extremely professionally actually with.
Looking at all the rig count they had.
Kim: Could they went all the way to 90 or 92 rigs and they said they're going to go to the 60 970 rigs, which is exactly what they would be affected now with their program too.
Sherif Foda: And they said they're going to go to the 69 70 rigs, which is exactly what they affected. Now with their program to increase the gas production, the unconventional, and they saw that they increased their rig count for the unconventional. And the whole idea was to ensure that the kingdom goes to on power 50% renewable, 50% gas by 2030. And that will mean that they will have a liquid availability of almost a million barrel available for export additional million barrel. And that's why they basically some of the short term oil rigs on land has been as well released.
Kim: Increase the gas.
Kim: Production.
Kim: Convention.
Speaker Change: And you saw that they increased the rig count for the unconventional and the whole idea was to ensure that the kingdom goes to on power, 50% renewable at 50% gas by 2030 and that would mean that they will have liquid availability of almost a million barrel available for export additional million barrel and thats why.
Operator: I'd like to thank you, and with that, I pass over the call to the operator for your questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Why.
Speaker Change: Basically some of the short term oil rigs on land has been as well released and they are looking at as well as some maintenance rigs that the commodities overall 23, I still believe 24 over 23 years of growth and 25.
Sherif Foda: And they are looking as well at some maintenance rigs that they're going to release. Overall 23. I still believe 24 over 23 is a growth, and 25 it's 25 over 24 will be stable. I would say you will have more increase on the unconventional and less on the oil and gas. Obviously, the Saudi have that ability to increase rigs and redeploy them in a very, very fast way because the rigs are in the country. So, in case the oil price or there is more disruption in the region, like what you saw in the last couple of days in Libya, with almost total shutdown of certain and some of the export, if they need to put more oil, they are capable of doing that.
David Anderson: Our first question is from David Anderson with Barclays. Please proceed. Hey, good morning, Sharif. How are you? Good morning, sir. How are you? I'm doing great.
25 of our 24 will be stable I would say you will have more increase on the unconventional.
And Les.
Sharifota: So, I don't want to give up too many of my questions before I come for next week. But let me just ask the one question probably is on everybody's mind right now. Saudi. You highlighted some of the rigs off-shore being dropped. We also saw some onshore rigs dropped. Yesterday, there was an announcement that they were pushing down day rates, and even there was some talk about service pricing being pushed out. Can you just let us give us some insight into what's happening on the margin right now in Saudi?
Speaker Change: On the oil and gas obviously, the Saudi have that ability to increase our rigs and redeploy them in very very fast way because the rigs are in the country. So in case, the oil price or there is more disruption in the region like what you saw in the last couple of days in Libya with almost total shutdown of.
Speaker Change: Certain in some of the export if they need to put more oil they are capable of doing that so I would say.
Sharifota: Are they in fact slowing here? And, King, do you think that Saudi grows 25 over 24 from the best-case scenario right here? Or your best view from here right now? Thanks. Thanks, David. I think I think as Saudi Aramco announced clearly when they cut the 12 million barrel to, I mean, they limited the MST to 12 million barrel is there are additional rigs that were all marked for the increase from 12 to 13 that have been released.
Sherif Foda: So I would say, with that long answer, Saudi I would say would be stable to moderate growth in 25 over 24. If the oil price is higher, they can put more rigs to the oil. If it's less, then obviously they can as well maybe shut down more rigs. So that's how it's going to get.
Speaker Change: With that long answer, Saudi I would say would be stable to moderate growth.
Speaker Change: In 2000.
Speaker Change: 25% over 24.
Sharifota: And they did this extremely professionally actually with looking at all the rig count they had because they went all the way to 90 or 92 rigs. And they said they're going to go to the 69-70 rigs, which is exactly what they affected. Now, with their program to increase the gas production, the unconventional, and you saw that they increased the rig count for the unconventional. And the whole idea was to ensure that the kingdom goes to on power 50% renewable, 50% gas by 2030.
Speaker Change: If the oil price is higher they can put more rigs to oil if it's less than obviously, they can as well maybe shut down more rigs on order.
Speaker Change: So the government program is accelerating right. That's I was going to get to so youre seeing sort of a shift here of capex kind of moving more towards gas. So I guess my follow up question <unk> talked before about you outperforming.
Sherif Foda: So you're seeing sort of a shift here of cat back kind of moving more towards gas. So I guess my follow-up question there is you were talking before about you outperforming kind of the broader market. Do you think you can outperform? I will you be able to outperform? I guess that bounty number based upon just being having more exposure to gas. I know you will outperform Saudi on gas, and as I said in our drilling contract where we got awarded a couple of new contracts with the success of Roeja, the download Rotary Steerable MWDLWD oldest.
Speaker Change: Kind of the broader market do you think you can outperform will you be able to outperform I guess that Saudi number based upon just being having more exposure to gas I know you've been under hora for quite some time.
Speaker Change: Yes, I think we will outperform the market and then we will outperform Saudi on gas and as I said in.
Speaker Change: Our drilling.
Speaker Change: Contract, where we got awarded a couple of new contracts.
Speaker Change: With the success of erosion.
Speaker Change: <unk> Roe.
Speaker Change: It's terrible MW Glwt all this.
Sharifota: And that will mean that they will have a liquid availability of almost a million barrel available for export, additional million barrel. And that's why they basically some of the short-term oil rigs on land has been as well released. And they are looking as well at some maintenance rigs that they're going to release. Overall, I still believe 24 over 23 is a growth and 25 over 24 will be stable. I would say you will have more increase on the unconventional and less on the oil and gas.
Sherif Foda: We will be able to capture more rigs, and we'll be able to have an upside year-on-year versus year because our position today is almost nonexistent in direction drilling.
Speaker Change: We will be able to capture more rigs and we'll be able to have an upside year on year versus that because our position today is almost nonexistent in direction drilling.
Speaker Change: Right.
Thank you sure. Thank.
Thank you Sir.
Sub-Rapet: Our next question is from Sub-Rapet with Bank of America. Please proceed. Hi, good morning Sherif. Good to you from you on the call. Thank you, Sherif. It's always nice to be back. Yeah, no, absolutely.
Safra paths: Our next question is from Safra paths with Bank of America. Please proceed.
Safra paths: Yeah.
Safra paths: Hi, Good morning, <unk> good to hear from you on the call.
Speaker Change: Thank you sure it's always nice to be back.
Speaker Change: Yeah, no absolutely so maybe I'll start with a follow up to what these hardening on Saudi.
Sub-Rapet: Sherif, maybe I start over the follow-up to what they've had on Saudi and specifically on the gas side of things. We all know Jifura and conventional gas, in general, is growing pretty rapidly in Saudi. Can you give us some color of Sherif on real activities right now where you expect activity to go over the next two to three years and then just maybe your role specifically in Jifura and unconventional gas and how do you expect from a product portfolio standpoint, market year standpoint, to outgrow competition just a little bit of color on that unconventional gas way of things.
Sharifota: Obviously, the Saudi have that ability to increase rigs and redeploy them in a very, very fast way because the rigs are in the country. So, in case the oil price or there is more disruption in the region like what you saw in the last couple of days in Libya, with almost total shutdown of certain and some of the exports, if they need to put more oil, they are capable of doing that.
Speaker Change: Specifically on the gas side of things.
Speaker Change: Our low default unconventional gas and Jamie.
Pretty rapidly Saudi can you give us some color Citi fund where activity is right now.
Speaker Change: Expect activity to go over the next two to three years and then just maybe you aren't really specifically in the food and unconventional gas and how do you expect.
Sharifota: So, I would say with that long answer, Saudi, I would say, would be stable to moderate growth in 25 over 24. If the oil price is higher, they can put more rigs to the oil. If it's less, then obviously they can as well maybe shut down more rigs. So, that's how it's going to get.
Speaker Change: From a product portfolio standpoint market share standpoint to outgrow competition, just a little bit of color on that.
Speaker Change: No absolutely.
Sherif Foda: Sure, so obviously, as you have seen and as announced by your customer, the Jifura has been a massive success to Saudi Aramco. They have developed just being in a totally different way and with a lot of science from the exploration cycle when they started with you know very good understanding of the subsurface and then they went through the very good development program and the development program today is in full pledge which means the welds are pad exactly like the you have in the Permian so you have four weld pads, long reach laterals, extremely successful multi-stage completion.
Speaker Change: Sure. So obviously.
Speaker Change: Have seen.
Speaker Change: As announced bye bye.
Speaker Change: Your customer.
Speaker Change: The <unk> has been a massive success to Saudi Aramco.
Speaker Change: Have developed.
Speaker Change: And a totally different way and with a lot of science from the exploration cycle when they started with.
Sharifota: So, you're seeing sort of a shift here of cat back kind of moving more towards gas. So, I guess my follow-up question there is, you were talking before about you outperforming kind of the broader market. Do you think you can outperform? I will you be able to outperform, I guess, that bounty number based upon just being having more exposure to gas. I know you've been under horror for quite some time. Yes, I think we will outperform the market and we will outperform Saudi on gas.
Speaker Change: Very.
Speaker Change: Good understanding of the subsurface and then they went through the very good development program and the development program today is in full fledge, which means the world or pad.
Speaker Change: Exactly like you would have in the Permian.
Have a four well pads long reach lateral wells.
Speaker Change: Extremely successful multi stage completion, we test all kind of the latest technology from Dissolvable blogs to eliminate.
Sharifota: And, as I said, in our drilling contract where we got awarded a couple of new contracts with the success of Roya, the download, Rotary Steerable, MWD, LWD, all this, we will be able to capture more rigs and we'll be able to have an upside year on year versus year because our position today is almost nonexistent in direction drilling.
Sherif Foda: We test all kind of the latest technology from you know dissolvable clogs to eliminating some of the of the NPT going to 22 23 hours a day pumping. So this is basically this first class exactly as the best that you have in the US, and and it's obviously unique because that's the framework. Today, that increase of rigs is very, very significant, so you have you're talking about a significant spend, significant increase about 20, 30 percent year-on-year on a recount on multiple on the number of stages, and this is going to keep exponential. You're talking about going from the old and days 5,000 stage a year to all ambition of 20, 25,000 stage a year, so that's it's going to be very, very significant. And again, this is to complete the objective of 20, 27. You have the first gas 20, 25, 27, and then until all the way to 2030, where basically you have two BCF of gas, you have NGL, ethyne, etc., etc., and these welds are very solid, right? So the program is very well laid out, and I think how the progress we have today is basically on the fracking side. Obviously, on the direction drilling side, there is multiple contract, and I think Aronco announced that officially as well. They announced the award of the EPC, and they announced the officially the award of multi-year direction drilling award for tier one and tier two. We are involved, and we as well, obviously, on the fracking side is us and another big multinational company, and both of us are fracking those welds. So the increase is going to be significant, and it's going to continue until, as I said, until the delivery of gas. So we see for us for next a very, very, very strong year-on-year growth in above double. Obviously, there was a plan to add a lot of rigs, there was a multiple change in leadership, I would say, and today you have outstanding leadership in Kuwait, KOC, and KPC, so all these plans are being put in place, and today you have the highest recount ever anybody can hear about it.
Speaker Change: Eliminating some of the.
Speaker Change: Of the MPD go into 'twenty, two 'twenty three hours a day pumping. So this is basically this first class exactly as the best that you have in the U S and and it's obviously unique because that's the only project in the middle East that goes in.
David Anderson: Thank you, Sherith.
Speaker Change: That framework today that increase of rigs is very very significant. So you have you are talking about a significant spend significant increase above 2030% year on year on a rig count on multi on the number of stages and this is going to keep exponential.
Subrapa: Our next question is from Subrapa. With Bank of America, please proceed. Hi, good morning, Sherith. Good to you from you on the call. Thank you, Sher. It's always nice to be back. Yeah, no, absolutely.
Sharifota: Sherith, maybe I'll start with a follow-up to what they've had on Saudi and specifically on the gas side of things. We all know the food and conventional gas in general is growing pretty rapidly in Saudi. Can you give us some color of Sherith on where activity is right now where you expect activity to go over the next two to three years and then just maybe your role specifically in the food and unconventional gas and how do you expect from a product portfolio standpoint, market share standpoint to outgrow competition, just a little bit of color on that, unconventional gas rate of things.
Speaker Change: You are talking about going from the olden days 5000 stage a year to all our ambition of 20 to 25000 <unk>. So thats is going to be very very significant and again this is to come.
Speaker Change: Bleed.
Speaker Change: The objective of 2027 2020 do you have the FERC <unk> 527, and then until all the way to 2030, where basically you have two bcf of gas or NGL.
Speaker Change: Et cetera, et cetera, and these wells are very solid right. So the program is very well laid out and I think our the progress we have today is basically.
Sharifota: Sure, so obviously as you have seen and as announced by your customer, the Jaffura has been a massive success to Saudi Aramco. They have developed just being in a totally different way and with a lot of science from the exploration cycle, when they started with a very good understanding of the subsurface and then they went through the very good development program. And the development program today is in full pledge, which means the wealth are paid exactly like you have in the Permian.
Speaker Change: On the on the fracking side, obviously on the direction drilling side. There is multiple contract and I think Aramco announced that officially as well the announced the award of the EPC and they announced the officially the award of a multi year direction drilling.
Speaker Change: Award for tier one and tier two.
Speaker Change: We are involved in.
Speaker Change: We as well obviously on the fracking side is us and another.
Speaker Change: Big multinational company and both of US are fracking those wells. So the increase is going to be significant.
Sharifota: So you have four-wheeled pads, long-reach laterals, extremely successful multi-stage completion. We test all kind of the latest technology from, you know, dissolvable clogs to eliminating some of the NPT going to 22, 23 hours a day pumping. So this is basically this first class exactly as the best that you have in the US. And it's obviously unique because that's the only project in the Middle East that goes in that framework. Today, that increase of rigs is very, very significant.
Speaker Change: Is going to continue until as I said until the delivery of gas. So we see for us for NES.
Speaker Change: Very very very strong year on year growth in above double digits.
Speaker Change: Okay, No thats fantastic series potential color and.
Speaker Change: Maybe just pivoting to outside Saudi you talked about the seven countries in the Mena region.
Speaker Change: Sometime in Kuwait, and maybe you can talk to opportunities outside of slowly maybe give us a little color on Kuwait <unk>.
Speaker Change: Underlying market opportunity and then specifically for Nick.
Speaker Change: Expect to do better than the market.
Speaker Change: So the countries it would be nice.
Sharifota: So you have, you're talking about significant spend, significant increase, about 20, 30% year on year on rig count on the number of stages. And this is going to keep exponential, you're talking about going from the old and days 5,000 stage a year to all ambition of 20, 25,000 stage a year. So that's it's going to be very, very significant. And again, this is to complete the objective of 20, 27, you have the first gas, 20, 25, 27, and then until all the way to 2030, where basically you have two BCF of gas, you have NGL, ethyne, et cetera, et cetera.
Speaker Change: Sure. So I mean, Kuwait is obviously has been.
Nick: Always there was a plan to add a lot of rigs.
Speaker Change: With our multiple change.
<unk>.
Speaker Change: And leadership I would say and today.
Speaker Change: Outstanding leadership in Kuwait.
And the POC and <unk>.
Speaker Change: So all of these plants are being put in place and today you have the highest rig count ever anybody can hear about it.
Sherif Foda: And I know a lot of people don't know that, but today the recount is reaching almost 200 in Kuwait. You have massive projects that are being sanctioned, and as it was announced by the Deputy CEO, Sir Hal Mola, they're going to drill more than 6,000 wells until 2030, and that is very, very, very significant. I mean, for people that don't know Kuwait, this is more than 20% carrier year on year. So this, basically obviously, to get to their vision, 2014 oil capacity and gas capacity, and they are going full ahead with that plan. If you look at UAE, UAE has the plan that again was announced by the leadership of 5 million barrel capacity, and they are on that plan to reach that 5 million, and people can be as well ad-knock drilling, which is the drilling arm of ad-knock, it's a public company today, and you can see that they have 140 rigs, which is again, those are numbers that never heard of.
Speaker Change: People don't know that but today the rig count is reaching almost 200 and Kuwait.
Speaker Change: You have massive.
Speaker Change: Projects that are being sanctioned.
Sharifota: And these wells are very solid, right? So the program is very well laid out. And I think how the progress we have today is basically on the fracking side. Obviously on the direction drilling side there is multiple contract. And I think Aronco announced that officially as well. They announced the award of the EPC. And they announced the officially the award of multi-year direction drilling award for tier one and tier two. We are involved.
Speaker Change: And.
Speaker Change: It was.
Speaker Change: Announced by the Deputy CEO.
Sharifota: And we as well, obviously on the fracking side is us and another big multinational company. And both of us are fracking those wells. So the increase is going to be significant and it's going to continue until, as I said, until the delivery of gas. So we see for us, for very, very, very strong year-on-year growth in above double.
Speaker Change: So how all of that it is theyre going to drill more than 6000 wells until 2030 and that is very very very significant I mean for people that know Kuwait. This is.
Speaker Change: More than 20% CAGR over a year on year. So this.
Speaker Change: Basically obviously to get to their vision 2040 oil capacity on gas capacity.
Speaker Change: And they are going to they're going forward ahead with that plan. If you look at UAE has the plaza again was announced by the leadership.
Speaker Change: 5 million barrel capacity and they are on that plan to reach that $5 million and people can lead as well at knocked drilling which is the drilling arm.
Speaker Change: It's a public company today and you can see that they have 140 rigs, which is again those are numbers that never heard of so.
Sherif Foda: So, and you look at the rest of the country that would say stability, you have stable arm and stable Qatar, obviously, they have the northern field of the gas, and the only thing I would say that can go against you a bit is the geopolitics in case of a wider war or something like that, or wider conflict, and that will be affecting mainly, I would say, Iraq and Libya, right? So, but overall, the rig count in the region, and again, a lot of people do not know that, today, the rig count, this is the first time that the Middle East has more rigs than the United States, and it's not now more, it's almost double.
Speaker Change: Look at the rest of the countries I would say stability you have stayed stable online is stable.
Speaker Change: Qatar, obviously, they have the northern field of the of the guides.
Sharifota: Okay, now that's fantastic series, so thanks for that color and maybe just pivoting to outside Saudi. You talked about several countries in the mean region and you spent some time at Kuwait. Maybe you can talk to opportunities outside of Saudi, maybe give us a little color on Kuwait, the underlying market opportunity, and then specifically for NASA, how do you expect to do better than the market in those non-Saudi countries in Vienna.
And the only thing I would say that can go against you a bit as the geopolitics.
Speaker Change: In case of a wider war or something like that or wider conflict and that would be affecting mainly I would say, Iraq and Libya right. So, but overall the rig count in the region and again a lot of people do not know that today the rig count this.
Sharifota: Sure, so I mean Kuwait obviously has been always there was a plan to add a lot of rigs, there was a multiple change in leadership, I would say, and today you have outstanding leadership in Kuwait, in the KOC and KPC, so all these plans are being put in place and today you have the highest recount ever, anybody can hear about it and I know a lot of people don't know that, but today the recount is reaching almost 200 in Kuwait. You have massive projects that are being sanctioned and as it was announced by the Deputy CEO, Sir Hal Mola, that they're going to drill more than 6,000 wells until 2030 and that is very, very, very significant, I mean for people that don't know Kuwait, this is more than 20% carrier year on year, so this basically obviously to get to their vision, 2014 of oil capacity and gas capacity and they are going full ahead with that plan.
Speaker Change: This is the first time that middle East has more rigs than the United States.
Speaker Change: And it's not now more it's almost doubled so the GCC alone.
Sherif Foda: So, the GCC alone has more rigs than the US, so you have almost 1,000 rigs running now in the Middle East, and that is a very significant number that in the olden days, it was not even half of the US. So, and that tells you the commitment on the capacity increase, the commitment on making sure that this is something for the long term, and it is not just based on the oil price, the end, the end, the end. The key difference in the Middle East, as well, is all of these countries, the majority of them, especially Saudi, UAE, etc., are going for full-on power using gas and renewable.
Speaker Change: As more rigs than the U S. So you have almost at 1000 rigs running now in middle East So and that is a very significant number that in the olden days. It was not even half of the U S. So and that tells you the commitment on the capacity increase the commitment.
Speaker Change: On making sure that this is something for the long term and it is not just based on the oil price.
Speaker Change: The NDA out the key difference in the middle East as well is all of these countries. The majority of them, especially in Saudi UAE et cetera are going for full on power using gas and renewable so they do not want to burn diesel generator in that power, it's all going.
Sherif Foda: So, they do not want to burn diesel generator in that power. It's all going to gas and renewable. That's why you have sanction of a huge project in both solar, wind, and gas. project. And this will continue for the foreseeable future.
Speaker Change: Two gas and.
Speaker Change: In renewables, that's why you have sanction of a huge projects in both.
Speaker Change: Solar wind and gas projects.
Sharifota: If you look at UAE, UAE has the plan that again was announced by the leadership of 5 million barrel capacity and they are on that plan to reach that 5 million and people can be as well adnog drilling which is the drilling arm of adnog, it's a public company today and you can see that they have 140 rigs which is again, those are numbers that never heard of, so and you look at the rest of the country, I would say stability, you have stable or man is stable, Qatar obviously, they have the northern field of the gas and the only thing I would say that can go against you a bit is the geopolitics in case of a wider war or something like that or a wider conflict and that will be affecting mainly, I would say Iraq and Libya. But overall, the rig count in the region and again a lot of people do not know that, today the rig count, this is the first time that Middle East has more rigs than the United States and it's not now more, it's almost double, so the GCC alone has more rigs than the US, so you have almost 1000 rigs running now in Middle East, so and that is a very significant number that in the olden days, it was not even half of the US, so and that tells you the commitment on the capacity increase, the commitment on making sure that this is something for the long term and it is not just based on the oil price, they end the out, the key difference in the Middle East as well is all of these countries, the majority of them, especially Saudi, UAE, etc, are going for full on power using gas and renewable, so they do not want to burn diesel generator in that power, it's all going to gas and renewable, that's why you have sanction of a huge project in both solar, wind and gas, projects. And this will continue for the foreseeable future.
Speaker Change: And this will continue for the foreseeable future.
Sherif Foda: Yeah, now that's fantastic color. Sherif can make it. It's it's very opaque out there. We don't have a lot of good data points, and that's why it's good to have you back on a call and get more color from you. So, with that, Sherif, I'll tell it back. Thanks for the color. Thank you.
Speaker Change: Right no thats fantastic color.
Speaker Change: Thank you.
Speaker Change: Youll take out there we don't have a lot of good data points and Thats why.
Speaker Change: Good to have you back on a call and get more color from you folks.
Speaker Change: So well.
Speaker Change: With that I'll turn it back thanks for the color.
Speaker Change: Thank you Shirley follow up thank.
Shirley: Thank you.
Kerr Helen: Our next question is from Kerr Helen with Benchbarr Company.
Kurt <unk>: Our next question is from Kurt <unk> with Benchmark company. Please proceed.
Kerr Helen: Please proceed. Hi, Sherif. How are you? Very good, Sher. How are you? Well, doing well. Thank you.
Kurt <unk>: Hi, Jerry how are you.
Very good Sir how are you.
Sherif Foda: So, yeah, I just wanted to maybe just circle back on the initial question here related to the Saudi comment. I think he gave some some really interesting color and good perspective on it. The one thing I just wanted to specifically follow up on was, you know, the dynamics around the Saudi seemingly, right, asking for price concessions and not just of the rigs but of the service company. So I'm assuming, predicated on your commentary, that you have not seen anything come from Haramco relating to asking for price concessions. Okay, obviously I'm not going to comment on my client, but I can tell you, as the region works, what we have in the region that is different than the US is long-term contract.
Speaker Change: I want to thank you. So yes, I just wanted to maybe circle back on.
Speaker Change: Our next question here related to the Saudi comment I think you gave some some really.
Kristin: Kristin color and good perspective on it the one thing I just wanted to specifically follow up onwards.
Speaker Change: The dynamics around the Saudi schemes.
Speaker Change: Seemingly right asking for price concessions.
Speaker Change: And not just of the rigs, but the service company. So.
Speaker Change: I'm, assuming predicated on your commentary that you have not.
Speaker Change: <unk> seen anything come from from Aramco relating to asking for price concessions.
Speaker Change: Yeah.
Speaker Change: Okay, obviously, I am not going to comment on my.
Speaker Change: Clients, but I can tell you.
Speaker Change: As the region works.
Speaker Change: Yes.
Speaker Change: What we have in the region that is different than the U S is long term contract. So the long term contract are good contracts in the sense of you have a very good visibility on the number of years, you will be able to serve that contract right. So some of those contract of five years 789.
Sherif Foda: So the long term contracts are good contracts in the sense of you have a very good visibility on the number of years you will be able to serve that contract, right? So some of those contracts are five years, seven, eight, nine; you know, so we have contracts, for example, in my aunties, 2032. So we know you have that. And obviously, sometimes you would say, oh, but when you cannot increase the price when the inflation was dramatic, and the answer is yes, you cannot. I mean, except for some when the contract gets to a renewal phase or there is like a huge need for some of those, right?
Speaker Change: So we have contracts for example amounted 2032. So we know you have that and obviously, sometimes people say oh, but.
Speaker Change: You cannot increase the price when the inflation.
Speaker Change: Was dramatic.
Speaker Change: Answer is yes, you cannot I mean, except for some.
Speaker Change: The contract gets to a renewal phase or there is like a huge need for some of those right. So I think what happened is that to be candid is some of the rig contractor during the obviously the inflation and the lack of jackup rigs et cetera, obviously.
Sherif Foda: So I think what happened is, to be candid, some of the rigs' contract during the obviously the inflation and the lack of jack-up rigs, etc. Obviously, increase the price, which is rightly so because of their inflation, the diesel price, etc., etc. And some of it went to almost double the delay rate.
Subrapa: Right, now that's fantastic color, Sherry can make you say it's it's very opaque out there. We don't have a lot of good data points and that's why it's good to have you back on a call and get more color from you. So with that, Sherry, I'll tell you back, thanks for the color. Thank you Sherry, follow up next time. Thank you.
Speaker Change: The price, which is rightly so because of the inflation the diesel price et cetera, et cetera, and some of it went to almost double the deliberate and today. If you have a situation where a lot of jackups are being released.
Sherif Foda: And today, if you have a situation where a lot of jackups are being released, you know, and you are coming to an extension and no penalty, you know, if you are a client, you will negotiate the price down or try to see who has the best quality and best price to continue forward. And I think that's kind of the exercise. And now on the services side, I think this exercise of inflation and increasing shipping costs, etc., etc. We've been trying to pass some of it to our clients in the different region. And majority was not very successful.
Kerr Helen: Our next question is from Kerr Helen with Benchbar Company. Please proceed. Hi Sherry, how are you? Very good, Sherry, how are you? Well, doing well, thank you. So yeah, I just wanted to maybe just circle back on the initial question here related to the Saudi comment. I think you gave some really interesting color and good perspective on it. The one thing I just wanted to specifically follow up on was, you know, the dynamics around the Saudi seemingly, right, asking for price concessions and not just of the rigs but of the service company. So I'm assuming predicated on on your commentary that you have not seen anything come from from Haramco relating to asking for price concessions.
Speaker Change: And you are coming to an extension.
And no penalty.
Speaker Change: If you are a client you will negotiate this price down or drive to see who has the best quality and best price to continue forward and I think thats kind of the exercise now on the services side I think this exercise of inflation and increased shipping costs et cetera et cetera.
Speaker Change: We've been trying to pass some of it to our clients in the different region.
Speaker Change: Majority of it was not very successful.
Sherif Foda: So now obviously you have the opposite, where sometimes you have, so you just have to stand the line. And because your cost is higher, you will not be able to give any pricing away because actually you have actually have increased, of course. And you did not really manage to increase your pricing either, right? So I'm trying to give you a bit of an overall picture. And again, it cannot obviously comment exactly on each client. But that's the environment in the Middle East. So again, it's healthy. It's a good contract. And I think the service industry just have to be a bit more this.
Speaker Change: Now obviously you have the opposite where sometimes you have so you just have to send the line and because your cost is higher you will not be able to give any pricing away because actually the you have actually have increase of costs and you did not really managed to increase your pricing either right. So I'm trying to.
Sharifota: Okay, obviously I'm not going to comment on my client, but I can tell you as the region works, what we have in the region that is different than the US is long term contract. So the long term contract are good contracts in the sense of you have a very good visibility on the number of years you will be able to serve that contract, right. So some of those contracts are five years, seven, eight, nine, you know, so we have contracts, for example, in my aunties, 2032.
Speaker Change: Give you a bit of an overall picture.
Speaker Change: Again, I cannot obviously comment exactly on each client, but that's the environment in the middle East.
Speaker Change: Again, it's healthy it's a good contract and I think the service industry just have to be a bit more discipline.
Kerr Helen: Now that's great. That's great color.
Speaker Change: Okay, now thats, great Thats great color.
Kerr Helen: Follow up on your need of business and just kind of curious as to what you mentioned a couple of different business lines: decarbonization and water and so on. What do you think the size of this business could be over the course of the next five years? I think personally it can be very significant. It all depends on how the ENP companies are going to take this pledge, like they did in UAE and the COP seriously. I mean, you take that seriously; you need to spend a lot of money. You need to monitor the field; you need to stop disposing wells in the significant amount, especially as the fields are aging, as the water cut are increasing. As for flaring today, I think we should not flare in any country except in some exploration remote wells. But the routine flaring of hundreds of millions of MCFs or even BCFs a day in some of the countries where especially they have some geopolitical issues, this will have to stop and get to power.
Speaker Change: A follow up.
Speaker Change: On the on the on your on your needed business and just kind of curious as to what.
Sharifota: So we know you have that. And obviously sometimes you would say, oh, but when you cannot increase the price, when the inflation was dramatic and the answer is yes, you cannot. I mean, except for some when the contract gets to a renewal phase or there is like a huge need for for some of those, right. So I think what happened is to be candid, some of the rig contract during the obviously the inflation and the lack of jack up rigs, etc.
Speaker Change: You mentioned, a couple of different business lines, the carbonization and water and so on.
Speaker Change: What are you what are you.
Thank the size of this business could be.
Speaker Change: Over the course of the next five years.
Speaker Change: I think personally it can be very significant it all depends on how the E&P companies going to dig this pledge.
Speaker Change: Like what they did in UAE and the Cup seriously.
Speaker Change: You take that seriously you need to spend a lot of money you.
Sharifota: Obviously increase the price, which is rightly so because of their inflation, the diesel price, etc, etc. And some of it went to almost double the delivery rate. And today, if you have a situation where a lot of jackups are being released, you know, and you are coming to an extension and no penalty, you know, if you are a client, you will negotiate the price down or try to see who has the best quality and best price to continue forward.
Speaker Change: You need to monitor the field you need to stump.
Speaker Change: Disposal wells.
Speaker Change: The significant amount, especially as the fields are aging as the water cuts are increasing as the.
Speaker Change: The flaring today, I think we should not let any country in any except in some exploration remote wealth, but the routine flaring of.
Speaker Change: Hundreds of million dollars of Mcf enter or even Bcf, a day and some of the countries, where the especially they have some some geopolitical issues. This will have to stop right and get to power. So all of this as we have solution. That's what we did in our Nevada, Our decarbonization segment.
Sharifota: And I think that's kind of the exercise. And now on the services sign, I think this exercise of inflation and increase shipping cost, etc., etc. We've been trying to to pass some of it to our clients in the different region. And majority was not very successful. So now, obviously, you have the opposite where sometimes you have, so you just have to stand the line. And because your cost is higher, you will not be able to give any pricing away because actually you have actually have increased, of course.
Sherif Foda: So all this, as we have solution, that's what we did in our NEDA or decarbonization segment. We give solution with a lot of partners, and some of it have nothing to do with oil and gas. So the water stuff is done in Europe for something totally different, and we adopt it to oil and gas, and obviously, again, our dear Clarence Aramco are second to none. They are always very focused on environment and what could be done, and that's why we did the pilot project.
Speaker Change: We gave solution with a lot of partners and some of it has nothing to do with oil and gas right. So the water stuff is done in Europe for something totally different and we adopted to oil and gas and obviously again our declines aramco are.
Speaker Change: Our second to none they are always very focused on environment and what can be done and that's why we did the pilot project.
Sharifota: And you did not really manage to increase your pricing either, right? So I'm trying to give you a bit of an overall picture. And again, it cannot obviously comment exactly on each line, but that's the environment in the Middle East. So again, it's healthy. It's a good contract. And I think the service industry just have to be a bit more this. Yeah, now that's great. That's great color. Yeah follow up on that on your on your need of business and and just kind of curious is to you know what you know you mentioned a couple different business lines decarbonization and water and so on.
Kerr Helen: So all this I would say in five years, if it is not above 100 million, I'll be very, very disappointed.
Speaker Change: All of this.
Speaker Change: Okay.
Speaker Change: In five years, if it is not above $100 million I'll be very very disciplined.
Kerr Helen: Okay, that's great. Appreciate that color.
Speaker Change: Okay. That's great I appreciate that color. Thank you.
Dan Cuts: Thank you. Our next question is from Dan Cuts with Morgan Stanley. Please proceed.
Our next question is from Dan.
With Morgan Stanley. Please proceed.
Dan Cuts: Hey, thanks. Good morning. Good morning, Sir.
Dan: Hey, Thanks, good morning.
Dan: Good morning, Sir.
Dan Cuts: I wanted to ask, just kind of piggybacking on the fact that you guys have still much more visibility on what's, you know, an opaque region for a lot of folks in other countries in the world, in the US, but maybe outside of just the gross number of rigs that are running, are there any other kind of well-development trends that you would kind of generally characterize as the region have been over the last few years, expected over the next few years, and what I'm kind of, you know, what I'm kind of asking about is maybe rig efficiencies, not just, you know, the speed of wells drilled or deep drilled, but also the quality, well-productivity, you know, service intensity and service content per well given the kind of, you know, legacy, legacy characteristic or the more mature characteristics of one of the fields in the region.
So I wanted to I wanted to ask.
Speaker Change: Kind of piggybacking on.
Speaker Change: The fact that you guys had.
Sharifota: What do you think the size of this business could be you know over the course of the next five years. I think personally it can be very significant. It all depends on how the the ENP companies going to take this pledge like they did in UAE in the COP seriously. I mean you take that seriously you need to spend a lot of money right.
Speaker Change: How much more visibility on what's.
And Oklahoma region.
Speaker Change: A lot of folks in other.
Speaker Change: In the U S, but maybe outside of just the gross number of rigs that are running are there any.
Speaker Change: All other.
Speaker Change: While development trends.
Speaker Change: You would kind of generally characterize as the region.
Speaker Change #100: Dean over the last few years are expected over the next few years.
Jan cuts: You need to monitor the fields you need to you know stop disposing wells in the significant amount especially as the fields are aging as the water cut are increasing as the you know the the flaring today I think we should not let any country in any except in some exploration remote wells but the routine flaring of you know hundreds of millions of MCF or even BCF a day in some of the countries where especially they have some some geopolitical issues this will have to stop right and and and gets to to power so all this as we have solution that's what we did in our NEDA or decarbonization segment we we give solution with a lot of partners and some of it have nothing to do with oil and gas right so the water stuff is done in Europe for something totally different and we adopted oil and gas and obviously again our dear client Aramco are you know second to none they are always very focused on environment and and what could be done and that's why we did the pilot project so all this I would say in in in in a five years if it is not above hundred million I'll be very very disappointed okay that's great appreciate that color thank you our next question is from Jan cuts with Morgan Stanley please proceed hey thanks morning morning sir but wanted to ask kind of piggybacking on you know the fact that you guys have too much more visibility on much you know an opaque region for a lot of folks in other this world in the US but maybe outside of just a the gross number of rigs that are running are there any other kind of well-development trends that that you would kind of generally characterize as the region have been over the last few years expected over the next few years and what I'm kind of you know what I'm kind of asking about is maybe rig efficiencies and not just you know the speed of wells drilled or deep drilled but also the quality well productivity you know service intensity and service content per well given the kind of you know legacy the legacy characteristic or the more mature characteristics of a lot of the fields in the region just wondering if you could um you know if there's any insight that you could share on some of the other well-developed trends that can impact So as in all the region or maybe I'll talk more similar to the US because that's where most people are familiar with, the development of most of the wealth and most of the efficiency and most of the technology is exactly the same and sometimes it's actually better. So the majority of the latest technology is actually deployed in the Middle East, especially when you talk about conventional oil and gas, not unconventional, right?
Speaker Change #101: What I'm kind of.
Speaker Change #102: I'm kind of asking about is maybe rig efficiencies not just the speed.
Speaker Change #102: Wells drilled or Keith drilled but also the quality.
Speaker Change #103: Well productivity.
Speaker Change #104: Hello, This is <unk> <unk> per well given.
Speaker Change #103: No.
Speaker Change #103: Legacy.
Speaker Change #103: The legacy characteristic.
Mature characteristics of loan yields in the region just wondering if you could.
Sherif Foda: Just wondering if you could, you know, if there's any insight that you could share on some of the other well-development trends that can impact So as in all the region or maybe I'll talk more similar to the US because that's where most people are familiar with, the development of most of the wealth and most of the efficiency and most of the technology is exactly the same and sometimes it's actually better. So the majority of the latest technology is actually deployed in the Middle East, especially when you talk about conventional oil and gas, not unconventional, right?
Speaker Change #103: Yeah.
If theres any insight that you could share on <unk>.
Speaker Change #105: While development.
Speaker Change #103: <unk>.
Speaker Change #103: Google's demand.
Speaker Change #106: Yes sure.
Speaker Change #106: So as in all the region or maybe I'll talk more similar to the U S. Because that's where most people are.
Speaker Change #106: Familiar with.
Speaker Change #107: The development of most of the wells that most of the efficiency and most of the technology is exactly the same and sometimes its actually better. So the majority of the latest technology is actually deployed in in the middle East, especially when you talk about conventional oil and gas.
Speaker Change #107: Not unconventional right. So again here we're talking conventional.
Sherif Foda: So again, here we're talking conventional, you know, jackups, conventional fields, wealth that produce 6, 8, 9, 10,000 barrels a day. It is not fracked; it is a lot of other technology. But most of this wealth you have efficiency gains on the number of days that used to drill the well. Obviously, have a full suite of logging and then completing that well, but you get the latest technology, you get the latest completion, the latest ESP, the latest cementing. All this is exactly happening. So if you look at the efficiency, for example, it's exactly as you have seen here in the US. So some of those wells were used to be drilled in 40 days, and today some of them are drilled in 14, 12 days.
Speaker Change #107: Jackups conventional field wells that produce 689 10000 barrel a day. It is not frac. It is a lot of other technology, but most of these wells you have efficiency gains on the number of days that used to drill the well.
Speaker Change #107: Obviously have a full suite of logging and then completing that well, but you get the latest technology, where you get the latest completion the latest ESP. The latest cementing all of this is exactly happening. So if you look at the efficiency.
Speaker Change #107: For example, it is exactly as you have seen here in the U S. So some of those wells, where it used to be drilled in 40 days and today. Some of them are drilled in 14 12 days and you saw that for example, again I will pick on my friends and Aramco.
Sherif Foda: And you saw that, for example, again, I will pick on my friends in Aramco. You see this is what they did in the unconventional. The unconventional, how it started and how it is today, it's exactly like you are like in an adarco basin or Delaware or something where basically they managed to slash the drilling time by a factor of three, right? So you get a lot of wealth per year, and sometimes double and triple what it used to be before. In other places, you don't have that because it's a bit of a standard procedure, so then you get an increase of efficiency.
Speaker Change #107: This is what they did in the unconventional the unconventional how it started and how it is today. It's exactly like you are like in Anadarko basin, or Delaware or something where basically they managed to slash the drilling time by a factor of three right. So you get a lot of wells drilled per rig per year.
Speaker Change #107: A year and sometimes double and triple what it used to be before and other places you don't have that because it's a bit of.
Speaker Change #107: Yeah.
Speaker Change #107: Standard procedure. So then you get an increase of a very limited.
Speaker Change #108: Increase of efficiency, what I think what you saw in the trend in the middle East over the past 10 years is elasticate lump sum turnkey, which is similar to what you had in Mexico right.
Sherif Foda: What I think, what you saw in the trend in the Middle East over the past 10 years, is LSDK, long sum turnkey, which is similar to what you had in Mexico, right? Well, basically, the client saw in some of the development, when it is cut and paste type of wells, why don't I go and I get someone to take the risk and take the rig and then do the whole thing and I slash my cost by 50%. And that's basically a trend that happened in many countries where the client, because the wells are the same, so if I get the efficiency gain, then I can get as well a better price.
Basically the client saw in some of the development when it is cut and paste type of wells why don't I go and I get someone to take the risk and take the rig and then do the whole thing and I slash my cost by 50% and that.
Speaker Change #108: It's basically a trend that happened in many countries.
Speaker Change #108: Where decline because the wells are the same so if I get the efficiency gain.
Speaker Change #108: Then I can get as well about the price at the beginning of this project those were kind of good and still profitable. Obviously now you get to the technical limit.
Jan cuts: So again, here we're talking conventional, you know, jackups, conventional fields, wealth that produce 6, 8, 9, 10,000 barrels a day, it is not fracked, it is a lot of other technology. But most of these wealth you have efficiency gains on the number of days that used to drill a well. Obviously, you have a full suite of logging and then completing that well, but you get the latest technology, you get the latest completion, the latest ESP, the latest cementing, all this is exactly happening.
Sherif Foda: At the beginning of this project, those were kind of good and still profitable. Obviously, now you get to the technical limit of some of those wells; then it becomes really a game of pricing, and I think the part that is really manage this way, the majority of it of these type of wells are in Iraq. So Iraq, all the wells are drilled are on LSDK because it's a fee per barrel and it is not a PSA and it is not an NOC. So and that's why you have now today a lot of Chinese ENP and a Chinese service country, companies in the country and all the wells are on LSDK, it longs sound to me.
Speaker Change #108: Of some of those wells then it becomes really a.
Jan cuts: So if you look at the efficiency, for example, it's exactly as you have seen here in the US, so some of those wells were used to be drilled in 40 days and today some of them are drilled in 14, 12 days. And you saw that, for example, again, I will pick on my friends in Aramco, you see this is what they did in the unconventional, the unconventional, how it started and how it is today, it's exactly like you are like in an adarco basin or Delaware or something where basically they managed to slash the drilling time by a factor of 3.
Speaker Change #109: Game off pricing and I think the part that is really manage this way the majority of it of these type of wells are in Iraq, Iraq, all the wells are drilled our own elasticate, because it's a fee per barrel and it is not a PSA and it is not an NOC, so and Thats why you have now today.
Speaker Change #110: A lot of Chinese E&P and the Chinese service country companies in the country and all the wells are unrealistic lump sum turnkey.
Sherif Foda: So, overall, if I may answer you, you have the same trend of improvement of efficiency. You have a number of well-drilled per rig, sometimes twice and three times better than it used to be. The development wells are very, very sophisticated, and exploration remains a big part of the pie where it is not in the U.S. for example. So, there is a lot of exploration well, a lot of still open-hole logging, identifying appraisal field because you still have a lot of green reservoir or green fields where you can drill new wells and have discoveries. You just saw the offshore discovery of Kuwait, which is everybody was like, Kuwait will have offshore, yes, it does offshore and it was a great success.
Speaker Change #111: So overall if I if I may answer you you have the same trend of improvement of efficiency you have number of wells drilled per rig, sometimes twice and three times better than it used to be.
Speaker Change #111: The development wells are very very sophisticated and exploration remains a big part of the pie where it is not in the U S. For example, so there is a lot of exploration well a lot of.
Jan cuts: So you get a lot of wealth per year and sometimes double and triple what it used to be before. In other places, you don't have that because it's a bit of standard procedure, so then you get an increase of a very limited increase of efficiency. What I think what you saw in the trend in the Middle East over the past 10 years is LSDK, Long Sum Turnkey, which is similar to what you had in Mexico, right?
Speaker Change #111: Still open hole logging.
Speaker Change #112: Identifying appraisal fees, because you still have a lot of green.
Speaker Change #112: Reservoir or a greenfield, where you can drill new wells and have discoveries.
Speaker Change #112: You just saw the offshore discovery of Kuwait, which is everybody was like Kuwait, we'll have offshore it yes. It does offshore in and it was a great success and now in the coming years, you will have jackups running in Kuwait like you have in Saudi and you'll have a new offshore development in the country.
Sherif Foda: And now, in the coming years, you will have jackups running in Kuwait like you have in Saudi, and you will have a new offshore development in the country. That's great. That's all super helpful. I appreciate that.
Jan cuts: Well, basically the client saw in some of the development when it is cut and paste type of wells, why don't I go and I get someone to take the risk and take the rig and then do the whole thing and I slash my cost by 50%. And that's basically a trend that happened in many countries where the clients because the wells are the same, so if I get the efficiency gain, then you know I can get as well a better price.
Speaker Change #113: That's great.
Speaker Change #112: Super helpful.
Speaker Change #114: I appreciate that.
Dan Cuts: Maybe just a question on Middle East depurbanization and low carbon strategies and talk a lot about your native segment. I'm trying to think through, again, just in part of the U.S. the pace of transition is kind of at odds with energy security and the political administration matters a lot in employing the pace of transition in the Middle East. I get the sense that the kind of pace of investment and build out of decarbonization and low carbon has been pretty consistently advancing. I guess the question is around what are some of the risks that could accelerate or decelerate the decarbonization and low carbon plans in the Middle East and seems more of a project execution and investment versus a political issue.
Speaker Change #114: Maybe just a question on middle East E carbonization, low carbon and our strategies and.
Speaker Change #115: You've talked a lot about.
Speaker Change #116: Natus segment I guess.
Speaker Change #116: I'm trying to think through again.
Speaker Change #116: U S.
Jan cuts: At the beginning of this project, those were kind of good and still profitable. Obviously, now you get to the technical limit of some of those wells, then it becomes really a game of pricing. And I think the part that is really managed this way, the majority of it of these type of wells are in Iraq. So Iraq, all the wells are drilled are on LSDK because it's a fee per barrel and it is not a PSA and it is not an NOC.
Speaker Change #117: Pace of transition is kind of.
Speaker Change #117: At odds with energy security and the political administration matters, a lot and employing influencing.
Speaker Change #117: The pace of transition in the Middle East.
Speaker Change #117: Since then.
Speaker Change #117: Hello.
Speaker Change #117: The kind of pace of investment and build out of optimization and more carbon.
Speaker Change #117: It's been pretty consistently advancing.
Speaker Change #117: So.
Speaker Change #117: I guess the question is around what are some risks that could kind of accelerate or decelerate.
Jan cuts: So and that's why you have now today a lot of Chinese ENP and Chinese service companies in the country. And all the wells are on LSDK, Overall, if I may answer you, you have the same trend of improvement of efficiency. You have a number of well-drill per rig, sometimes twice and three times better than it used to be. The development wells are very, very sophisticated and exploration remains a big part of the pie where it is not in the U.S, for example.
Speaker Change #117: You know the decarbonization and low carbon plant in the middle East.
Speaker Change #117: It is more kind of a.
Speaker Change #118: Project execution and investment versus like.
Speaker Change #118: Our political.
Sherif Foda: But we just love your thoughts on the upside, downside risk to energy transition decarbonization in the Middle East. So look, I mean, if you look at the recent COP27 and COP28, when it was done in Egypt, when it was done in UAE, and both were very clear that for the first time, the COP invited the ENP in national oil company. And before they were never invited, they were never on the table like in Scotland. So why is that? Because these guys are committed, and I think, as you saw in 2008, with Dr. Sultan inviting all the 50 top ENP companies, and they made the pledge of the no methane and no flaring in by 2030.
Speaker Change #119: Issue, but would just love your thoughts on yes.
Speaker Change #120: On the upside downside risk to it.
Speaker Change #121: Energy transition.
Speaker Change #122: The proposition.
Speaker Change #122: The middle East.
Speaker Change #123: So look I mean.
Speaker Change #123: If you look at.
Speaker Change #123: The recent cop 27, and cop 28.
Jan cuts: There is a lot of exploration well. A lot of still open-hole logging, identifying appraisal fields because you still have a lot of green reservoir or green fields where you can drill new wells and have discoveries. You just saw the offshore discovery of Kuwait, which is everybody was like Kuwait will have offshore, yes, it does offshore and it was a great success. And now in the coming years you will have jackups running in Kuwait like you have in Saudi and you will have a new offshore development in another country. That's great. That's all super helpful. I appreciate that.
Speaker Change #123: One was done in Egypt, when it was done in UAE and both were very clear that for the first time the cup invited the E&P National oil company.
And before they would never invited there were never on the table like in Scotland. So why is that because these guys are committed and I think as you saw in 2008 with Doctor Salto inviting all of the 50 top E&P companies and they've made a pledge of the non methane and no flaring by 2030 so.
Sherif Foda: So the energy transition here is not, I am going away from oil and gas and I'm going to go to renewal, but no, I'm doing both. I need both because the energy, I need both, and obviously, the income of those countries in the Middle East is entirely oil and gas, right? So, but how can I produce more oil and gas with less emission? So maximize my oil and gas, and minimize my emission. And I think you will always see Saudi UAE, especially both, or in that kind of very fast leadership event. So they already don't flare.
Speaker Change #123: It is the.
Speaker Change #124: Energy transition here is not going away from oil and gas and I'm going to go through renewal, but no I'm doing both I need both because the energy I need both on obviously the income of those countries in the middle East is entirely oil and gas right. So, but how can I produce more oil and gas with less emission so maximum.
Sharifota: Maybe just a question on Middle East deparbonization and low carbon strategies and talk a lot about your native segment. I guess I'm trying to think through again, you know, just in part of the U.S, the pace of transition is kind of, you know, at odds with energy security and the political administration matters a lot in employing, employing the pace of transition. In the Middle East I get the sense that, you know, that the kind of pace of investment and build out of decarbonization and low carbon has been put it consistently advancing.
Speaker Change #124: My oil and gas and minimize my emission and I think you will always see Sally.
Saudi UAE, especially both are in that kind of very fast leadership event. So the.
Speaker Change #125: Although it is unclear.
Sherif Foda: And they are looking into how to minimize all the water usage, the oil plant, keep the precious water, monitor all the methane, and all the kind of stuff. So I think this is going to be ongoing because it is a decarbonization of my oil and gas. It is not like I'm going away from it, but I am not going to flare. Or for example, the best is the, as His Royal Highness said in Saudi, I don't want to use any liquid for power, right? So meaning this is decarbonization, let's emission. It's exactly what the US did when they stopped coal and they moved to gas, right?
Speaker Change #126: And they are looking into how to minimize all the water usage the auto plant keep.
Keep the precious water monitor ultimately in all of this kind of stuff. So I think this is going to be ongoing because it is a decarbonization of my oil and gas. It is not like im going away from it but I am not going to flat or for example, the best is the is really the <unk>.
Sharifota: So I guess the question is around what are some of the risks that could kind of accelerate or decarbonization and low carbon plans in the Middle East and it seems more of kind of a project execution and investment versus like a political issue but we just love your thoughts on the upside down side risk to energy transition decarbonization in the Middle East. Thanks. So look, I mean, if you look at the recent COP27 and COP28 when it was done in Egypt, when it was done in UAE, and both were very clear that for the first time the COP invited the ENP national oil company and before they were never invited, they were never on the table like in Scotland.
Speaker Change #127: <unk> said in Saudi I don't want to use any liquid for power right. So meaning this is <expletive>.
Emission, it's exactly what the U S did when they stopped call and move to gas right and Thats why they have the lowest greenhouse gasses competitively from before and after so.
Sherif Foda: And that's why they have the lowest greenhouse gases comparatively from before and after. If I answer your question more directly on the countries where you have a lot of issues, as you said, geopolitical, et cetera, et cetera, definitely the decarbonization will be priority 50, right? Because first you have to look at a lot of other stuff before that.
Speaker Change #128: If I answer your question more directly on the countries, where you have a lot of issues as you said geopolitical it et cetera et cetera, definitely the de carbonization would be priority 50, right. Because first you have to look at a lot of other stuff before that so I think our risk and thats why wouldn't be deployed we.
Sherif Foda: So I think our risk, and that's why when we deployed, we said we have to first make sure that this project or this decarbonization technology are economical. And once it's economical, it's going to be deployed in the countries first where we target. We know that this is a high priority, and then later we will look into the other when we know it's deployed and developed properly, then we go to the other countries. So I think it's still, it's going to be a huge issue, and I think the Middle East, especially the GCC, are extremely committed to decarbonize their oil and gas, meaning they have leds emission and produce more oil and gas.
Speaker Change #129: <unk> said, we have to first make sure that this project or this decarbonization technology are economical and once its economical is going to be deployed in the country's first where we target. We know that this is a.
Sharifota: So why is that? Because these guys are committed and I think as you saw in 28 with Dr. Sultan inviting all the 50 top ENP companies and they made the pledge of the no methane and no flaring in by 2030. So the energy transition here is not, I am going away from oil and gas and I'm going to go to renewable. No, I'm doing both. I need both because the energy I need both and obviously the income of those countries in the Middle East is entirely oil and gas, right?
Speaker Change #129: High priority and then later, we will look into the other when it's deployed and developed properly then we go to the other countries. So I think it still is.
Speaker Change #129: It's going to be.
Speaker Change #129: A huge issue and I think the middle East, especially the GCC are extremely committed to decarbonize that oil and gas, meaning they have less emission and produce more oil and gas.
Dan Cuts: That's great. I'll really help with the countries of China back.
Speaker Change #129: That's great overall helpful color I'll turn it back.
Sharifota: But how can I produce more oil and gas with less emission? So maximize my oil and gas and minimize my emission and I think you will always see Saudi, UAE especially both are in that kind of very fast leadership event. So they already don't flare and they are looking into how to minimize all the water usage, the oil plant, keep the precious water, monitor all the methane, all the kind of stuff.
Speaker Change #129: Okay.
Doug Becker: Our next question is from Doug Becker with Capital One. Please proceed. Thank you.
Speaker Change #130: Our next question is from Doug Becker with capital one. Please proceed.
Doug Becker: Thank you have a few housekeeping questions, but is it reasonable to expect the typical seasonal pattern plays out the rest of the year. So some modest revenue growth and margin expansion in <unk> and then a year end bump in <unk>.
Stefan Angeli: I have a few housekeeping questions, but is it reasonable to expect the typical seasonal pattern plays out the rest of the year, so some modest revenue growth and margin expansion in 3Q and in a year, and bump in 4Q? So Stefan here, I would say for the rest of the year, the growth which we had in H1 over H1 of the previous year will probably approximate the same exact. We're not going to give guidance, but it won't be too far off that, and with continued revenue growth, obviously you become more efficient, and I would presume the margins will grow a little bit.
Stephen: So it's Stephen here.
Stephen: I would say for the rest of the year the growth, which we had an H in H one overnight to one of the previous year, we will probably approximate the signs that we're not going to give guidance, but it won't be it won't be too far off.
Sharifota: So I think this is going to be ongoing because it is a decarbonization of my oil and gas. It is not like I'm going away from it, but I am not going to flare. Or for example, the bet is the, as his Royal Highness said in Saudi, I don't want to use any liquid for power, right? So meaning this is decarbonization. It's exactly what the US did when they stopped coal and they moved to gas, right?
Stephen: And with.
Stephen: Continued revenue growth, obviously, you become more efficient.
Stephen: Presumed in our margins.
Speaker Change #133: We'll grow a little bit.
Stefan Angeli: Totally appreciate that, and then I also understand the time was uncertain here, but what intermediate milestones should we be looking for in terms of the re-listing and fulfilling the mediation. In other words, will we see signs of progress, or will we just read about it in a press release or in a filing at some point?
Sharifota: And that's why they have the lowest greenhouse gases comparatively from before and after. So If I answer your question more directly on the countries where you have a lot of issues as you said geopolitical etc., definitely the decarbonization will be priority 50, right? Because first you have to look at a lot of other stuff before that. So I think our risk, and that's why when we deployed, we said we have to first make sure that this project or this decarbonization technology are economical.
No totally appreciate.
Speaker Change #133: And then.
Speaker Change #134: I also understand the timing is uncertain here, but whats intermediate milestone should we be looking for in terms of the re listing and fulfilling the remediation just in other words.
Speaker Change #135: We see signs of progress we just read about it in a press release or in our filings will be going through.
Stefan Angeli: We'll be going to. It's definitely going. We'll be going back to Nasdaq immediately.
Speaker Change #136: Definitely we will be going back to NASDAQ immediately right.
Stefan Angeli: It's been a, we got the listed because we weren't on time in the back in 21-22. Now we've done 23 on time back in April, and we've done H1 today, which were filed. We've concluded the SEC investigation, so we think we've done everything that we need to, but obviously we have to go back and communicate with Nasdaq after we've done all this stuff today, and we'll let you guys know as soon as possible. We're optimistic, but I can't really comment more than that. On the remediation, we've been, we went through the restatement process and all these inquiries.
Speaker Change #136: Sure.
Speaker Change #137: It is.
Sharifota: And once it's economical, it's going to be deployed in the countries first where we target, we know that this is a high priority and then later we will look into the other when we know it's deployed and developed properly, then we go to the other countries. So I think it's still, it's going to be a huge issue and I think the Middle East, especially the GCC, are extremely committed to decarbonize their oil and gas, meaning they have less emission and produce more oil and gas. That's great, all very helpful countries, all kind of back.
Speaker Change #138: We got the listed because we werent on time in the filings back in 'twenty, one 'twenty two now and we've done 23.
Speaker Change #138: Time back in April and without H, one today, which were filed with concluded the SEC investigation. So we think.
Speaker Change #138: <unk> done everything.
Speaker Change #138: But we need to but obviously we have to go back.
Speaker Change #138: Communicate with NASDAQ after we're done with stuff today, and we will let you guys know as soon as possible. We are optimistic, but I can't really comment more work on the remediation.
Speaker Change #138: We believe.
Speaker Change #138: We went through the restatement process and all these inquiries we've been doing remediation basically now for the last 18 months, we've done a hell of a lot on the remediation and we think that.
Stefan Angeli: We've been doing remediation basically now for the last 18 months. We've done a hell of a lot on the remediation, and we think that we have, from the SEC's point of view, we've got one year from yesterday to make sure our remediation is done, but we're hoping to make sure that everything is done by the end of the year, right? That were material weaknesses, or most of them are eliminated by the end of the year in our financial report, isn't it? At the end of the year.
Doug Becker: Our next question is from Doug Becker with Capital One, please proceed. Thank you, I have a few housekeeping questions, but is it reasonable to expect the typical seasonal pattern plays out the rest of the year, so some modest, revenue growth and margin expansion in 3Q and in a year and bump in 4Q? So Stefan here, I would say for the rest of the year, the growth which we had in H1 over H1 of the previous year will probably approximate the same as that. We're not going to give guidance, but it won't be too far off that. And with continued revenue growth, obviously you become more efficient and I would presume the margins will grow a little bit.
Speaker Change #138: We have from <unk> point of view, we got one year from yesterday to make sure. Our remediation is done, but we're hoping to make sure that everything is done by the end of the year right.
Our material weaknesses will most of them are eliminated by the end of the year.
Speaker Change #138: Financial reporting at the end of the year.
Stefan Angeli: Sounds encouraging; it's very good to have you guys back in the public conversation.
Speaker Change #139: Yes, it sounds encouraging it's very good to have you guys back in the year.
Speaker Change #140: In the public conversation.
John A.J.: Thank you. Our next question is from John A.J.
Speaker Change #141: Thank you.
Speaker Change #141: Our next question is from John Ajay with crest. Please proceed.
John A.J.: with Okham Crest, please proceed. Thank you. Congratulations on a great quarter and first half and coming out of the statement period. The first question I have is about margins. You've touched on it a little bit. It sounds like, you know, we're looking at continued improvement through the rest of this year. I'm not sure if we think about the next year or two after that.
John Ajay: Alright. Thank you congratulations on a great quarter, and first half and coming out of.
Speaker Change #143: The restatement period.
Stefanangely: Yeah, totally appreciate that, and then I also understand the timing is uncertain here, but what intermediate milestone should we be looking for in terms of the relisting and fulfilling the remediation? Just in other words, will we see signs of progress or we just read about it in a press release or in a filing at some point? We'll be going back to Nasdaq immediately. It's been a, we got the listed because we weren't on time in the filing back in 21-22.
John Ajay: The first question I have is about <unk>.
Speaker Change #144: Margin is a little bit it sounds like we're looking at continued improvement through the rest of this year.
Speaker Change #145: How should we think about.
The next year or two after that.
Stefan Angeli: And to what extent is this outlook kind of baked in with the contract inflation you already have in hand, and what would be the variables that are unknown that will determine where the actuality compares to whatever you think it might be at this moment. So our contracts are we have a very good solid, I would say, backlog of contracts. As I had mentioned, some of it nine years, right? So there is no lack of visibility here on contract. So the key now is I see the growth is going to continue at least for 2027. And why is that?
Speaker Change #146: And to what extent is this.
Speaker Change #146: Outlook kind of baked in with the contract in.
Speaker Change #147: And you already have in hand, and what would be the variables that are unknown that will determine where.
Speaker Change #147: Where the actuality compares to whatever you think it might be.
Speaker Change #147: Right.
Speaker Change #148: So our contracts are we have very good solid I would say backlog of contracts.
Stefanangely: Now we've done 23 on time back in April and we've done H1 today which were filed. We've concluded the SEC investigation, so we think we've done everything. That we need to, but obviously we have to go back and communicate with Nasdaq after we've done all this stuff today and we'll let you guys know as soon as possible. We're optimistic, but I can't really comment more than that. On the remediation, we've been, we went through the restatement process and all these inquiries.
Speaker Change #148: As I had mentioned some of it nine years right. So there is no lack of visibility here on contract.
Speaker Change #148: So the key now is I see the growth is going to continue at least for 2027.
Sherif Foda: Because the majority of the projects where the clients have long-term plans and adopted for the capacity is until that date, some of it is more than 2030, etc. But I would say we have a good visibility 2027. So I would say that is a solid growth towards that time. The difference would be how are you going to increase your activity more or increase your revenue more than the activity? And that will depend entirely on our adoption and success of our, yeah, or drilling segment. And that's where you can outpace the market, right? Because you have something today you don't have.
Speaker Change #149: And why is that because the majority of the projects were declined.
Speaker Change #149: <unk> long term.
Plans and adopted for the capacity is until the date. Some of it is more to 2030 et cetera, but I would say we have a good visibility.
Stefanangely: We've been doing remediation basically now for the last 18 months. We've done a hell of a lot on the remediation and we think that we have from the SEC's point of view, we've got one year from yesterday to make sure our remediation is done, but we're hoping to make sure that everything is done by the end of the year, right? And that were our material weaknesses or most of them are eliminated by the end of the year in our financial report, at the end of the year. Sounds encouraging. It's very good to have you guys back in the public conversation. Thank you.
Speaker Change #149: So I would say.
Speaker Change #149: That is a solid growth towards that time, the difference would be.
Speaker Change #150: How are you going to.
Speaker Change #151: The increase your activity more the already increased your revenue more than the activity and that will depend entirely on our adoption and success of our ROE via our drilling to drilling segment and Thats, where you can outpace the market right. Because you have something today you don't have.
Stefan Angeli: And tomorrow you have something that you do have so you can, and you have contracts, so can you adopt it. So the risk would be that it takes much longer or it's not successful, right? The very simple. If our technology has issues or it takes longer time to be commercial and be able to be at par with the big boys, yeah, then we will have delays in that growth. The other part is the decarbonisation and can you get the adoption of it? The third risk is obviously the macro, which we have no, absolutely, we cannot do anything about, which is in total oil price collapse, or a total recount huge drop because of that oil price drops to below $50.
Speaker Change #151: And tomorrow, we have something that you do have so you can and you have contracts. So can you adopted so the risk would be that it takes much longer or if not successful right they're very simple.
John A.J: Our next question is from John A.J, with Okam Crest. Please proceed. Thank you.
Speaker Change #152: Our technology has issues order it takes longer time to be commercial and be able to be at par with the with the Big Boys. Yeah. Then we will have delays in that growth.
Congratulations on a great quarter and first half and coming out of the statement period. The first question I have is about Martin. He touched on it a little bit. It sounds like, you know, we're looking at continued improvement through the rest of this year. I'm not sure if we think about the next year or two after that and to what extent is this outlook kind of baked in with the contract and placing your e-haven hand and what would be the variables that are unknown that will determine where the actuality compares to whatever you think it might be at this moment.
Speaker Change #152: The other part is the decarbonization and can you get to the.
Speaker Change #152: The adoption of it.
Speaker Change #153: The third bridge, because obviously, the macro which we have no.
Speaker Change #153: Thirdly, we cannot do anything about which is in total oil price collapse or the total.
Speaker Change #154: Rig count.
Speaker Change #154: Huge draw because of that oil price drops too.
Speaker Change #154: Below $50 I don't see this happening, but still Avi I mean, this is something good covenants.
Stefan Angeli: I don't see this happening, but this is something good happening as well. But so from the stuff that we can control, I see there is a very little risk in our growth strategy unless our technology does not work. And I have to be thinking about the margin of the percentage. From 24 to 25 to 26. Do we think about it as being flat on the core business and maybe driven up with the mixed one directional bearing and rotary and stuff like that? Or do you see both growth and potential expand margins in the core as well as the mix effect?
Speaker Change #154: But.
Avi: So from the start that we can control I see there is very little risk.
So our contracts are, we have very good solid, I would say, backlog of contracts. As I had mentioned some of it 90s, right? So there is no lack of visibility here on contract. So the key now is I see the growth is going to continue at least for 2027 and why is that? Because the majority of the projects where the clients have long term plans and adopted for the capacity is until that date.
Avi: And our growth strategy.
Avi: Unless our technology does not work.
Speaker Change #156: Let me think about that.
Speaker Change #157: EBITDA margin as a percentage.
Some of it is more than 2030, etc. But I would say we have a good visibility 2027. So I would say that is a solid growth towards that time. The difference would be how are you going to increase your activity more or increase your revenue more than the activity and that will depend entirely on our adoption and success of our, yeah, or drilling segment. And that's where you can outpace the market, right?
Speaker Change #157: From 24 to 25 to 26.
Do we think about it as being flat on the core business and maybe driven with the direct peering.
Speaker Change #158: Peering and rotary and stuff like that or do you see.
Speaker Change #158: Growth.
Speaker Change #158: The project will expand margins.
Speaker Change #158: The core as well as the mix effect.
Stefan Angeli: I think you answered your question quite well there, right? Right now we accident at 23.5, 23.6% Q2. As I said before, I think the margins will be close, will improve slightly, and they will continually improve as revenue grows, right? And it will be what you said the core business will be more flatish and with the new technology type businesses, we hope to get some margin improvement.
Speaker Change #159: I think you answered your question quite well very fluid right now.
We exited.
Speaker Change #159: 23 423, 6%.
Speaker Change #160: Q2, as I said before I think the margins will be close will improve slightly.
Speaker Change #160: That will continue to improve as revenue grows right.
Speaker Change #160: <unk>.
Speaker Change #161: It will be what.
Speaker Change #162: What you said the core business will be more flattish.
Speaker Change #162: With the new technology type businesses, we hope to get some margin improvement.
Because you have something today you don't have and tomorrow you have something that you do have so you can, and you have contracts so can you adopt it. So the risk would be that it takes much longer or it's not successful, right? The very simple risk. If our technology has issues or it takes longer time to be commercial and be able to be at part with the with the with the big boys, yeah, then we will have delays in that growth.
Stefan Angeli: And in terms of the top line outlook and kind of your visibility for 25 and 26, can you kind of talk a little bit about how much growth is a baseline of growth of kind of bag and then what we might be thinking of as, you know, 10 walks of life, do you think things get right? I missed the part of your, I missed the part of it because there was a static there, but right now it's probably a bit early for us to comment on specific numbers for 25 and 26 because we haven't put any detailed plan together.
Speaker Change #162: And in terms of top line outlook.
The other part is the decarbonization and can you get the adoption of it? The third risk is obviously the macro which we have no absolutely we cannot do anything about, which is a total oil price drops to you know below 50 dollars. I don't see this happening, but this is something good happen as well. But so from the stuff that we can control, I see there is a very little risk in our growth strategy unless our technology does not work.
Speaker Change #163: I know your visibility for 'twenty five 'twenty six can you kind of talk a little bit about how.
Speaker Change #163: Such growth is.
Speaker Change #165: Our baseline growth.
Speaker Change #166: And then okay.
Speaker Change #166: As.
Okay.
Speaker Change #166: Do you see things right.
Speaker Change #166: Okay.
Speaker Change #166: So at least the part of it because there was stuck there but.
Speaker Change #166: Right now.
Speaker Change #167: Probably a bit early for us to comment on specific numbers for 25% and 26, because we haven't put a detailed very detailed plan together.
Stefan Angeli: Sherif commented on that we should get quite good growth next year and the following year based on the contracts we have and the opportunities about, but we've not detailed a finite plan this year, right? And we'll be doing that in towards the end of Q3, early Q4. Okay, great. In terms of the technical, I'm very sure you're talking about that.
Speaker Change #167: <unk> commented on.
Speaker Change #167: We should get quite good growth next year and the following year based on the contracts, we have and the opportunities about but we have not.
Speaker Change #167: We've not detailed.
Speaker Change #167: A final plan this year.
Speaker Change #167: And we will be doing that in towards the end of Q3 early Q4.
Speaker Change #169: Okay great.
Speaker Change #169: In terms of.
Speaker Change #169: On a directional drilling.
Speaker Change #169: Talk about that.
And I have to be thinking about the percentage that even the margin of the percentage. You know, from 24 to 25 to 26, do we think about it as being flat on the core of business and maybe driven up with the mixed one directional bearing and rotary and stuff like that, or do you see both growth and potential expand margins in the core as well as the mix effect? I think you answered your question quite well there, right?
Sherif Foda: Maybe if everything goes right, what could we be looking at in terms of an ultimate opportunity for you and a piece in of realizing that and the profitability of that business line, maybe as a percentage margin. I would say, look, the market of the direction drilling is above $2 billion. So our aim since we started that journey five years ago is to be at least 10% of that market, right? So, how the adoption is really based on our success. So the good news is we have contracts in place. So the foundation today, if you go to the Middle East and try to get a contract, is extremely difficult.
Speaker Change #169: Again.
Speaker Change #169: If everything goes right and.
What could we be looking at in terms of the ultimate opportunity for you and a paint.
Speaker Change #169: Pacing of realizing that and.
Speaker Change #170: The profitability of that business line, maybe as a percentage margin.
Speaker Change #170: Right.
Speaker Change #170: So John I would say look the market is.
Speaker Change #170: Of the of the direction drilling is above $2 billion.
Speaker Change #170: So.
John Ajay: Our aim since we started that journey five years ago is to be at least 10% of that market right. So.
Right now, we accident at 23.5, 23.6% Q2. As I said before, I think the margins will be close, will improve slightly and they'll continually improve as revenue grows, right? And it will be what you said, the core business will be more flatish and with the new technology type businesses. We hope to get some margin improvement. And in terms of the top line outlook and kind of your visibility for 25 and 26, you kind of talk a little bit about how much growth is a baseline of growth of kind of back and then we might be thinking of as 10 walks of life if you see things good, right?
John Ajay: How the adoption.
John Ajay: It is really based on our success. So the good news is we have contracts in place. So the foundation today. If you go to the Middle East and tried to get the contract is extremely difficult and obviously as we are the national champion we have strong local company. So we have that foundation.
Sherif Foda: And obviously, as we are the national champion, we are a strong local company. So we have that foundation; we have a contract in place already. So the key for us is really to get the technology to work. And we make sure that we are very close to our customer in the sense we do not go and sell something that does not work or it's inferior to the competition. So we tell the customer openly, we will only deploy this in this field, in this reservoir because we know we can operate, meaning the dog leg is correct, the penetration is accurate, the MWD is good, the quality of the LWD is good.
John Ajay: We have contract in place already so the key for US is really to get the technology to work and we make sure that we are very close to our customer in the sense. We do not go and sell something that does not work. It is inferior to the competition. So we tell the customer openly we will only.
John Ajay: We deployed this in this field and this reservoir because we know we can.
John Ajay: We can operate meaning the dogleg is correct. The penetration is accurate. The <unk> is good the quality of the Lwt is good then obviously declined check all of these data as well it's not like we said that they believe US right. So so that adoption is going to be obviously slow at the start.
I missed the part of it because there was static there, but right now, it's probably a bit early for us to comment on specific numbers for 25 and 26 because we haven't put any detailed plan together. Sharif commented on that we should get quite good growth next year and the following year based on the contracts we have and the opportunities about, but we've not detailed a finite plan as yet, right? And we'll be doing that in towards the end of Q3 early Q4.
Sherif Foda: And obviously, the client checks all these data as well. It's not like we said that they believe us, right? So that adoption is going to be obviously slow at the start. And then it keeps ramping up as we keep successful run. And that's why I and I prepared remark, I explained that we tested the technology in the United States for the last two to three years to make sure first is the field testing is done here in the US. And that's where we drilled almost 70,000 feet. Now we know that we can drill some of the welds; some of it is still we are not we will not test it in some other fields.
John Ajay: And then it keeps ramping up as we keep successful run and Thats why.
Speaker Change #171: In my prepared remark I explained that we tested the technology and in in the United States for the last two to three years to make sure first is the field testing is done here in the U S and Thats, where we drilled almost 70000 feet now we know that we can drill.
Speaker Change #171: Some of the wells some of it is still we are not.
Maybe if everything goes right, what could we be looking at in terms of an ultimate opportunity for you and a piece in of realizing that and the profitably of that business line, maybe as a percentage margin. So John, I would say look, the market of the direction drilling is above $2 billion. So our aim since we started that journey five years ago is to be at least 10% of that market, right?
Speaker Change #172: We would not tested in some other fields, but our aim is that Tam that is $2 billion and how much can you get out of it.
Sherif Foda: But our aim is that time that is $2,000,000, and how much can you get out of it? Great. Well, thanks so much. Congratulations.
Speaker Change #173: Great well, thanks, so much.
Speaker Change #172: Congratulations.
Operator: Thank you, sir.
Speaker Change #174: Thank you Sir.
Operator: With no further questions in the queue, this will conclude today's conference. You may disconnect your lives at this time, and thank you for your participation.
Speaker Change #174: With no further questions in the queue. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Speaker Change #174: Okay.
Speaker Change #174: Okay.
So how the adoption is really based on our success. So the good news is we have contracts in place. So the foundation today if you go to the Middle East and try to get a contract is extremely difficult. And obviously as we are the National Champion, we are a strong local company. So we have that foundation, we have contract in place already. So the key for us is really to get the technology to work and we make sure that we are very close to our customer in the sense we do not go and sell something that does not work or it is inferior to the competition.
Speaker Change #174: Okay.
Speaker Change #174: [music].
Speaker Change #174: Okay.
Speaker Change #174: [music].
So we tell the customer openly, we will only deploy this in this field, in this reservoir because we know we can operate, meaning the dog leg is correct, the penetration is accurate, the MWD is good, the quality of the LWD is good. And obviously the client checked all these data as well. It is not like we said that they believe us, right? So so that adoption is going to be obviously slow at the start and then it keeps ramping up as we keep successful run.
And that's why I and my prepared remark I explained that we tested the technology in in the United States for the last two to three years to make sure first is the field testing is done here in the US and that's where we drilled almost 70,000 feet. Now we know that we can drill some of the welds, some of it is still we are not we will not test it in some other fields, but but our aim is that time that is $2 billion and how much can you get out of it.
Great. Well, thanks so much. Congratulations. Thank you, sir.
With no further questions in the queue, this will conclude today's conference. You may disconnect your lives at this time, and thank you for your participation.