Operator: All to Abraj Energy Services Q3 2026 Results Conference Call. With us on the line today, we have Mr. Zahran Al Kindi, Chief Operating Officer, Mr. Hubert, Chief Financial Officer, and Mr. Sadiq, Deputy CFO and Investor Relations Officer. Without further delay, I would like to hand over the call to management.
Sadiq Jawad Al-Lawati: Good afternoon, ladies and gentlemen, and welcome to Abraj's Earnings Call for Q3 2026. Thank you, EFG Hermes, for hosting today's call, and I would like to extend my thanks to MSX for giving the opportunity to meet our investors. Two days ago, we published our Q3 earnings and viewed financial results for Q3. These are as on Abraj Investor Relation website, which we did recently upgrade it, and I would encourage everyone to visit it. The presentation and the record call will be shortly after the call will be posted on our website as well as at MSX portal.
Sadiq Jawad Al-Lawati: As usual, I would like to draw your attention to the disclaimer statement, which I invite you to read it at your convenience. Joining me today. Agenda of this session will cover financial and operational highlights for the Q3 backlog, market share updates, and utilization rate, financial performance. Our closing remarks will include update on our strategy, execution, and guidelines for the remaining of the year. We will then open the floor for your questions. I will just take this opportunity in Arabic to express, to introduce. [Foreign language] EFG Hermes [Foreign language] presentation [Foreign language]. We'll hand over to Mr. Zahran Al Kindi, our COO.
Zahran Al Kindi: [[[[[[[Good afternoon, everyone. Before we start the presentation firs remark is to recognize Abraj team who have done an outstanding job on delivering and starting the first two Wave III rigs and managed to spot the rigs despite the logistic challenge and clear those rigs from the ports in a very minimal time. It took us around 50 to 55 days from the time we pulled out the first two rigs from the port all the way to rig commissioning and acceptance. So thank you very much, Abraj team, for an outstanding performance.
Zahran Al Kindi: Going back to the presentation, let me start by highlighting Abraj financial key highlight performance for the quarter. Later on, Mr. Hubert Lafeuille, the CFO, will give more details. Overall, we had another excellent quarter with an increase on revenue, net income, utilization rate compared to Q2. For the quarter, we record revenue of OMR 42 million, represents a 7% increase QoQ. It is well within the guidance we gave last quarter. This increase mainly reflect a higher rig activities and starting the third rig in Kuwait.
Zahran Al Kindi: In addition to the full quarter contribution, the Kuwait rigs that start last quarter, our PAT also increased, Alhamdulillah, by 8% QoQ in line with our revenue upside. For the full year, our revenue OMR 117 million, and our PAT reach OMR 14.6 million, which means earnings per share for the nine months period of 19 baisa up to 5% compared to last year. Our operating cash flow for Q3 amounted of OMR 15.2 million represents 19% increase over Q2, highlighting our ability on our rig activity increase. CAPEX spend during the quarter remained high.
Zahran Al Kindi: It is around OMR 20 million, reflect the ongoing Wave III rigs delivery. As mentioned earlier, we have started 2 of the 6 rigs of Wave III batch, and we plan to start up to another 2, insha'Allah, before end of this year. On year-to-date basis, our CAPEX spend was around OMR 49 million, and we expect to spend another OMR 20 million next quarter, which is likely to be the back of our current CAPEX cycle, the peak of our current CAPEX cycle. Let me now walk you through the key operational highlights for this quarter.
Zahran Al Kindi: Alhamdulillah Rabbil Alameen, we closed Q3 2026 with rig utilization ratio of 98%, representing a significant improvement of 6 percentage points compared to Q2. This 98% actually a month average for September, but if we take a snapshot of 30 September, we have actively reached full utilization with all the rigs being contracted as we anticipated, Alhamdulillah. In Q3, we started 2 rigs that were idle as of 30 June, plus we started late September the first Wave III rigs, as I mentioned earlier.
Zahran Al Kindi: The second Wave III rigs started middle of October, and we expect this to start the third and the fourth rig, bi'idhnillah ta'ala, by end of the year. Also, this quarter, we have improved our customer satisfaction. We reach up to 98% teamwork and operation excellence. In term of NPT, non-productive time, for the quarter, was less than 1%, showing continuous operational efficiency. Our NPT remained the same, less than average industry benchmark. The key highlight also we achieved for the first 3,000 horsepower rig in Kuwait, we drilled the longest lateral section ever drilled in Kuwait.
Zahran Al Kindi: It is around 10,000 feet. Under HSE, upfront, Alhamdulillah, Q3, our LTI indicator has improved by 25% QoQ, and continue to remain well below industry average. Moving to the backlog and market share utilization, we closed the quarter with a backlog position of OMR 920 million, which is about 3% lower than the last quarter. Since the only addition to the Q3 backlog was one of the rig contracted award of OMR 8.7 million for one year plus one year optional.
Zahran Al Kindi: That rig was went from PDO there to Oxy. 2 days ago, and we are very proud to say, the company announced the signatory of the contract related to 9 workover, 9 hoists, with an estimated contract value of OMR 100 million. This amount will be reported, insha'Allah, in addition to the backlog on Q4, meaning that we are expected to close the year with a minimum of backlog of OMR 975 million and will establish a new record.
Zahran Al Kindi: Our Q3 firm backlog commitment represent more than 45,000 accumulated days of work, equivalent to 123 rig years, and stand for an approximately 4.6 years of remaining firm contract per rig. Our Q3 backlog of over 12 months remaining funding revenue, book-to-bill ratio, was 5.9 times, providing solid and constant visibility in our sublines, and therefore confidence in our future earning delivery. In terms of market share, our drilling market share in Oman remains stable, around 75%, represent 25 active rigs, out of total rig counts in the country, around 92 rigs.
Zahran Al Kindi: And we expect this percentage will increase, insha'Allah, to 30% as we keep deploying with 3 rigs. For the integrated frac services, our market share has marginally increased by 1% as we are ramping up our operation with PDO. In the new contract, we started our operating on deep gas wells. In cementing services, our market share remains stable. It is around 18%. The guaranteed OQEP contract was offset by the end of contract with ARA. With that, I will hand over the presentation to my colleague, Mr. Hubert. Thank you.
Hubert Lafeuille: Thank you, Zahran Al Kindi, and very good afternoon to everyone on the call. I am going to walk you through now some of the key financial performance for the quarter. I also invite you to refer to our Q3 earnings statement release that will cover most of the points that I am going to address. The first slide is showing the financial performance and some key metrics. We are looking at revenue, EBITDA, profit after tax, and CAPEX.
Hubert Lafeuille: For each one of those metrics, we are looking at year-on-year comparison, together with the quarter-on-quarter comparison, which is Q3, this is Q2. Starting with the revenue, which is the upper left graph, we have a year-to-date revenue increase of 8.5, which represents 8% increase, and this is mainly driven by higher utilization rates of about 7.2, as well as higher Well Services activity of 1.2. As a reminder, in 2025, we had up to four weeks back with utilization rates around 85%. If you look at Q2 revenue, our revenue for this quarter was OMR 42 million, with a OMR 2.7 million increase, or +7%.
Hubert Lafeuille: This is Q2. If you remember, back in Q2, we gave a revenue guidance for Q3 with an upside of about 5% to 10%, and eventually we landed very nicely at 7%. In the middle of the range. I will cover the QoQ revenue variance later in a detailed bridging. Moving on to EBITDA. Year-to-date EBITDA of OMR 38 million was OMR 0.8 million higher year-on-year, or +2%, mainly due to increase in rig activity and frac-up operation. That was about OMR 3.9 million. This was partly offset by planned maintenance carried out in 2026, OMR 1.6 million.
Hubert Lafeuille: We have some asset and inventory costs of about OMR 0.8 million, as well as a slightly lower revenue contribution of OMR 0.6 million. If you look at the quarterly EBITDA, Q3 EBITDA was OMR 13.6 million and was higher by OMR 1.3 million or 10%, again, mainly due to the additional rig activity, which accounted for OMR 1.7 million, as well as planned maintenance, as we had more out-of-service time in Q2 than we had in Q3, so that was a positive contribution of OMR 1.1 million. This was partially offset by asset and startup costs of OMR 1.1 million, as well as some G&A expenses of OMR 0.2 million.
Hubert Lafeuille: Moving on to the PAT, the year-to-date profit after tax, PAT, was OMR 14.6 million and is higher by OMR 0.6 or 5%, which is mainly due to the EBITDA increase of OMR 0.8, as I just discussed, partially offset by additional tax impact of OMR 0.2 million. Now, if you look at the depreciation, it was mainly flat year on year, because the increase in the depreciation costs coming from the new rigs was overall offset by the lower depreciation costs on the rest of the fleet. So depreciation was flat year on year. Likewise, net finance costs were also flat year on year.
Hubert Lafeuille: In spite of the increase of the debt level, we have done a good job in terms of repricing some of the bank loan, which results in reducing the average cost of debt by approximately 70 basis points year on year. This is why the net finance cost stays the same in spite of an increasing debt level.
Hubert Lafeuille: Now, if you look at the PAT for Q3, we landed at OMR 5.2 million, which was OMR 0.4 million higher than the last quarter, representing an increase of 8%, which again was driven by the EBITDA increase of OMR 1.3 million, as mentioned before, partially offset by higher depreciation of Kuwait of OMR 0.5 million and higher finance costs QoQ, simply because we have a change in the portion of interest expense that was capitalized in Q2 as opposed to Q3. This also will be covered in my bridging section. On the CAPEX side, you can see that we spent year to date about OMR 49 million, of which 70% relate to fleet expansions.
Hubert Lafeuille: If you look at our fleet expansion program overall, we have the six rigs of the Wave III with PDO. We have the third rig of Kuwait, plus one additional PDO rig, so that is a total of eight rigs. So far, in two days, we have spent OMR 52 million since the inception of the program, and this is more or less 57% of the whole program, so slightly shy of 60%. We will continue to see high capital allocation in Q4 and Q1 of 2027, as we are deploying the rig. Let me go through the bridging analysis now.
Hubert Lafeuille: We will review the quarter-on-quarter bridge for the revenue and for the PAT, and then we will review the cash position movement for the nine months ending period. Starting with the revenue, which is the upper graph, you can see that we have a revenue increase of OMR 2.7 million, as I mentioned, so it is +7% QoQ. You have 2.7% coming from rig activity, which is basically the two rigs that were added in the quarter that were idle in Q2. That is about OMR 1.2 million. Then we have the full contribution of the third rig in Kuwait that started in mid-June, and this is +OMR 1.5 million.
Hubert Lafeuille: On the maintenance, we have an upside of OMR 0.7 million, which is basically the out-of-service time that was incurred in Q2 on CAT IV inspections and recertification activity, and we did not have any CAT IV activities in Q3. So that translates into an upside on the revenue of OMR 0.7 million QoQ. Then we have a higher frac activity of about OMR 0.5 million, which relates to the ramp-up of the PDO contract that was previously announced. With respect to the PAT, we have an increase of OMR 0.4 million, equivalent to 8%.
Hubert Lafeuille: You have the rig activity impact of OMR 1.7 million, which is basically the P&L component of what we discussed above in terms of higher rig activity. On the asset management, as we said, we have a little bit of a cost that also includes startup costs of about OMR 1.1 million. We have slightly higher SG&A of about OMR 0.3 million. We have OMR 0.5 million of additional cost of depreciation, which is basically coming from the contribution of the Kuwait rig, for which we have full quarter depreciation costs in Q3.
Hubert Lafeuille: On the finance costs, again, we have a slightly higher, which is only due to having capitalized a higher portion of interest in Q2 compared to what we have done in Q3. Moving on to the cash flow bridging. This is the cash flow bridging for the nine months period. We start with the cash opening 1 January till closing 30 September. The opening cash position at the start of the year was OMR 7.1 million. We closed Q3 at OMR 6 million, so we have roughly a 16% decrease over the nine months period. Adding to the opening balance is the year-to-date profit before tax of OMR 17.2 million.
Hubert Lafeuille: Then you add your non-cash item of OMR 19.3 million. Then we have a favorable net working capital variance of OMR 4.1 million. After that comes the CapEx, as we have mentioned, so OMR 49 million of CapEx that we spent year to date, which was financed through drawing additional bank loans of OMR 39 million. At the same time, we repaid loan principal as well as lease liabilities of OMR 14.2 million, as well as the associated interest of OMR 4.4 million. In the cash flow, then we also have the OMR 30 million dividend that was made in Q1.
Hubert Lafeuille: The rest is basically the remaining movement related to income tax payments and other net items, which are mainly timing difference between accounting recognition and cash settlement of deferred expenses and deferred income. The next slide is about the net debt and the leverage. As of 30 September, the company net debt position was OMR 122 million, with a slight increase of 1% QoQ. The gross debt increase was OMR 3.4 million, and that was partially offset by a cash position increase of OMR 2.5 million, which again is mainly coming from the improvement in working capital.
Hubert Lafeuille: If you look at the net debt of OMR 122 million, basically it is made of long-term loans of about OMR 115 million. You have OMR 10 million of short-term loans. You have OMR 3.5 million of lease liabilities, less OMR 6 million of cash, and that will give you the OMR 122 million. Looking at the leverage ratio, our net debt to EBITDA actually marginally decreased quarter on quarter due to the combined effect that the net debt position has slightly moved. It is only 1%. Then we have an increased EBITDA. Obviously, as we have more rigs, then basically the basis of the EBITDA becomes a little bit higher.
Hubert Lafeuille: If you take the flatish debt quarter on quarter divided by an increased EBITDA, it gives you a slightly decreased leverage ratio. Again, nonetheless, we still expect that this leverage ratio will continue to increase, simply because we see the peak of the CapEx cycle hitting us in Q4 or Q1. If you look at the net debt bridging, as part of the lower graph, you can see that we drew an additional debt of OMR 6.8 million during the quarter, which was offset by loan principal payments, repayment of OMR 3.7 million, plus you have a OMR 2.5 million change of cash position.
Hubert Lafeuille: Again, as I said, the change in the cash position, which is a OMR 2.5 million increase QoQ, represent 70%, was supported mainly by a strong improvement in the net working capital, particularly on the trade receivable, where we have done good efforts in trying to collect as quicker than what we normally do. This has enabled the working capital to give us a positive swing of OMR 5.6 million. We do have a renewed focus on the net working capital management and the DSO, particularly on the DSO and the inventory level.
Hubert Lafeuille: If you look at our DSO, which is something that we watch very, very closely, we have seen an improvement of about 20 days since the beginning of the year, and that represent a cash upside of roughly OMR 7 to 8 million, so it is not negligible. On the inventory level, we are at the same level of 2425, even though we have more operating rigs, which again highlight some of the inefficiencies that we have realized in utilizing our inventory across the fleets. Now, I will move on quickly for the next slide to the segment level performance.
Hubert Lafeuille: For the segment level performance, again, we have two segments. We have drilling and workover, which comprise of two geography, Oman and Kuwait, and Well Services. In the drilling and workover segment, financial performance is highly sensitive to the number and the distance of the rig move. The Well Services and other segments, it includes fracturing, cementing, and revenue from our training center, Infitech.
Hubert Lafeuille: This business operates, I mean, the fracking and the cementing operate largely on an on-call basis, making financial performance highly dependent to the volume of job that you have executed during the period. Looking at the revenue trend, if you look at drilling revenue in Oman, it has improved over the last three quarters in the range of about 4% to 6% per quarter, and this is just due to the timing of the maintenance inspection and recertification that we have incurred in Q1 and Q2, as well as the steadily ramp-up in the rig activity increase.
Hubert Lafeuille: The drilling revenue in Kuwait has increased Q2 over Q1, mainly due to the higher time recharge. Then we started, in the middle of June, we start operation with rig 401, which is the third rig in Kuwait. This is where you see the increase Q3 over Q2, which is basically coming from the full contribution of rig 401, which is a 3,000 horsepower machine that comes with a high day rate.
Hubert Lafeuille: The Well Services increase Q3 over Q2 is mainly coming from the additional frac on the recently awarded PDO contract, which was slightly partially offset by a little bit less of activity in the cementing job due by the type and the number of jobs that we have done. Now, the bottom graph, you have the net profit. The net profit in Oman is improving steadily. We do have a bit of an adjustment on the SG&A accounts, but the normalized profit is exactly where it is supposed to be, at around roughly 13% of the revenue, in line with the previous quarter's profit margin.
Hubert Lafeuille: In Kuwait, although we had more rigs and more revenue, there is a slight adjustment again on SG&A, a one-time SG&A adjustment that has slightly impacted the net profit. Overall, if you normalize net profit in Kuwait, you would reach something like OMR 0.6 million, which is 17% of the revenue, and this is explained by the fact that the rigs, first of all, as I mentioned, is highly accretive, and we have had the full contribution in Q3.
Hubert Lafeuille: In Well Services and other, we had slightly higher operating costs in Q3, typically manpower, hire of equipment, chemicals, fuel, et cetera, which has slightly impacted the profitability of services, but overall, still pretty much in line. This now concludes my presentation. I will hand the floor over back to Zahran Al Kindi for his final remarks, and I will come back with some guidance.
Zahran Al Kindi: Thank you.
Operator: Thank you.
Zahran Al Kindi: Thank you, Hubert.
Operator: Thank you.
Zahran Al Kindi: Yeah, for the strategy execution.
Hubert Lafeuille: Yeah, just continue.
Operator: Go ahead. Please go ahead.
Zahran Al Kindi: Okay, let me close with a brief update on strategy execution and outlook. In the drilling and workover, as we mentioned earlier, we are very pleased with the remarkable achievement of putting two of Wave III rigs in operation in a very minimal time during this particular geopolitical challenge. Alhamdulillah, and we have the other two rigs already arrived in the country. They are at the site, they are under rig up, and hopefully within a couple of weeks, not 6 to 8 weeks, they should be back in operation, bi'idhnillah ta'ala.
Zahran Al Kindi: In additional, on this quarter, we had two stacked rigs that we managed to put them back in operation with PDO. Those two machines were stacked for almost a year and a half. In terms of Well Services, we have had very good operational results with good service quality delivery on our jobs, with a very low minimal NPT, and we have seen increase in activity with the new PDO integrated frac services, and we have started, Alhamdulillah rabbil alamin, fracking the deep gas wells.
Zahran Al Kindi: From a business development standpoint of view, to date, we have secured OMR 365 million of contract awarded, which includes the latest announcement of the nine workover units with PDO. We see many more opportunity ahead as we are engaging currently with six tenders, including two large rig tenders. We think that the potential of locking the future growth and future earning is high, and the business dynamic remains very good.
Hubert Lafeuille: Thank you, Zahran Al Kindi. Just to finalize, let me talk about the outlook that we have. We are upgrading our full-year revenue guidance for the second quarter in a row from OMR 160 million to OMR 163 million. It was previously OMR 150 million to OMR 160 million, and we are doing that on the back of the very successful deployment of the Wave III new rigs that we see coming through. This implies that we expect next quarter revenue to land between OMR 43 million to OMR 45 million.
Hubert Lafeuille: From a CapEx standpoint, we expect to spend between OMR 18 million to OMR 23 million in Q4, which will put us at a total CapEx spending for 2026 between OMR 67 million to OMR 72 million, which is also in line with the previous guidance. This is all that we have in terms of our presentation. Thank you for your attention. I will now hand the call back to Zaina from EFG Hermes, who will open the floor for any Q&A.
Operator: Thank you so much for the presentation. We will now open up the floor for questions. If you would like to ask a question, you can do so through the raised hand function, or you may type your question in the Q&A or chat box. We are going to give it a few minutes for questions to come in. Okay, we have our first raised hand from Kaushik. Can you please introduce yourself and where you are from, and unmute locally?
[Analyst 1]: Yeah, hi. Congrats for your great set of numbers, and thank you for taking the question. Just a couple of questions. One is on the CapEx. We have the current PDO contract, the CapEx is going on, and I gather that is going to get completed this quarter. Apart from that, we also have secured the new workover rig contract, of which I understand that there will be six new rigs coming. So, what will be the CapEx entitled for? Will there be any major CapEx for these new workover rigs, and when will that commence? Can you give us some estimate on that amount of CapEx that will be done for that?
[Analyst 1]: Also, in terms of your leverage, do you have any target? We understand that you have guided for 30% net debt to EBITDA. Do you have any target internally for that? Just one more question is, for the past two to three quarters, we have been seeing a loss on PP&E disposal. This quarter, it was OMR 1.3 million, and for nine months, it was around OMR 2 million. Can you just explain what this is, and do you see any further provisions on this? Thank you.
Hubert Lafeuille: Thank you for your question. There was a question about the voice. There was a question about what should be our target leverage ratio, and there was a question about asset disposal that are coming through the accounts. I did not quite understand the first point.
Sadiq Jawad Al-Lawati: The first question, I think, was that, yes, to answer that, the CapEx will still continue for Q1 because we still have two rigs more to be delivered in Q1 for the Wave III. The complete cycle will be completed by Q1 2027.
Zahran Al Kindi: In terms of the workover CapEx we are going to spend, we are going to spend around USD 56 million. The first workover unit will start its operation by end of next year, and the rest between Q1 to Q4 2028.
Hubert Lafeuille: Okay. I am going to take the next two questions on the target leverage. We believe that through the cycle, on the steady state business, we should be between 1.5 to 2, which I think is very moderately leveraged. Obviously, we are higher now because of the CapEx cycle that we are going through, and we expect to still go slightly higher. 1.5 to 2 would be the target. On the PP&E disposal, there was a bit of a work done in terms of identifying assets that can no longer be used anywhere throughout the fleet. We have recognized this amount here, which is a non-cash.
Hubert Lafeuille: It is just an accounting loss. It is a non-cash loss. I hope we have answered all your questions.
[Analyst 1]: Yeah, but can I have just one clarification?
Hubert Lafeuille: Sure.
[Analyst 1]: Just to get an understanding for the workover CapEx, the first one will be delivered between Q4 2027 to Q4 2028. So we also see the CapEx getting distributed during that period. That is, will it commence from Q2 2027 next year and maybe complete by H1 2028? So will that approximate be the plan?
Hubert Lafeuille: That is right. That is correct.
[Analyst 1]: Got it. Thanks again. Thanks for taking the call.
Hubert Lafeuille: Thank you.
Operator: Our next question comes from Shahul from Vision Capital. Please unmute locally and ask your question.
Shaoor Turabee: Yes. Hi. Good afternoon. I hope I am audible. Thank you for the presentation, and congratulations on great numbers. I will start my question with the current utilization. As you mentioned that the company has achieved 100% rig utilization by the end of Q3. When is the latest, when is the next contract or something of the rigs that are coming out of the contracts? When should we expect this utilization to reduce below 100%?
Zahran Al Kindi: We are expecting this to reduce below 100% by end of Q1 next year, as four rigs will get out of the contracts. Three of them will get out of PDO contract as its own replacement of Wave III will arrive. We managed, Alhamdulillah, as I mentioned previously, one contract, one of them with Oxy. In total, we will have three out of PDO next year and one from ARA. We are expecting that dip to happen by end of Q1 next year. However, saying that, as I mentioned in the outlook, we are actively engaged in so many contracts for those, so many tenders with those machines internally within the country.
Hubert Lafeuille: Effectively, those rigs are being tendered as we speak.
Shaoor Turabee: Great. Thank you. Thank you for the answer. My next question is, obviously, when your rigs go out of the contracts, when you say that your capital expenditures are for the new rigs that are being built for PDO, what happens to those rigs that are out of the contract?
Zahran Al Kindi: Yes, as I mentioned earlier, those rigs will be out of PDO contract. They are already engaged on different tenders. Those are 20 years old machines. However, they are still usable. They will be seeing a peak in the market, and we engage them within different tenders within the country.
Hubert Lafeuille: I think if I may, because I think the question was more about the accounting treatment, what happened to the cost. Basically, when the rigs come off the contract and they do not have a new contract, then basically we have the OpEx costs, and we let those costs go through the P&L. To a certain extent, we see we can reassign the crew to other rigs, but the actual cost, to another extent, the repair and maintenance goes down because we will just do the bare minimum just to keep the rig warm stacked.
Hubert Lafeuille: But we typically do not capitalize those costs until such points we receive a contract award, and then we do what is a contract readiness, and all those costs are being capitalized because it is covered by a contract that is typically covered by a multi. But in between contracts, in between times, which is normally what happens, typically we do not capitalize the cost. It becomes OpEx. What we do is we reduce them to very bare minimums.
Zahran Al Kindi: Thank you for the clarification.
Shaoor Turabee: Thank you. My last question is regarding the day rates. Obviously, we have seen significant surge in oil prices because of the ongoing conflict. My question is, has this affected or would this affect the day rates that Abraj actually earns on its rigs? Abraj actually earns on its rigs?
Zahran Al Kindi: Not really. We have a long-term contract. In fact, we see more pressure on reducing the day rate rather than increasing the day rate. However, demand is still remain healthy. We did not see any significant drop on the day rate, and all our units are contracted on a long-term contract, an average of 4.5 years per machine.
Shaoor Turabee: Thank you. Thank you very much.
Operator: Okay, we have a few questions coming into the Q&A box. We have a few questions from Aqsa Sheikh. The first few questions are on utilization. What utilization rate should we expect in 2027? What was the fleet utilization in Q3? Are any rigs coming off contract or are up for repricing in Q4 and for 2027?
Zahran Al Kindi: The current utilization rate, as we mentioned earlier, is 100%, and it will remain 100% until mid of Q1 next year, until then. As we indicated earlier, there are projects coming out, so we will have an utilization rate of almost 92%. Yeah. That is where we are going to end up by end of Q2.
Hubert Lafeuille: We have, those rigs are being tendered, right? We have to see whether we get some of the tenders awarded.
Zahran Al Kindi: Indeed. From now until those rigs are out of its contract, we may receive good news where we participate those rigs with. The picture could be flipped from 92% or 90% fleet utilization to 100% again.
Sadiq Jawad Al-Lawati: Well, just to add on that, yes, indeed, we will have four rigs coming out on stack, but out of them, three are replacements for Wave III rigs, which means the manpower will be shifted to the new rigs, as well as the rental and the OpEx associated with. We will be ended only with the very minimal cost, which is the depreciation. It is not like an impact which we had in 2025, where we had four rigs, but yes, those are not replacements, so we had to carry the manpower and the rental associated and OpEx associated with for some time.
Hubert Lafeuille: One last remark. Out of the four rigs that we took in, three of them are rigs that we actually planned to retire in 2026, because they were supposed to be replaced by the Wave III rigs. The only reason why we did not retire them was simply because there was a very high rig demand, and we have been able to continue to market them. Because we see the business dynamics being very good and we have a lot of tenders in the pipe, we believe that a lot of them are going to be able to market all, to contract all three of them, and we believe that we have a chance to secure one of them in two contracts.
Operator: Perfect. Thank you. The follow-up question is regarding day rates. What day rates should we expect in 2027? In terms of top line figures, what should we expect? Around the same figure as recorded in 2026, or your forecast for a full year of 2026? Can you give some color on that?
Zahran Al Kindi: In terms of a day rate, we are expecting the day rate to remain the same as of 2026. In terms of the top line, we are expecting that to increase our revenue by 5% to 7% compared to 2026.
Hubert Lafeuille: Well, we will give a more detailed guidance on full year revenue 2027, but for sure, we expect 2027 to be at a higher level than 2026, simply because we do not have the contribution of the Wave III rigs. Even if we have some rigs that may come up, we still assume that we should be at least 5% over. But again, we will communicate the guidance on 2027 at a later stage.
Operator: Perfect. The next question is regarding margins. Expenses actually grew faster than revenue this quarter. How much of the Q3 cost was one-off mobilization and startup costs, and how much is recurring depreciation and finance costs? When do you expect margins to recover?
Hubert Lafeuille: Okay. As I said, if you look at the depreciation quarter-on-quarter, it was flat simply because we have an added contribution of the rig 401 into Wave, so about OMR 0.5 million during the quarter, which was offset by overall lower depreciation by the rest. So depreciation was flat. Likewise, net finance costs were flat, simply because in spite of the higher debt level, we have been able to reprice our finance costs, and therefore it was stable. Now, in terms of one-off that we have incurred in the Q3 for asset costs and startup, it is probably in the range of OMR 1 to OMR 1.5 million.
Operator: Okay, thank you. The last question from Aqsa Sheikh was regarding the PDO newbuild rig. What are the expected day rates for that whole contract? What is the contract length and the expected utilization ramp-up of the rig?
Zahran Al Kindi: I hope he is referring to Wave III, because the new signed contract, it is for a hoist, it is a workover, not a rig. If he is referring to the Wave II rigs, the contract is for six years, and there are optional periods beyond the six years, and we are expecting to deliver all of them except one by 2028. Seven except the last machine will arrive on beginning of 2028.
Operator: Perfect. We have a question from Mahi Mahmoud from Damman. First of all, she says, "Congrats on the results." Then she is asking, "The current CapEx cycle should end in Q1 2027 or Q1 2028?
Hubert Lafeuille: Okay. The current CapEx cycle, when we mention peak, it means the height of the expenses. Just to be clear, by Q1 2027, all the rigs except one will have been delivered, right? There is one missing rig that will only come in Q1 2028. The peak of the current cycle is going to be next quarter or Q1, depending on the timing of the contractual milestone payments. That will be the peak for this current cycle. Then we will just have one more rig that is going to come in 2028. It is one rig compared to seven rigs that have been delivered so far. It is not going to move the needle.
Hubert Lafeuille: Then, as we announce the new hoist workover contracts that we announced 2 days ago, we are going to start into a new CapEx cycle, which is going to be for the delivery of 6 new units, 6 new workover units. This CapEx cycle will start probably in Q1. It will start in Q1. The first delivery of the hoist is Q3 2027, correct?
Zahran Al Kindi: Correct.
Hubert Lafeuille: It is going to be phased again. It is going to start in Q1, and it is going to spread along 2027, with the first rig being delivered in Q3 2027, and the last of the units being delivered in Q4 2028. It is going to be a long phase in over probably 18 months.
Operator: Thank you for clarifying. Our next question comes from Royan Neketi. Can you please unmute locally and ask your question?
[Analyst 2]: Hey. Just 2 quick questions. The first one on Well Services and other in Oman. CapEx has increased quite a lot versus last quarter. I would like to know what happened here. Also, the second question on Kuwait daily rates. I would like to understand what are the reasons of this increase. Thank you.
Zahran Al Kindi: Regarding Well Services CapEx, because we started the new contract of the IFS, there are few CapEx need to be procured, like the consumables, the well testing, the sand management system, and so on. That is why you see increase on Well Services CapEx.
Hubert Lafeuille: The answer on Kuwait, I think you referred to the rates in Kuwait. The rig that we started in Kuwait, which is rig 401, which started mid-June, is a 3,000 horsepower rig. This is the biggest rig that we have in the fleet. Typically, it is a high-end market niche. The day rates for those type of equipment in Kuwait are typically in the high 40,000. This is the reason why it makes a difference on a quarter-to-quarter basis.
[Analyst 2]: Thank you.
Operator: Give it a few minutes for more questions to come in. As a reminder, you can use the raise hand function to ask your question, or you can type your question in the chat box. Okay, it looks like we have no further questions, I will hand the call back to management for any closing remarks.
Zahran Al Kindi: Thank you very much. Thanks, and Insha'Allah, we meet in the next call. شكرًا جزيلًا، جزاكم الله خيرًا على الأسئلة القيمة، وإن شاء الله نلتقي في الكول القادم بإذن الله تعالى.
Operator: Insha'Allah. Thank you for the participation. Thank you to everyone who joined today's call. This concludes Abraj's call. You may now disconnect.
Zahran Al Kindi: Thank you.
