Greetings, and welcome to NESR Fourth Quarter 2024 Financial Results call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Blake Gendron, Vice President of Investor Relations. Thank you. You may begin.

Thanks, Melissa. Hello and welcome to NESR's fourth quarter 2024 earnings call. With me today are Sherif Foda, Chairman and Chief Executive Officer of NESR; and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our fourth year results and overall performance. 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 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. 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 over to Sherif.

Thanks, Blake. Ladies and gentlemen, good morning, and thank you for participating in this conference call. I'm extremely proud of another stellar year that the team delivered in 2024. In the fourth quarter, we once again reached new heights for revenue, EBITDA, and EPS. With robust cash flow generation, we've entered 2025 in a position of notable balance sheet strength, and we've never been better positioned to size the many opportunities that remain in front of us. First, let me reflect briefly on what we were able to achieve over the past year. 2024 was an exceptional year for the company, marked by many key milestones, especially our NASDAQ relisting this past October. This was a fantastic event where we had our management team traveling to New York and celebrate with our investor at the impressive NASDAQ Center at Times Square. Thank you, to all our investors and analysts that attended the event. Operationally, 2024 was a continuation of our unique growth story as we secure new contracts, enhanced our core business, and pushed into new technology frontier with our ROYA direction drilling platform and NEDA decarbonization portfolio. We expanded and deepened our anchor country footprint on many fronts with multiple growth drivers within each country contributing to our near doubling of the overall market growth in 2024. Today, our large core countries expand into Saudi, Oman, Kuwait, UAE, Iraq, Algeria and Egypt. We have achieved record revenue and growth in each, this year. We are positive about the prospects and opportunities into all of them for ’25 and we maintain optimistic about adding more countries to that league in the near future. Best example is Libya, with its recent development. We continue to address all profitable growth opportunities in all the countries where we operate. And we are nimble…

Thank you, Sherif. Good morning to our audience in the US and good afternoon, good evening to our audience in the Middle East, North Africa, Asia and/or Europe. I'm very pleased to give an update on our strong financial performance for the fourth quarter of 2024 and for the full year ’24. In summary, despite the ongoing macro volatility worldwide and geopolitical uncertainty in the Middle East, NESR achieved stellar results for the fourth quarter of ’24 and for the full year of ’24. First, let's cover revenue. Our overall fourth quarter revenue was a record $343.7 million, which was up 2.2 % sequentially and up 11.8 % year-over-year, outpacing the broader market. Revenue for the full year ’24 was $1.3 billion exactly, up 13.6 % year-over-year, with exceptionally strong activity in the Gulf countries. Now turning to adjusted EBITDA. Adjusted EBITDA for the fourth quarter of 2024 was also a record $87.2 million with near record margins of 25.4%, up 157 basis points on a sequential quarter basis. Full year adjusted EBITDA was $310.1 million, up 18.2% year-over-year, with full year margins up 93 basis points to 23.8%. Interest expense for Q4 ’24 was $9.9 million and full year interest was $39.9 million. Full year ’24 effective tax rate was 20.1%, which included a tax release of $3.8 million. Normalizing for this adjustment implies a full year ’24 ETR of around 24.1%. Turning to EPS, earnings per share is adjusted for charges and credits, was $0.30 for the fourth quarter of ’24 and $1.04 for the full year ’24 which was up 96% year-over-year. The charges and credits impacting adjusted EBITDA and adjusted EPS were made up of primarily of two items in Q4 ’24 as follows. Cost of remediation of controlled material weaknesses which should moderate dramatically after…

Thanks, Stefan. Let me conclude by reiterating the key takeaways from the fourth quarter and outlook. First, while the market came into the year with extremely low expectation for the sector, and while the commodity backdrop remains uncertain, we believe that MENA upstream activity will remain a relative bright spot for growth. The gas development theme is central to this view. Although competitive contracts in our business bring multi-year visibility to the company and overall profitability remain healthy, as the sector remains disciplined. We expect ’25 to follow the same seasonal pattern as did in ’24, with first quarter slowest impacted by fewer operating days and the full month of Ramadan in March, followed by a sequential activity build through the year. Overall, our 2025 growth outlook for NESR relative to the market remains unchanged. Second, within the solid MENA backdrop, NESR is extremely well-positioned to outperform due to, one, favorable project exposure particularly related to the broad-based gas development theme; two, our strategic positioning in areas such as Kuwait and Libya, which are expected to lead the growth on a percentage basis. Third, our frontier technology growth leg remains on track, with pilot success in ROYA now duplicated in several countries, and our unique NEDA positioning and investment in produced water mirroring the announcement and commitment recently made by our largest customer and cross-industry partners. Whereas ROYA is expected to be a more linear driver of growth from here, NEDA and our water business represent massive potential that is being defined in real-time, but nevertheless remains a long-term strategy with expected catalysts this year. I would like to close by thanking all of our employees, their families, for an extremely strong close of ’24, and thank our partners and dear customer for their continued support and belief in NESR. With that, I pass over the call to the operator for your question. Melissa?

Thank you. [Operator Instructions] Our first question comes from the line of David Anderson with Barclays. Please proceed with your question.

Okay, great. Thank you. Good morning, Sherif, how are you?

Good morning, sir.

I wanted to ask you about your outlook in a couple of different ways. Maybe first, can we just start, you see, the region kind of spending patterns over the regions, kind of how you see that playing our during the year? The peers, maybe with one exception and most of the GCC continues to ramp up, almost sort of sites and the oil price, meanwhile OPEC bring back barrels to the market, would there be a further reduction in Saudi, if oil prices languished? So how are you sort of think about of missing pieces during the year and overall, would you expect growth -- over all spending growth in the Middle East like mid-single digit? Is that kind of where you are heading?

Yeah, I agree, so just to answer your questions, so yeah, the Middle East, I would say, moderate growth in ’25 compared to ’24. So I would say a single digit growth. And obviously, it depends if you break it into the countries. So Saudi will be a drop in the non-unconventional and increase in unconventional. Kuwait, no difference in growth. So it will be double digit growth year-over-year. And you have Oman, Iraq, kind of stable. UAE will grow again in unconventional, I think the announcement was very clear by ADNOC on the unconventional, which is the 144 wells and the spend of $1.7 billion, this is going ahead. And obviously their capacity, so they will continue to grow as well. And then you have, if you turn to North Africa, then obviously you have the massive Libya growth, which is, again, it's not in double digits, it's in exponential, right? It depends all, there will be question on the budget and how the budget is released. And the funding is transferred from Central Bank to the operator companies for them to be able to execute. However, already, as I said, the rig count is already added by Fort Riggs, which is basically more than triple the rig count, right? So if I look overall, then you look at the region overall, then you're talking about, as you said, low single digits, right? And that's why we always say, at least we're going to double that as we've been doing, and we're going to do the same thing in ’25.

So that was my next part of my question was kind of just focusing on NESR and your position, particularly in Saudi. I was wondering if you could talk about how the mix has changed. So if we think about kind of what's all the news has come out of the last 12 months and it's out of the Kingdom, we've seen a reduction in offshore, we've seen some reduction in the kind of conventional spending, but Jafurah, a different story altogether. Can you talk about how within NESR, how that sort of changed your mix and kind of what's going on there and how Jafurah is progressing and kind of your exposure and how you're thinking about that the next couple of years?

Yeah, sure. So if you look at the offshore, I think the offshore, as I keep saying, it was very well-documented going from the 13 million barrels per day capacity to the 12 billion barrels per day capacity. They released the additional rig that they got. So Saudi was at all time high on jet jack-ups, almost 90 or 91. And now they are back to the 58, 59 jack-ups, right? And that's basically the stability of that from here. And the oil, they released as well land rigs based on not needing the additional barrels and now it's stable already, right? So between both, I think from the oil side is stability. Now on the gas, the normal gas, there was not decline. And then obviously the unconventional program is increasing because they are going from 10 -- 8,000 stages all the way to their goal of almost 25,000 stages a year, right? So that growth is going to continue and the plan is on the same path. Now, our exposure as we are obviously involved from the beginning of the Jafurah and then convention, we continue to be part of that. There is a huge potential. Obviously this is going to be tendered, right, as the usual Saudi Aramco. So they already did that on the direction drilling and was awarded for all the rigs that they have. And now they are going to do the same thing for the completion. And there will always be multi awards. So that will be known sometimes in the second half of the year or maybe the end of the first half. So definitely our position will depend on the results of that. But so far we look quite positive about it. Now, if you look overall of Saudi and the…

Very helpful, Sherif. Thank you, if I could just squeeze one more in here. I just want to, you can talk about your capital allocation program here, a little bit from a bigger picture. It sounded like there's potentially still some M&A out there. Are you more likely to spend capital internally on building out technologies or product lines? Or are you thinking more about your footprint? How are you thinking about NESR over the next few years in terms of strategically where you want to go?

Yeah, so as Stefan explained, we obviously, we need to spend our capital, our CapEx, obviously, for the growth. As a company, we continue to grow, so we spend our maintenance CapEx plus our growth CapEx, which could be quite significant, which is good, because that means that we're going to grow even faster. And we continue to look at our platform of technology. So we are not looking at a big M&A in geographical because we are now in all the countries. We're very pleased and happy to be solid in our core countries and outside. And we surely want to enhance our drilling platform ROYA and our NEDA decarbonization. So from that technology aspect, we maintain that agility, and we're obviously looking at some very, very unique and innovative solution, especially on our advanced piloting of mineral recovery and direct lithium extraction. Today, if one of these projects becomes really economical and successful, it's massive, right? So we need to have that ability to acquire some of the technology partners that we are teaming with, or just add to some of these projects in a bigger way. So I think that's where we are going to see over the next couple of months, how we are progressing with that. On the same time, on the direction drilling, we're obviously spending on extensive testing, and we want to add as well some very key features that some of it is very unique to some of what we call like a VC type of investment. And some of those very innovative, we might add them to our portfolio. Now, if I look at that and how we produce our cash flow, we are going to obviously in the second half of the year, re-look at the entire cash flow that we produce, the M&A portfolio, the platform, and then we determine, should we start to do a program like share buyback or dividend or something like that. We will definitely look at that towards the second half of this year.

Thank you very much for taking all my questions, Sherif.

Thank you, sir.

Thank you. Our next question comes from the line of Arun Jayaram with J.P. Morgan. Please proceed with your question.

Yeah, good morning, gentlemen. I wanted to see if you could elaborate a little bit on the margin performance in the fourth quarter and thoughts on potential margin progression in 2025, understanding there's typically some seasonal factors in 1Q, which is cited. But just wanted to see if you could address kind of your confidence that these types of margins could be sustainable and anything about the 2025?

It's definite. We had very good margin performance in Q4. Our service quality and operational execution was very, very good, right? And when you have very good execution and service quality, it improves the margins, right? In 2025, we expect that the margins will track ’24, right, and be very similar to ’24. As Sherif said, we think we'll have high single-digit growth, right, in ’25? But there'll be more competition in ’25 and so we expect the margins to track 2024 quite consistently.

That's helpful. And just maybe my follow-up, Sherif, I was wondering if you could elaborate on commercially what's going on for NESR in Kuwait. You highlighted how you'd been selected amongst a small number of operators. I was just wondering if you could highlight some of the work you're doing for KOC, and perhaps you highlighted an offshore discovery, which kind of wanted to see if you could maybe elaborate on their plans to develop that.

Sure. So Kuwait is, as I said, is the very bright spot. Obviously, you started kind of later than the growth that happened in the other countries. And now you see Kuwait above, you know, it's 200 rigs. People don't even know that, right? So very, very, very strong activity, rigs are drilling. They have, they formulated their vision, which is 4 million barrel capacity from the current 2.5 million barrels, 2.6 million barrels, which means there is a lot of add, right? So that's, and people, again, that know Kuwait, Burgan, which was the second, it's the second largest field in the world, is obviously maturing, but it's producing a lot. And then now they have a lot of other projects around. They have achieved an offshore discovery, which is very, very strong. I mean, Kuwait has always been, since 1938, a land business. And now they just found two, the first two wells, I would say, from an explorationist, that means it's a huge success, it's 100% success. So they drilled two wells, the two wells of discovery. And one is estimated to be around 3 billion of deposit. And the second one is 1 billion of deposit. One is shallower or closer to the land than the other. And now they are on well number three. The plan is six wells. This was always, as the program have been, six wells, and then they're going to go to, depending on, obviously, the delineation, and how do they -- going to see how this development would be. And for people, again, to appreciate, in the Middle East or the NOC, they look at this as a very long-term view. They don't look at this as short-term. So the plan would be, can I produce 100,000 barrel, 200,000 barrel…

Great, thanks, Sherif.

Thank you. Our next question comes from the line of Jeff Robertson with Water Tower Research. Please proceed with your question.

Thank you, good morning. Sherif, as the emphasis on unconventional resources grows, will that have any material impact on the product mix and the margins for NESR?

Well, I mean, today we have the unconventional in our mix, obviously, and this will continue. It's basically like the United States, it's a big frac business. So the difference would be as the activity grow and the efficiency improve, you continue to kind of try to maintain -- what I call, try to maintain the margins while the cost is increasing, but the efficiency try to offset that increases. So in the future, that's what we are planning to do, same way, more efficiency, more technology. Today, Saudi Arabia, Jafurah is state of the art. And a lot of people as well question would Saudi be able to have efficiency of the permanent? Yes, they do, right? So Saudi Arabia is at that level, pumping at 22 hours, 23 hours a day, multi-stage, dual frac, etc. So all the latest is there, and obviously the efficiency keep improving. So today, in some cases, we do 18 stage a day, 19 stage a day. Some of other technology we are bringing, we have partners with the US, and that's basically how you maintain that improvement in efficiency and trying to get the reduction in cost to be able to maintain economical for that cost curve, right? In addition to that, in the same field, we are trying some new stuff along with our customer on the water, right? Which I think, I'm still such a big believer that the industry should do a better job in reusing its resources. So and that's how you recycle the water, try to get the minerals out. If you get some products out of that as well, you sell it so that improve your margin and as well contribute to the climate. And I think if we do that, we would be able to maintain and even improve the margins in the future because we are adding new business to that platform.

Secondly, on the ROYA platform, what's the pathway to continue to test that and ultimately be able to use that technology in new contracts? So the ROYA Steerable business is a very, I would say extensive testing if you do it in a very reliable way. So today our ROYA platform, which is the RSS Rotary Steerable, MWD, LWD is what I call a success technological. So the technology works. We proved it. We proved it in the US 70,000 feet drills. Now what you're doing is you go through a very deliberate extensive testing that is very rigid. And every time you pass a stage, you go and you test everything. So for example, our RSS today, after the wells and after the drilling that we did, we bring back those tools and we test, we do it like a destructive testing, check everything, make sure that we believe and we know how the tool is ruggedized, how it will be able to drill in different formation. Then we send it and do another test or another job. All these jobs, obviously, once we know it's drilling exactly like the competition or like the market, we charge for it already, right? So as I said, we have this good outcome that we have contracts already. So we are delivering on those contracts. So I would say by H2, by the second half of this year, we'll be able to determine now everything is commercial and they are reliable. We'll obviously always have some teething issue, but the tool is reliable enough to be a market standard to call it a commercial tool.

Thank you for taking my questions.

Thank you, sir.

Thank you. Our next question comes from the line of Arvind Sengar with Geosphere Capital. Please proceed with your question.

Thank you. Good morning, Sherif. Question on the valuation gap between where NESR is valued and similarly positioned serving the same markets in Middle East and a little bit of North Africa that are listed in the Middle East are valued. I mean, it's a valuation gap that you can drive a truck through. So any thoughts on how you might be able to close that gap?

Well, very good question, Arvind. I mean, I wish I understand the market. Our growth story is obviously very unique and we continue to do the same. I think maybe it's a bit underappreciated. If I call on the Middle East, obviously, if that's your question, on the companies that are listed in the Middle East, obviously they are well positioned like ADNOC Drilling, ADC, Ades. These are the three, I would say, the companies listed there. And definitely it's something we're looking at extensively. We looked at it in the past. There is, for people to, again, appreciate, there is no fungibility between the exchange, any exchange, actually, in the Middle East and any exchange in the US or in Europe. So what you have to do is you have to do ADRs or if you do, do a listing. Or at a certain point of time, if you can say, as you said, or as you are asking, the disallocation totally, definitely you look at new ideas, right? Should you list there and should you do something different? But so far, we are on the course to see. I think we, people, I think maybe you need to appreciate us more on the NASDAQ or in the US. And it's something that we're going to monitor while we are keeping the dialogue with our friends and folks in the Middle East listing agency.

Understood. And one last question. The warrants, I didn't see anything in the press release. Are those expiring this summer?

No, we extended the warrants until June ’26. It's not in the press release, but it will be in the 20-F. So it is public that we extended them to June of ’26.

Okay, thank you.

Thank you. [Operator Instructions] Our next question comes from John Ajay with Occam Crest Management. Please proceed with your question.

Yes, hi. I'd like to see if you can quantify a base case for overall weighted average market growth for 2025 and a base case for NESR growth. But more importantly, I'd like to understand your level of visibility and confidence in delivering that level of base case NESR growth. And what are some of the key assumptions that could swing it one way or the other, on oil prices or geopolitical developments? And as far as oil prices go, my understanding is, and I'd like to see if this is correct, is that 80 % of your business is not oil price sensitive. But I'd like to understand what would be an adverse oil price scenario that might cause overall market growth or your growth to be a little lower and how much, you know, what is that sensitivity? And then I'd like to understand, you talked about there being some exciting growth opportunities and you want to see how some things play out on deploying capital in those organic opportunities. I'd like to understand on top of this base case, how significant could some of these opportunities be in terms of layering significant revenue on top of this base case?

Thanks, Ajay, obviously a lot of assumption here. So let me try to answer all your questions. So the MENA region growth ’25 over ’24 would be anywhere depending on who you talk to, depending on the assumption that you have, rigs are coming on time, some of the project gets delayed, etc, we are talking about 3% to 4%. And I would say minimum we're going to do is 8% to 10%. Right? So that's the growth profile we see ourselves versus the other. Why? Because we have that luxury of being small. So if you are small and you have contract that you have the visibility of those contracts, you add new contracts to it and then you make the math, you're going to make it, right? So if you are 10% of the market being, growing is not that hard versus if you are 50% of the market is going to be very difficult because you'll have to follow the market. The best example of that, as I keep saying, is our position in Oman. So in Oman, we are very big and in terms of percentage, we are, I would say, the third largest service company. And we grow with the market. We don't outpace the market. When we outpace the market, we outpace the market if we win a new service line that we don't have, which is today we are tendering a couple of contracts that we don't have. If we win them, we will outgrow the market even in Oman, right? Now, on your assumption of the oil price, I would say that's my personal view, that the oil price will maintain in that range, $60 to $70, which means that this is basically all the assumption and all the budget of all…

Great. Well, thanks for the update. Really appreciate it.

Thank you, sir.

Thank you. That concludes our question-and-answer session. I'll turn the floor back to Mr. Foda for any final questions.

Thank you very much. We really appreciate your time, appreciate your belief. And again, I’d like to thank you all for your support and belief in the journey. Thank you, very much, very excited for ’25. Thank you.

Thank you. This concludes today’s conference call. You may now disconnect your lines at this time. Thank you for your participation.