National Energy Services Reunited Corp. (NESR) Q1 2026 Earnings Call Transcript

Greetings. Welcome to Nessert Reports' first quarter 2026 financial results conference call. At this time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'd like to turn the conference over to Blake Gendron, Vice President of Investor Relations. Thank you. You may now begin.

Thanks, Rob. Rob, hello and welcome to Nessar's first quarter 2026 earnings call. With me today are Sharif Foda, Chairman and Chief Executive Officer of Nessar, and Stephan Angeli, Chief Financial Officer. On today's call, we will comment on our first quarter results and overall performance. After our prepared remarks, we will open up 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 our 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 Sharif.

Thanks, Blake. Ladies and gentlemen, good morning and thank you for participating in this conference call. The world, and particularly the Middle East, has experienced a seismic geopolitical shift over the past several months I want to start the call by sincerely thanking all our employees and their families not only for delivering fantastic results in the face of unprecedented challenges but also for their focus on safety supporting our customers and outstanding operational readiness beyond the strong results I'm most proud to report that all our team members and their families remain safe our operation remain unimpacted and our commitment to our customer remains undeterred during these tough times we see this as our obligation to stand alongside our customers ensure their operation are not impacted delayed or interrupted I have two key message for today's call first I want to report on what I personally saw on the ground in the Middle East from the very outset of the conflict to today while some of the global media is reporting in Middle East paralyzed by conflict and constraint what I have seen myself is a region that has rallied around a singular focus of resilience and unstoppable operation. Second, I want to zoom out to discuss the differentiated positioning of NESS and the substantial post-conflict opportunity set that I see on the horizon. Energy security, localized capacity, and infrastructure diversity are now resounding themes in the energy sector. To reiterate the key message, we remain uniquely aligned and stand shoulder-to-shoulder with our customers. We've had zero evacuation. Our local workforce has committed to safely ensuring no turndown of any jobs and 100% reliability. We've implemented a 30-60-90 supply chain program to maintain uninterrupted flow of materials and spares. Our crisis management team ramped up its oversight seamlessly and we stand ready with extra capacity to effectively meet the evolving needs across the region. Just as in the COVID pandemic, our counter-cyclical investment strategy is not just a slogan, but its natural commitment to step up in times of crisis. In that spirit, let me relay some key observation from the region since landing in Saudi on March 1st. My goal was to ensure close contact with our customers and employees. And what I came away with was a deeper admiration for the resilience of regional leadership and field crews throughout the value chain. From our largest customer in the Gulf, the message was clear. Safety, contingency planning, and operational flexibility. This is not the first time the region has grappled with security and shipping challenges. And that fact was on display in the way our biggest clients have courageously maintained core operation and adapted supply routes and storage. As can be expected, Saudi Arabia is leading this effort extremely professionally and pragmatically, with an unwavering eye on the future. As stated publicly, they are bringing on three of the largest and lowest cost upstream projects globally and are pushing ahead with two more megaprojects over the next several years to enhance a diversified crude mix. Exploration continues apace with six new fields and two new Arabian oil reservoir that add multi-decade visibility to upstream development. The same goes for the natural gas program in the kingdom. If anything, the recent impact on global LNG market has only emboldened Saudi gas development. Likewise, Kuwait has exhibited an exceptional level of resilience, which clearly shows that the growth plan's message in February conference COGS are among the most durable in the region. Our recent contract announcement and my discussion over the past several weeks undersaw that the tender pipeline remains robust and that activity today remains closely aligned with capacity expansion decoupled from near-term oil flows. My visit to UAE and Oman were similarly constructive, as land-based activity has been essentially unimpacted, and expansion continues across both oil and gas, this discussion truly punctuated the view that massive infrastructure investment will be needed, and that more local service capacity with proven track record of quality and robust supply chain will be needed to support this investment program. As just announced, ACNO pledged to spend $55 billion on a new project over the next two years, again confirming the commitment to massive investment. I had a couple of stops in North Africa, starting with Egypt and Libya and ending with Algeria. The takeaway was unambiguous. North Africa has untapped existing capacity for undisrupted export to Europe. The authorities and the clients recognize that now is the time to enhance their resources and increase the spending to substantially increase the production and use the untapped excess pipeline capacity that already exists to meet urgent global demand. Algeria and Libya are at the forefront of this, and both countries represent colossal frontier for both conventional and unconventional resources. This is why NESS has invested in and deepened our footprint across North Africa. The reshuffling of global supply chain, plus the entry of key IOCs, has the potential to supercharge the growth outlook in this part of the world. Energy security, localized capacity, infrastructure, diversity, all three dominated my discussion with customer and industry leaders since the outbreak of the conflict. Let me sum up in brief why each will contribute to an even stronger multi-year MENA upcycle that previously conceived. Number one, energy security will only accelerate oil capacity expansion. with enhanced flexibility across areas of production. Domestic gas is more crucial than ever for growing power needs. Number two, localized capacity. Nesra already plays a central role, and we will surely be called upon to expand further, leveraging our fully localized workforce, equipment, and resilient supply chain. Number three, infrastructure diversification will ultimately drive and orient the upstream capacity build-out, particularly in the Gulf countries. Now let me turn to necessary differentiated positioning in this macro landscape. Best described as the saying, it is better to be lucky than smart. Honestly, our project exposure and activity mix are uniquely favorable given the impact of the conflict in the region. As an example, we have limited exposure to places that have experienced the greatest disruption and force majeure as in the key LNG export hubs in Qatar. Additionally, our offshore exposure to exploration or to some of the suspended rigs are much less than others and is not significant in comparison to our entire operation. The bulk of our business is land-based and concentrated in the solid GCC countries that have shown remarkable resilience in keeping the upstream sector active. Jafura is also particularly and uniquely positive for Ness, and I'm pleased to report both an acceleration in the overall project and also flawless execution with many more to come in the future. We are extremely proud and honored to be really the trusted partner of our beloved customers. On the supply chain front, we quickly established and executed a 30, 60, 90 days blueprint strategy, which essentially buckets inventory level across all our projects to ensure that we are diversifying supply routes smartly and with an overall eye on operational continuity. This work for Nestor during the COVID pandemic, and this proactive approach is giving our customer confidence in Nest readiness. As I always tell our team, never miss an opportunity to convert crisis into continuous improvement for the future. Like we have on supply chain, secure inventory, step into the void, safely and flawlessly deliver when our clients need us most. predictably we've had to absorb extra freight and logistics to ensure our readiness at all time however it pays off the trust we continue to build with our customer is an invaluable asset that will endure well past the current conflict and short-term expenses with that let me pass on to Stefan to discuss our solid result an update on our capital allocation plan. Stefan.

Thank you, Cherie. Good morning to those joining us from the United States and good afternoon or good evening to participants across the Middle East, North Africa, Asia and Europe. We appreciate you taking the time to be with us today. I'm pleased to provide an update on our financial results for the first quarter of 2026 and to share our perspectives on the outlook for the year. Let's start with our first quarter performance. Revenue for the quarter was $404.6 million, an all-time high, increasing 1.6% sequentially and 33.5% year-over-year. Sequential growth was driven primarily by Saudi Arabia, reflecting the continued ramp-up of the Jafora contract, partially offset by lower activity in Egypt, Oman and Iraq, the latter of which was due to regional disruptions during March. On a year-over-year basis, growth was supported by a full quarter contribution from Jafora and increased activity across Kuwait, Algeria, Libya and Egypt. Shift into profitability. Adjusted EBITDA for the quarter was $76.7 million, representing a margin of approximately 19%. This reflects typical Q1 seasonality combined with key contract ramp-ups, and two, incremental freight and logistic costs associated with the regional geopolitical disruption, which is estimated to be around $4 million, which covers special air freight charters and other like measures to ensure zero interruptions to our client operations. Despite this, the margins remain resilient due to strong cost discipline, improved operational execution and our lean overhead structure. Adjusted EBITDA included $2.9 million of charges and credits, primarily related to Forex losses of $3.6 million in North Africa, partially offset by favourable items. Consistent with prior commentary, we continue to expect charges and credits from restructuring and contract mobilisation related costs to be minimal going forward. Net income for the quarter was $23.8 million, more than doubling sequentially and increasing 129% year over year. Adjusted diluted EPS was $0.26. This performance reflects strong operational flow through as activity scales. particularly in our unconventional completions and testing service lines. Turning to cash flow and liquidity, which remain key sources of resilience in our model. Operating cash flow for the quarter was $30.7 million. Working capital was a headwind in Q1, primarily due to seasonal DSO increase driven by Ramadan and Eid, which were anticipated, and two, the unforeseen impact of geopolitical events in March across the region. Free cash flow was negative $5.3 million, an improvement versus Q1.25. CapEx for the quarter was $36 million, aligned with our stated counter-cyclical investment strategy as we continue to deploy capital into recently awarded contracts and position the business for the next phase of growth. Moving to the balance sheet as of March 31. Gross debt was $287.4 million. Net debt was $194.4 million. Our net debt to adjusted EBITDA ratio remains at 0.66 times, well below our one-times target. Return on capital employed improved to approximately 10.9%, reflecting continued discipline capital allocation and improved asset utilisation. Looking ahead for Q2 2026, we expect a continued robust year-over-year growth driven by the Jafora ramp-up and recent contract awards. Two, sequential margin improvement consistent with normal seasonality. Three, interest expense to be around $6.5 million. And four, tax to be at the 22.5% ETR. are. From a cost perspective, the primary impact from current geopolitical conditions remains freight and logistics, which we have planned for. We also expect Q2 operating cash flow and free cash flow to rebound, similar to Q225 in the normal seasonal pattern. As we highlighted in the last two quarters, we continue to see a clear path to our $2 billion target and maintain our margins despite the increase in costs due to the recent present and conflicts in the region. We will continue with our counter-cyclical investment and CapEx will be around $180 million for the full year of 26, reflecting increased activity and a strong pipeline of contract awards. We continue to expect strong operating cash flow with free cash flow conversion of approximately 35 to 40% of adjusted EBITDA on a full year basis. As the company enters a new phase of growth, we are formalising our capital allocation framework to ensure we continue to deploy capital in a disciplined and value-accretive manner. Our approach is grounded in a clear set of priorities. First, we'll continue to invest in high-return growth opportunities, including recent contract awards and technology-led expansion across our core markets. These investments remain the primary driver of long-term value creation. Second, we remain committed to maintaining a strong balance sheet with a target net leverage ratio at or below one times, providing flexibility through cycles and supporting our growth strategy. Third, and as a new feature, I'm very pleased to announce that we're now in a position to begin returning capital to shareholders in a consistent and sustainable manner. Accordingly, we plan to initiate a quarterly dividend beginning in Q426 at 10 cents per share or 40 cents annually. This reflects our confidence in the durability of our cash flow generation and our intention to establish a sustainable and growing base dividend over time. In addition, we are launching a $50 million share repurchase program over the next 12 months. This program provides us with flexibility to opportunistically return capital when we believe our shares are trading below intrinsic value while continuing to prioritize investment in the business. Taken together this framework balances growth, financial strength and shareholder returns and positions the company to deliver consistent long-term value creation. To conclude despite ongoing political uncertainty the outlook across the Middle East and North Africa remains very positive, with the region expected to lead the next phase of global activity growth, as Sharif highlighted in his remarks. NESA remains focused on delivering profitable growth, strengthening operational execution, expanding technology capabilities, and maintaining disciplined capital and working capital management. On behalf of management, I'd like to thank our employees for their continued dedication and performance, and our shareholders and banking partners for their ongoing support. Nesta in 2026 has strong momentum and a clear, durable path to continued growth. I will now turn the call back to Sri.

Thanks, Stephan. Let me conclude. I hope the first quarter results show our customer first and foremost that we do not shrink in the face of conflict. we continue to invest both in the opportunities today and for the long-term vision that our clients continue to stand behind. Our people and field teams are among the most dependable in the industry. For investors, I hope the message resonates that growth plans across the MENA region remain durable and that the net growth model is not only solid but is stronger than ever considering the favorable project pipeline and robust investment outlook beyond the conflict. The time I spend with clients over the past several months were some of the most meaningful interaction that I've had. I upload our customers for their strength, commitment, and trust in this which I'm humbled to say are reflected in our results and outlook our industry is not just steel engines and consumables our industry encompasses not just our people in the field but the families communities and countries that have stood together during these uncertain times we created nests to reflect the ingenuity of the nina region and to build a national champion that could weather the greatest storm and emerge even stronger. While we pray for a speedy and safe resolution to the current conflict, we stand ready to meet the emergent needs of our customers and our communities. With that, I'd like to open the floor for your question. Please go ahead.

Thank you. At this time, we'll be conducting our question and answer session. If you'd like to ask a question today, you may press star 1 from your telephone keypad and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you, and our first question today comes from the line of Arun Jairam with AP Morgan. Please receive your question.

Good morning, Sharif and team. Thanks for the detailed update on your perception of what's going on in the Middle East. Very, very helpful. Sharif, last quarter you highlighted a very robust tender pipeline for Nesr. You highlighted, I believe, $3 billion of tender activities. I was wondering if you could just kind of update us on kind of the status of some of that tender activity as we think about the balance of the year.

Thanks, Arun. We had, as we announced, the award in Kuwait and North Africa. with the cementing, which is the first thing that was basically announced by our customer. We got awarded much bigger than our fair share, if you like, which we are very happy with. So we will have, I would say, a leadership position in both markets for that segment. The rest of the tenders are going on as planned. As a matter of fact, there is like no delay or suspension. So we are actively in that bidding strategy now or the bidding, not strategy, I would say the feedback with our customer. Some of them, they like to have like a clarification. Some of them, they have round of negotiation. So all this is going on, and I still believe that the majority would be awarded in the next two to three months, and then they will be announced, obviously, as we get the news from the customers. So the pipeline is still $3 billion, and I would say, actually, there will be more activity and stuff that we were not planning for due to the conflict that is going to restart, and you're going to see it with the people or the customer trying to see how they can enhance their capacity. So some of the fields, I think, in my opinion, personal opinion, that some of the customers will bring some of those projects earlier than expected.

Great. And just to follow up, you guys printed, call it 77 million of EBITDA in 1Q, obviously a quarter that had some Middle East disruption in Ramadan, and then you highlighted 4 million of quarter-specific costs. Stefan, do you have any additional color on 2Q or how you're feeling about the full year? I know there's some uncertainties, but just give us a little bit of thoughts on framing. You did beat the street number this quarter. It's helping us frame near-term expectations.

So for a full-year basis, as said previously, we'll maintain the same margin as we did last year, which is around 21, 21.5%, right? Q1 is always the seasonally low number for the year. As I said in the prepared remarks, we had $4 million of freight costs, right? And Q4 will be the highest for the year and it will improve each quarter to the highest quarter at the end of the year to end up with an average which is roughly the same as the previous year, even with the additional freight cost, we think we'll be close to or maintain the same margin as the previous year. Okay, thanks a lot.

Our next questions are from the line of Josh Silverstein with UBS. Please receive your question.

Good morning, guys. You had mentioned before that there were a few areas that you didn't really have exposure to, which is good for right now, you know, Qatar, offshore, Saudi, Iraq, you know, a few other places. I'm curious if this potential conflict has maybe opened up some doors in those areas or if maybe you're thinking about now expanding into those regions that you previously didn't have that much exposure to.

So what I'm, I have to say, if we are lucky that we were not, for example, exposed into the, some of the areas where we had force majeure, et cetera, I would say obviously when they return we will for sure be involved and and we tender actively but i would say this is not going to be the focus for us in the very near future right so i think there will be as i said diversification and with a lot of customers uh for some of the new areas i would say and definitely we are active in bidding in all projects, whether it's offshore, on land, everywhere in the MENA region. Now we have the very solid infrastructure across all the 15 countries. And we are authorized and allowed basically to bid on all the big projects and small projects because now we have the track record.

So we're very actively engaged. we're going to obviously put the correct pricing and and and the proper bidding strategy and whether the client award us in in the different areas it's up to them obviously to to choose okay got it and then uh can you just walk through i guess some of the thoughts around the return of capital strategy um you know was is the dividend you know a level to start building off of um you know why a little bit more focus on that versus the buyback uh any help there would be great. Thanks.

We decide, well, right now we've got free cash flow coming from all the big projects we've won, right? And that free cash flow will continue to improve over the years to come, right? And so we've been looking at how we're going to return amounts to shareholders and we thought it was best to go with a dividend first, right? The dividend's been set at 40 cents per year, which at a $25 price is 1.6% return. And that's the reward our share, you know, our long-term shareholders, right? Our Middle Eastern shareholders. And if there's funds that are interested in buying dividend stocks in the US, right? And we also took the advantage to announce the buyback just in case, you know, the share price was the dip to opportunistically buy back at a at a cheaper price right but we continue the hope that the share price keeps going up our next questions from the line of Saurabh Pant with Bank of America this is you two questions hi good morning Shereef and Stefan morning Shereef maybe I want to touch on Jafura a little bit in your prepared remarks Shereef you were talking about acceleration in the overall project and

obviously flawless execution maybe can you talk to where we are in the Jafura ramp-up process maybe any update on timing of the deployment of the fourth fleet and just a little more color on what you meant by acceleration in the overall project is that is that part of the ramp-up or what exactly are we talking about and then secondly Sharif related to that on the efficiency where are we on the efficiency front do you think we have reached optimum efficiency as the project is ramping up or do you think there's more upside as you continue to ramp up.

Thanks. So Jafura has been obviously a fantastic project for us and for Aramco. I'm sure you saw Aramco announcement on it already publicly. So the readiness and efficiency that Aramco is managing to add welds because of their fantastic performance on the rigs that means that more pads are ready which means that if we continue with our performance which is obviously our plan and improve on it that means that we will be able to have more stages than planned for the year and if we continue to do that and aramco allow us that means that we will be able to ramp up that number of stages that we do per quarter faster so let's say if If we planned whatever number of stage, X number of stage in Q3, we will be able to do it in Q2, right? And therefore, whenever we're planning in Q4, we can do it maybe in Q3. And that's what I call it, the acceleration of the project, because Aramco's performance has been really outstanding. And our business, we added fleets. And as I always say, we counter cyclical. So basically, we added more fleets than Aramco basically planning. So we are always ready, and that worked extremely well for us, especially with what happened now with the current conflict of the logistics problem. But we have our equipment already in Saudi or on the way to Saudi, right? So we have our fourth fleet already in country, which means that we are going to be deploying it very very soon so now for the efficiency there is always room for efficiency improvement so what we did ourselves internally is we looked and at all our now fleets and and everything new and everything that comes in the u.s. with you know continuous pumping is it do it please is it extended a lot of this This we are implementing as we speak now in the kingdom, obviously in very close consultation with our clients. And we see that we still have a very nice room of improvement, and we see as well we can beat actually the number of stages that is being done in the Permian. So I am a believer that the Jafura project will be the best in class worldwide in number of stages, pumping hours, efficiency, et cetera, which is obviously going to be a very nice upside for us in terms of the number of stages and definitely in terms of profitability.

Oh, that's a fantastic update, Sharif. Clearly, very strong execution over there. And then just a little update maybe on the ground situation in the Middle East. First quarter of March obviously was impacted by the conflict. but since the ceasefire was announced in early April, Sharif, what has changed on the ground? I'm assuming operations are smoother, air transportation has improved, right? But how have things changed since then? And Stefan, you said $4 million impact. Can you give some thoughts on what's baked into your thinking for 2Q at this point?

Are you thinking 4 million times 3 for $12 million impact or is it less than that just given the ceasefire might have improved the situation on the ground so if i if i tell you first the political stuff right so i think that's what people have a bit of a misconcept and i try to explain it in details right the clients in the middle east think again long term think about their capacity think about how they're gonna perform you have to again decouple the production from activity so unless there is a direct hit hit to something that is significant, where they announce it, which is they are, again, all very transparent. So you saw His Highness in Qatar declared there is a force majeure, there is an LNG hit, it will take three to five years, it will take this billions of dollars, therefore we are suspending. And some of the rigs that were in, I would call, a dangerous zone, they told them to suspend operation and some of the rigs they asked them to not to operate at night all this would action in the places where it was basically safely dangerously but all the other places even when they did not export they did not release the rigs they did not stop activity because the ecosystem is very important and some of the clients the way the way they managed it is they actually drilled until the reservoir so they drill the basically the first two casing and they don't drill the reservoir but they keep the wells ready to ensure that the activity is intact to ensure as well the capacity and of the people everything is there so then when they ramp up they ramp up again the same and you saw Kuwait for example where they have an issue with the with the with the strait, we still have our operation almost uninterrupted, right? So I think that's very important. So even with the ceasefire, definitely it makes things better. It makes some of the logistics stuff a bit easier. But at the end of the day, the strait is still closed. So if you had, you did not diversify your supply chain, you are in trouble. And that's where I keep repeating this. It's very important that you balance your supply chain, you balance your routes. So we send all our Saudi stuff directly, for example. So we have our Saudi business. We have a hub in Saudi. We manage everything in Saudi directly. We don't go through another route. And that's very important because that's what makes us strong. and then we obviously balance with the authorities between the different ports right now if you look at the cost what we did is it which is something in our DNA we make sure that we have excess capacity excess spares and if we anticipate there are issues we actually took the proactive approach to air freight some of the stuff despite the fact that it might have come normally but we don't take chances so we air freighted a lot of the stuff that we wanted to be in the country so we never disrupt the client operation we believe that this cost will go down as we go in the next quarter why because again hopefully that whole story of shipping and you have to air freight etc is is much less and then we'll this cost will will drop now you can be very positive as well and say the street will open, everything will be hunky-dory, so then even the freight of the shipping will go to what it was before.

Right, right. Now, that's fantastic, Alishiri. I'll turn it back.

Our next question is from the line of Derek Pondizer with Vyper Sandler. Please just use your question.

Hey, good morning, guys. Kishore, I'm curious to hear your thoughts on having a bit of a tighter U.S. supply chain, just given where oil prices have gone, the U.S. independents and EMPs are talking about returning rigs and frack rigs so frack crews to work excuse me um capital equipment cycle potentially kicking off so i'm just curious if there's any potential pressures as you continue to scale jefora or have you already efficiently effectively locked in your equipment needs for the committed and uncommitted work over the next you know several years or so thanks no derek i mean i'm actually quite happy that the us is very tight and it's going to get tighter which is great so we already locked our fleet the fourth and the fifth so we have all our

equipment and as I said the equipment is either in country or en route to the country so if the US gets tighter is even better because that means the less competition and and we will be able to keep performing as we are so we locked our products our chemicals our spares our engines we plan all this ahead of time and at the time as i said before the conflict we we we did the very very detailed study on what we need over the the the the full year and as well we planned some buffering to ensure that we can meet or even exceed the client demand with equipment and spares so we are in we are in good shape and I hope the U.S. keeps ramping up.

That's great to hear. Your comments on AdNoc were really interesting as far as the 55 billion. Obviously, they're leaving OPEC so clear opportunities set here. Just curious if you could expand on how you see your opportunity set growing with AdNoc, particularly as they've brought a lot of services in-house over the last several years. So just I'm just curious how you'll be a partner to them as they look to scale now leaving OPEC.

So, look, I mean, at NOC, we've been working with them since the start. We keep ramping up. We won a couple of contracts lately, and now we are bidding on a lot of mega projects with them. So definitely the acceleration of their spend and what they call Made in Emirates initiative that was announced by His Excellency Dr. Sultan, and you see it on the news, all over the news, right? So it's very public, and they made that announcement for the 55, it's 200 billion dirhams in over two years. So we will be bidding on all these projects, a lot of it. Definitely, the lion's share of a lot of the activity in Abu Dhabi goes to Adnok and Adnok Drilling and Affiliated Company, which is normal, right? But it's fine. The rest is huge, right? So we always bid for all these projects, and we bid against Adnok Drilling as well. And that's how the whole structure of ADNOC E&P itself, that they put the floor for everybody, the international, ourselves, others. So when the pie is bigger, we will get bigger, even with the ADNOC drilling taking the lion's share. So we see it very positive. We see even more positive with the acceleration of spend. And as I keep repeating, this diversification, and I think people are underestimating it, there will be a lot of diversity of even some of the fields. People will look into the fields that will have a supply route that is different, and they will accelerate some of those projects that were, for example, planned for 28, 29, 30.

They will bring them ahead of time, and that's why a lot of the countries are putting budget ready for some of those projects to be executed so very positive for us that's great great color thank sure I'll turn it back the next questions are from the line of Greg Lewis with BTIG yeah I thank you good afternoon good morning thanks for taking my question um I was sure if I was hoping you could talk a little bit more about the opportunity in North Africa you know clearly there's a growing theme that hey the Middle East is going to remain the Middle East but you could see incremental capital flow to some other markets. So just kind of curious, you know, when we could start to see that maybe show up in numbers in terms of incremental revenue, and then as we see more capital deployed in North Africa, how should we think about the supply chain, and are there any capacity constraints we could see in that market that could limit upside?

Look, North Africa actually has a huge opportunity, and I think for people to appreciate that, you have countries with capacity of pipeline that is not full. So imagine the amazing opportunity. Now the world has a problem, not because of capacity, it's mainly because of supply route that is blocked. And now we have Europe that is in need of gas, and they have a pipe that is underwater in the Mediterranean, not in full capacity. So what you need to do is you just pump more gas into it, right? So I think the opportunity is very clear. Obviously, the authorities, the clients, they all recognize that. So now is the time to really add investment. So this will be two prones, right? so you have a strategy to sign a new exploration and production agreement with international and you saw that that didn't take effect already total conoco phillips mou with chevron exxon so i think these guys when they come you will see very high intensity of new projects because the The money comes straight from the IOCs to these projects. And then you have the national oil company like Sonatrack, like the NOC, et cetera, or the local E&P companies where they are going to add their capacity as well or their budget to ensure that they can add production. And you saw even visits from like the prime minister of Italy, et cetera. So it's very clear the opportunity is there. And I see it very positive. do we see it on the ground yes we see it do you see the additional of rigs yes we see it we see the libya for example is at that all-time high in a rig count algeria is adding rigs is adding the concession so i think the positivity in north africa will come uh uh very soon uh in this in the sense of significant uh percentage uh year-on-year growth obviously the size wise for For us, it's much smaller than GCC. However, obviously, if you grow 20%, 30% year on year, it's very positive. In addition to that, there is the new unconventional scheme that is opening up, and some people as well do not know, but Algeria has the same fantastic unconventional resource like you have, for example, in Argentina, in Vaca Muerta. So, which means once it's unleashed, you can see significant increase of activity, production, and business for everybody.

Super helpful. Thank you very much.

As a reminder, to ask a question at this time, you may press star one. The next question is in the line of Jeff Robertson, Water Tower Research. Please receive three questions.

Thank you. Good morning. Sharif, when you think about the Tinder pipeline and some of the diversification that your opportunities you're seeing in the markets, Can you share any color on what impact that might have on margins in the next few years?

Look, it all depends on the client, the country, and the segment. So I don't want to just tell you vague answers, but in some, just for you to appreciate, in some countries we have segments or product line that runs above 30 percent and in some they run less and so it depends on the bidding it depends how competitive it depends as well some of the cost or requirement so i would say now we are at that size and we are kind of uh uh uh prioritizing the capex that we spend versus some of the projects that we get awarded as we are to get awarded on a much larger project i think the margin in the majority of the time would be accretive so we'll be better than what we have so and that's again now you can i don't want to say you want to be choosy but some of the segment and some of the business if doesn't make sense for us to bid at the less price of what we have been running or what we have in the pipeline and others then definitely we will have a pricing impact in addition to that we have to take into account all like the logistic cost the increase of freight etc which means that we need to as an industry need a bit to move up on because the cost is higher right I give you the best example diesel if you look at today the diesel price it is up by a hundred percent based on obviously the the oil price right so you get like punished from that right because uh your cost structure so that is why we need to elevate a bit uh some of our uh pricing because obviously the the cost is higher and our clients understand that very well and we always make sure that as long as you are doing this properly and professionally and then you should be fine thank you and secondly just on a different note is there any update you can share on some of the water projects you're working on within the needless segment yeah i mean uh obviously we don't talk much about it uh not because it's kind of slowed or anything but i guess because of priority and what's happening in the region, but all our projects are actually, I would say, going well from the third phase of testing, and now our water project is in the last stage of the economic viability with the return of the minerals and our lithium and project that we do with our customer is going as well very well after the successful pilots so all this is it's very positive and we are working on it and again because the client has such a good long-term view on this despite what's happening we're still working on it and I still believe that we will have a nice upside on some of these projects where with the economic obviously being viable right so some of the other countries where they are like in in the middle of the conflict if you like yeah this got postponed some of the trial some of the pilots obviously were pushed until after the fact because you know you cannot ship stuff now and and just to do a trial of a water project, right? So even despite the ESG is not like in the best favor of the world, but it's still, all these projects are running because what we're trying to do is again, make sure that these projects are economic without subsidies. So are they economic viable without the slogan? Then we know that then it's a good business and it will stay alive. So, yeah, you will hear hopefully before year end on some of these projects on cutting to a scale outside the pilot and to a scale project.

Thank you. The next question is in the line of Tom Bishop of BI Research. We'll just see if there are questions.

Well, actually, good evening, I guess, for you. I just wanted to know how big is the North African...

We don't declare per country or per region our split, but I would just say the GCC is much larger than North Africa.

At this time, I'll turn the floor back to Mantra for closing remarks.

Thank you very much. Appreciate all the time. And again, we're very positive about our future and the strength. And I guess, as Stefan mentioned, with the capital return, I think that that's the right message to everyone, that we are extremely, extremely positive for the future. Thank you very much.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.