Operator
Greetings, and welcome to the NESR Report Second Quarter 2026 Financial Results. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Blake Gendron, Vice President of Investor Relations. Thank you, sir. You may begin.
Thanks, Maria. Hello and welcome to Nessar's second quarter 2026 earnings call. With me today are Sharif Foda, Chairman and Chief Executive Officer of Nessar, and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our second 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. I could not be prouder of the nearly 8,000 men and women of NET who not only rose to the challenge in the second quarter, but exceeded all expectations and stood by our customers when needed most. I also have immense gratitude to all our clients that proved to the world that it will take more than a geopolitical disruption to change the strategic inertia of the region. Our differentiated, record-setting results reflect the resilience of our customers, our unique project exposure and the responsiveness of our local team that consistently and repeatedly turned crisis into opportunity as stated in the beginning of the conflict on our last conference call we were first to rally to our customers we remained by their side and we nimbly reoriented our 30 60 1990 supply chain strategy to ensure 100% reliability with zero interruption. This response showed up clearly in our fantastic results, just as we had planned and communicated. Throughout the conflict, we've stayed true to our founding ethos. Nest began with the vision of creating a MENA energy service company built for local content leadership, supply chain resilience, fit-for-purpose technology, and to empower our 100% in-country workforce to set new standards for safety, quality, and reliability as a true national leader. The strategy was simple. Attract capital globally to cultivate locally what our customer could consider the national champion. If we could simultaneously match or even exceed the service delivery standard to the global peers, then the growth, profitability and cash flow would naturally follow. We would also be the go to partner in times of crisis. The story across the Middle East had been a story of in-country investment, innovation, and human capital development. Nesr's founding simply reflected the trends that had been put in motion. This story was certainly tested over the past several months, but I can proudly say that Nesr's star has never shined brighter amidst the dim of conflict and uncertainty. our second quarter results speak for themselves they speak clearly to the Middle East story of national champion resilience and speak unambiguously to the success our founding strategy despite the conflict we've exceeded the 2 billion revenue run rate target that we originally set at the founding of the firm and we've already established new ambitious targets that are well on the path to achieve these even more quickly as we have proven to the market the next growth story continues to accelerate and our momentum will be tough to stop or even slow down our recent performance is not a one-off but the solid track record that we have been building over many quarters while the conflict presented its own set of challenges and opportunities for net market capture the growth trajectory that has been in motion particularly over the past several years has proven rock-solid regardless of the commodity price geopolitical backdrop or competitive landscape it's been precisely the execution of our counter cyclical investment strategy that has helped us decouple fundamentally from the broader cyclicality of the energy service sector and the geopolitical daily news cycle which is why I can confidently trust that our path to our 3b3 corporate strategy a step-by-step playbook to reach a 3 billion revenue runway target is achievable this strategy long late last year including fueling the funnel expanding our anchor country footprint and realizing the technology portfolio built over the past five years it captured our main R&D focus areas and include opportunistic M&A along with strengthening our unique technology partnership now let me expand upon our 3b3 in more detail first fueling the funnel today we are the largest frack company in the Middle East and across our largest segments we are well within the top three provider in the region this scale is what fuels our supply chain efficiency and also our ability and agility as we can move people and assets seamlessly around the region to respond to for instance what I call the post-conflict box of restart opportunities but this also means that our remaining segments still have plenty of growth runway to reach the scale of our top services here we need to ensure winning more than our fair share of tenders so that funnel is always filled with secured multi-year contracts we have very good visibility of these standards and with our past performance we have secured the license to enable bidding on bigger contract sizes for the different product lines the second part is adding to the list of anchor countries here we are talking about enlarging our geographical footprint smartly by either entering a new country or making one of the small ones much bigger we are present in all basins of the Middle East but some we are way too small or decided to limit our exposure in the past as we gain momentum we are invited and asked to participate in several new opportunities with innovative business model that ensures we maintain our slogan of only profitable growth a good example of this is Syria where ConocoPhillips total Qatar energy and others have signed a wave of recent agreement to revive the country oil and gas industry alongside its economy and also play a crucial role in the export capacity build out on going to the eastern net we know the blueprint of how to intelligently start the operation and support both the IOC and the newly formed national company with partnership and scalable operation the third pillar encompass our frontier growth especially Neda and Roya among other R&D and innovation venture we have invested in the past did multiple pilots and time has come to realize the fruits of our past investment we will be able to demonstrate in the coming quarters the results of those efforts we recently announced a number of contract awards in Kuwait but we are particularly excited about our Ahmadi Innovation Valley contract. As an inaugural partner in AIV, we were one of the first to announce our commitment and plan for a world-class innovation center in the new heart of upstream innovation in Kuwait. More importantly for NETS, this contract represents our new entry into a long-term master technology agreement framework which unlocks an entirely new innovation budget that is aligned with our open technology platform which will exploit to adapt promising solution tailored to the Kuwait market to give you an idea of the magnitude of the scope the next AID focus area include drilling flow assurance heavy oil industrial inspection service enhanced recovery and very crucially unconventional resources where we have established a leading best-in-class in the region from our work in Jafura in Saudi Arabia. This engagement will be supported by over a dozen R&D partnerships with leading tech companies globally, several hundreds granted patents, and with the forthcoming groundbreaking of a world-class research center. this is our DNA build and invest in the future of the region with commitment at the highest level for long-term sustainability and prosperity and with that let me turn over to Stefan to discuss our stellar results in details Thank You Sharif good morning to those joining us from the United States and
good afternoon or good evening to the participants across the Middle East, North Africa, Asia and Europe. Thank you for taking the time to join us today. I'm pleased to discuss our financial results for the second quarter of 2026 and provide our perspective on the business, our continued momentum and our outlook for the remainder of the year. Let's begin with our second quarter performance. Revenue for the quarter reached a record $520.8 million dollars, increasing 28.7% sequentially and 59.1% year-over-year. Sequential growth was driven primarily by Saudi Arabia, reflecting the continued successful ramp-up of the Jafora contract where four hydraulic fracturing fleets were active throughout the quarter, together with strong growth in our conventional Saudi operations. We also delivered solid growth in Oman and in Egypt partially offset by lower activity in Iraq which continued to be impacted by the regional disruptions during the quarter. Year-over-year growth was also driven by the strong contributions from the Jafora contract together with increased activity across Oman, Kuwait and North Africa. Iraq remained the principal headwind during the quarter with activity levels affected by ongoing regional disruptions. Shifting our focus to profitability. Adjusted EBITDA reached a record $106.2 million during the second quarter, representing a margin of 20.4%. The margin expansion reflects the normal seasonal improvement we typically see in our business, together with the benefits of key project ramp-ups, most notably Chifora. During the quarter, margins were impacted by approximately $4 million or around 80 basis points of incremental freight and logistic costs resulting from regional geopolitical disruptions. These costs primarily related to special air freight charters and other contingency measures that enabled us to maintain uninterrupted services for our customers. Despite these headwinds, margins remained resilient, supported by disciplined cost management, improved operational execution, higher activity efficiencies, and our lean overhead structure. Adjusted EBITDA also included $1.5 million of net charges and credits, primarily reflecting $1 million of expected credit loss provision related to a North Africa customer. From an income and earnings per share perspective, adjusted net income for the quarter reached a record $45.5 million, dollars, increasing 70.1% sequentially and 125.9% year-over-year. Adjusted diluted EPS was a record 44 cents, reflecting the strong operating leverage in our business as high activity levels continue to translate into expanding profitability, particularly within our unconventional completions and testing service lines. Looking at cash flow and liquidity, This continues to be one of NESA's key strengths in an area where we have consistently differentiated ourselves over the past several years. As many of you will recall, our first quarter operating cash flow and free cash flow were impacted timing-wise by the normal seasonal build in working capital associated with Ramadan and the higher activity levels we experienced during the quarter. As expected, this reversed in the second quarter, with operating cash flow increasing to $174 million dollars. The improvement was primarily driven by three factors. One, record working capital execution included our lowest day sales outstanding on record for a non-year-end reporting period, resulting in a significant reduction in accounts receivable and unbilled revenue. Two, higher accounts payable and accrued expenses at quarter end, largely reflecting the timing difference between customer collections and outbound payments, many of which were settled in the first few days of the third quarter, and three, partially offsetting by higher infantry balances as we proactively secured critical materials to ensure uninterrupted operations across the Middle East during the regional conflict, consistent with our 30, 60, 90 day contingency planning. Capital expenditures totaled $74.1 million during the quarter, consistent with our counter-cyclical investment strategy as we continued deploying equipment into recently awarded contracts and positioned the business for the next phase of growth overall free cash flow reached 99.9 million during the quarter as noted previously included within that result was approximately 40 million of temporary quarter-end working capital timing associated with accounts payable and accrued expense even after normalizing for this time in effect the business generated approximately $60 million of free cash flow. This reinforces the consistency and resilience of our cash generation and reflects the same seasonal working capital pattern we experienced during the first half of 2025. Moving to debt. As of June 30th, gross debt was $274.6 million, reduction of $12.7 million from the end of the first quarter, while net debt declined to $99.6 million. This resulted in a net debt to adjusted EBITDA ratio of just 0.3 times, well below our long-term target of maintaining leverage below 1 times. This provides significant financial flexibility to support both organic growth and disciplined capital allocation. As highlighted earlier, quarter-end cash benefit from approximately 40 million of supplier payments that were made shortly after quarter-end. Even after normalising for this temporary timing difference, our net leverage ratio would have remained a very conservative 0.42 times. Finally, reflecting the significant improvement in profitability during the quarter, trailing 12-month return on capital employed increased to approximately 13.5%, driven by higher earnings, disciplined capital allocation and improving asset utilisation. As we look ahead to the third quarter, we remain encouraged by the momentum in the business and currently expect 1. Continued strong year-over-year revenue growth, supported by the ongoing ramp-up of the Jafora contract and recent contract awards across Kuwait, the UAE and North Africa. 2. Sequential margin improvement, consistent with the normal seasonal trends we have discussed previously. 3. Net interest expense of approximately $6.8 million. 4. An effective tax rate of approximately 24%. From a cost perspective, freight logistics continues to represent the primary impact from the current geopolitical environment. We have proactively planned for these costs and based on current conditions, do not expect them to exceed the incremental cost experienced during the second quarter unless the regional situation deteriorates materially. We also expect third quarter operating cash flow, free cash flow and capital expenditure to remain consistent with our long-term objective of generating free cash flow equivalent to approximately 35% of adjusted EBITDA on a full-year basis. With respect to our full-year outlook for 2026, our performance through the first half of the year exceeded our original expectations. As a result, we now view $2 billion of revenue as a minimum objective for 2026, having effectively achieved our previously communicated and fourth-quarter annualised exit rate target two quarters ahead of schedule. We continue to expect full-year adjusted EBITDA margins to remain broadly in line with 2025 levels, despite the additional freight and logistic costs associated with the current regional geopolitical environment. We remain committed to our counter-cyclical investment strategy and now expect full-year capital expenditures of approximately $210 million to $215 million, reflecting the increased activity levels, the execution of recently awarded contracts, and continued investment to support our long-term $3 billion, 3B3 gross strategy. For the full year, we currently expect net interest expense of approximately $26 to $27 million, an effective tax rate of approximately 24%, net income margins in the 9 to 9.5% range, and free cash flow conversion of approximately 35% to 40% of adjusted EBITDA depending on final collections. Overall, we believe Nessa is well positioned to deliver another year of record financial performance while continuing to invest for long-term profitable growth. As the company enters its next phase of growth, we also announced last quarter a formal capital allocation framework designed to ensure we continue deploying capital with a disciplined and value-accretive manner. I'd like to briefly reiterate that framework today. Our approach is built around three priorities. First, we'll continue investing in high-return growth opportunities, including recently awarded contracts and technology-led expansion across core markets. These investments remain the primary driver of long-term shareholder value creation and are fully aligned with our 3B and 3B3 growth strategy. Second, we remain committed to maintaining a strong balance sheet, targeting net leverage at or below 1x adjusted EBITDA. This provides financial flexibility through the cycle while supporting continued investment in the business. Given our current trajectory, achieving a zero net debt position over the next two years is a realistic possibility. Third, we're committed to returning capital to shareholders in a consistent and sustainable manner and as announced last quarter we intend to 1 initiate quarterly giving beginning in the fourth quarter of 26 at 10 cents per share or 40 cents per share annually we expect to announce the record and payment dates with our next earnings release this reflects our confidence in the durability of our cash flow generation and our commitment to establishing a sustainable dividend that can grow over time to maintain our 50 million 12 month share repurchase program while evaluating its renewal upon completion of the initial authorisation in the first quarter of 2027. This provides us with flexibility to repurchase shares opportunistically when we believe they are trading below intrinsic value while continuing the prioritised investment in the business. Taken together, this capital allocation framework balances investment for growth, balance sheet strength and discipline shareholder returns, positioning Nessa to deliver sustainable long-term value creation. Today, as you may have seen in one of our 8k announcements, we announced that we'll be changing our auditors from Grant Thornton Dubai to PricewaterhouseCoopers Dubai, effective for the 2027 audit. The required rotation of the Grant Thornton Lead Audit Engagement Partner provided an appropriate opportunity for us to take a comprehensive look at our independent audit requirements and consider how best to support Ness as we continue to grow. Thus Nessa undertook a competitive tender process. Given the significant progress we have made as a company, including our growth to date, the successful completion of our back office transformation and our strategy for the future, we concluded that the Big Four international accounting firm will be the best fit for Nessa's audit requirements going forward. As noted in the announcement, there were no disagreements with Grant Thornton on any accounting matters or principles. While we believe this is the right decision for NEST at this stage of our journey, I want to take a moment to sincerely thank Darren Yule and the entire Grant Thornton Dubai team for the tremendous support over the years. From 2020 through 2025 audit program they've been a trusted partner to NEST and their dedication, professionalism and commitment have been greatly appreciated. They have also played an important role in helping us successfully complete our back office transformation which was a significant undertaking for the company. We are grateful for everything the team has done to support NEST through the period of growth and change. I would also like to thank them in advance for their continued commitment and support as we work together to bring the 2026 audit to a successful conclusion. To conclude, we are excited about the opportunities ahead. The Middle East and North Africa continue to be the most attractive energy services markets globally, and we believe the region is well positioned to lead the next phase of industry growth, as Sharif discussed earlier. Combined with our strong market position, expanding technology portfolio, and growing backlog of long-term contracts, we believe NESA is exceptionally well positioned to capitalise on these opportunities. Against that backdrop, Nessant remains focused on delivering profitable growth, driving operational excellence, maintaining disciplined capital allocation and working capital management, and expanding our technology leadership. The combination of our strong operational momentum, resilient financial performance, robust cash generation and disciplined capital allocation gives us confidence in our ability to continue delivering profitable growth, strong cash generation, and long-term shareholder value in 26 and beyond. On behalf of the management team, we'd like to thank our employees for their continued dedication and outstanding execution, as well as our customers, shareholders, and banking partners for the continued trust and support.
With that, I turn the call back to Shurif. thanks Stefan let me conclude I'm extremely pleased to be here today reaching the target of two billion dollars that we set ourselves to couple of quarters in advance I'm proud of our team and extremely thankful to our clients for their trust and support over our journey I continue to feel honored serving all our esteemed customers and be with them every day during those difficult times we have demonstrated resilience exceptional growth while the region has suffered lockdowns sirens evacuation alerts but nothing deterred our momentum we are very confident with our upcoming growth profile we believe we will achieve our 3b3 target faster than anticipated and encouraged by the contract wins and continued R&D success with that I'd like to open the door for the your question Maria please go ahead
Operator
thank you we will now be conducting a question-and-answer session if you would like to ask a question please press star one on your telephone keypad the confirmation tone will indicate that
Operator
your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Arun Jerem with JP Morgan. Please proceed with your question.
Yeah good morning Sharif and and team um sharif and uh and stefan i was wondering if you could help us understand the drivers of the strong revenue growth sequentially your revenues were up 116 million um you know almost 30 percent uh and i guess we're trying to think about framing the second half outlook you know stefan mentioned that you believe that two billion is kind of a floor for revenue this year, but we're just trying to understand is if that fourth frack fleet in Jafura was fully utilized in 2Q, and I know you're adding a fifth later in third quarter, so just trying to think about what the run rate could look like for the top line as you get into 3Q, 4Q.
Thanks, Arun. So, obviously, as Stefan explained, the second quarter, And definitely, Jafura was the main highlights. As we had started the project back in November, we said we are going to ramp up faster. We decided to counter cyclical, as we call it, the investment. So we bought the fleets ahead of time. We shipped them all. We maintained all this inventory, 30, 60, 90, et cetera, et cetera, to ensure that we have all products available. we in the second quarter the fourth fleet was working and a and we shipped the fifth fleet it should be in the country very soon and we will work with our clients to see the best timing to to deploy it right so it's obviously their decision but what we wanted always to maintain is we have all this equipment ready and the same time as we did in other countries replace anyone that either evacuated decided to stop decided not to work so and we and obviously this benefited us to capture some of this work as Stefan mentioned as well Oman was a very very strong this quarter obviously they don't have any problem with export so they they benefited from the price we had as well good North Africa incremental quarter-on-quarter so overall I would characterize it Jafura is definitely the stellar and we had support from the others and all again as we said last quarter we are very fortunate that the disruption in And the main areas is not affecting us because we are very small in the areas where the disruption did happen or did occur. So that's why our decrement is very, very small.
Got it. And my follow-up is can you provide more details or thoughts around timing of achieving the $3 billion kind of run rate, you know, kind of target? obviously a lot of tender activity going on right now but what is a reasonable you know expectations to reaching that that new relatively new target so so the the the idea 3b3 mean 3 billion in three years that's the definition of that and we launched it last year and basically the idea was if you have the pillars you get the contract awards as we anticipate you win more than your
fair share of the contract especially on the smaller segment than the bigger segment therefore that you will be able to deploy those equipment and on these contracts that are all long term I believe that we will be able to achieve the target as they call it faster so it's called 3b3 again three years so we think we would be able to have that run rate faster than even three years so again depending obviously on the contract wins we have to win these contracts as a as I mentioned in my prepared remarks as well we have this new countries where we wanted to to to to enter and start new business we have very good dialogue over the past three to four months with several of them and I mentioned in my remarks as well Syria in particular very promising you saw ConocoPhillips you saw the the engagement even with the administration with them you saw the Iraqi Prime Minister was here in the US so there is a lot of action being happening a lot of IOCs deciding to really up their game in North Africa and other places so the key now is that you are one of the reliable and very very strong supplier in the Middle East so they will come to you like they come with it to our peers but we again we are ready we have local workforce we never stopped we never evacuated so we have a lot of equipment being bought so that size make us available to be able to capture that growth faster and if we do between the two and as well have a success of our road yeah our advanced direction drilling and our net our decarbonization and mineral and lithium etc then you will be able to achieve that hopefully faster than our three years target great thanks a lot our next question comes from David Anderson with Barclays please proceed with your question hey good
Good morning, Sharif. I want to dig into Kuwait in a second here, but before we go there, you know, nobody spends more time in the Middle East than you. I was wondering if you could kind of give us an assessment on the ground. You talked about a post-conflict box of restart opportunities, but how are your customers sort of thinking about the next six months? You're also talking about a $3 billion tender pipeline. Can you update your view there? Is that pushed to the right at all? Is it bigger than you thought?
Just some kind of broader kind of commentary on kind of what you've seen on the ground please thanks thanks David so first the macro nothing has changed from what I said before which is basically the majority of the countries with the leadership preparing for a post-conflict which obviously took some time now but the post-conflict readiness so rigs are all warm stock nothing more cold stock if they had to release rigs Kuwait for example did not released the rigs Abu Dhabi kept the rigs so everybody kept their fleet to be ready to when when the export is happening so the activity and and I repeat this many times to investors you have to decouple the activity and production and export so the region decided I am not shutting down I am not laying off the rigs or facility I'm keeping the activity what I do I manage my production by either not drilling the reservoir section like many of them did or but I keep the rigs running because I need the ecosystem to maintain the same I need the supply chain to remain I need the people to be employed and unless you have a disruption that is that you cannot change about it which is like Iraq like Qatar and this is project that cannot continue so you have LSDK that for example shut down dramatically in Qatar and Iraq you have LNG that stops we had a force majeure etc but the majority of them are ready some of them are saying I am going to get back to my production in matter of two to three months once the conflict is off once I can export when the the hormones is open if the deal is struck between Oman and Iran now and the US accept it I can export immediately I am ready and I can I can do that UAE you saw that they produced north of four million barrel a day so everybody is ready for that and when I call the post-conflict box which is basically you need to be ready with cold tubing slick line intervention etc because some of these wells you need to to enter you need to put plugs you need to do some work over and and some of them, you need to go back and drill the reservoir section, so who is ready, and that's what they assess. So I am more optimistic than others on the Middle East recovery, and I still believe that it's going to be much faster than what people think once the Hormuz is open. Now for your other question.
Yeah, I just want to know a little bit more about the kuwait you the master technology agreement um you just talked about that quite a bit and it sounds like it's quite a bit more excessive than i realized um you've been talking about kuwait as one of those anchor countries for a while i think you said it's gonna be the i don't know if it's still gonna be the second largest uh country in your portfolio this year but can you just talk about the significance of this contract and and when do you start to expect when does revenue or sort of contracts start to flow from this master technology agreement from what you can gather sure so the AIV why I'm very excited about it why because it's it's been in the work for some time but the leadership in Kuwait very visionary
decided to make this a reality and they made an inaugural so this is basically for people that maybe visited the Iran before you have the techno valley this is going to be very similar which is in Ahmadi where the space is they took the space they took the and then they will have a research center based on fit for purpose technology for the Kuwait market four of us now signed as inaugural players we announced the award but the way they did it very smartly you have a contract with the value and you you are going to open on and build the research center but you as well you need these technologies to work and if you prove that those technology on the ground will make differentiated and address the issues the challenges of the Kuwait as an R&D but with an application you make revenue immediately from this even before you build the facility and that's why it's a very significant it's going to be very big there is it's a choice that obviously the leadership in Kuwait decided and we are obviously honored to be the top four companies were one of the top four companies worldwide chosen for that and then they can have another set of companies that will come as phase two and they will be in if you like an inauguration ceremonial officially done sometimes in Q4 obviously barring any more issues to make something like that in the Middle East but it's going to be within the ADPAC and WPC within that kind of time frame so it's a it's very important because this never happened so basically if you have a massive technology agreement with the national oil company of Kuwait and let's say you have a very innovative flow issues like downhole water separation technology you are able to immediately operate it and run it you don't need to have a tender and a contract and an application no ship the tool and we start it's successful and it really made what you said it will make then you have a contract with it for a multi-year let's say 30 million dollars to apply this technology in the end for example in some wells immediately you have that contract and you don't need to wait for anything so it's like a single source if you prove that your technology is differentiated enough to maintain that in the Kuwait market great thank you very
much our next question comes from Derek Petheiser with Piper Sandler please proceed with your question hey good morning everybody I just wanted to go back to the 3b3 I think you mentioned Sharif that you talked about getting the licenses to enable bidding those bigger contract sizes so maybe just help us understand what you meant by that comment um what you mean like growing your footprint or what licenses you're talking about and then how that can really support the timing of the 3v3 yeah so for for just for explanation in more details you know in the contracts in the middle
east these are multi-year contracts five seven years sometimes nine years right so if the client decide to I am going to give let's say a cool Cuban contract right so I will I will dissect this into big companies and smaller company or middle companies everybody does it in a different shape or form but let's say for a big picture this is basically what it means if you are you we always used to be like the national find the local company very good but you are not at the level etc in the past and then we kept growing growing growing so as I explained we have what I call the majority of our completion product line or production product line like cultivating cementing we are the top top three or top four right so you are allowed to bid on the big lots now on the smaller ones you You have to prove that you are capable from a technology perspective, from people, from equipment, that you can cover the majority of that product line, right? So once you have that and you proved it either with a cycle of contract wins or a track record, then you are invited to bid as well on the big lots. And today, we're very proud that we are already at that level in the majority of our segment. Meaning, in this coming $3 billion or $4 billion tenders that has been running now, we are tendering. Some of it are huge contracts, like massive contracts. Obviously, some of these awards are being pushed. And I said it before, it's going to be in Q2, Q3. I think now it's going to be Q3, Q4. Because for obvious reasons, they don't want someone in you. Let's say somebody, a newcomer, that takes a big part, 20% of a contract, but he was never there. How he's going to ship the equipment? How he's going to start sending people? How he's going to get visa? When there are wars and, you know, the planes are not flying, et cetera. So I would say these tenders are going to be pushed for like a quarter or something. All the awards, sorry, the awards will be pushed because the tenders, majority of it, we submitted our pricing. And it's going to come. And that's why, back to the main question, if you have the license to bid on a bigger lot, that means you can win one of the big lots, which means that you can grow much faster. And that's why we believe if we win more than our fair share in the coming tenders, then the $3 billion is not going to be like in 2019. It could be faster than our three-year target that we launched back in Q4 of last year.
That's great. I appreciate all the comments. I mean, just a quick follow-up on that. I mean, is it fair to think you can be awarded something as big as the Jafora contract?
No. Jafora is massive, man. Jafura is the largest contract in the world, the largest standard in the world in the oil feed services, and we 100%, right? So, no, these standards will not be awarded as a binary or one-off, right? This will be awarded as, you know, multi-award to multiple companies. So, So some of it, they will award like five players, six players, seven players. All of them will be there. But the key for us is I want to be from those three big ones or four big ones, right? So then we establish our position to be that big. Like, for example, today, very, very proud when we walk in the Middle East and we talk to the clients, and we are the number one frack company, the largest frack company. So people come to us for technology, for everything. But we have the scale that we can replicate in other countries.
Got it. Okay. Very, very helpful. My follow-up question is, you mentioned your opening remarks. Obviously, we know Jafar is a huge growth driver in Saudi, but you did mention your strong conventional operations in the country as well.
So maybe just quickly educate us on kind of what you're performing there, maybe the different service lines and some of the technology you're feeding and are you gaining maybe some national market share in the country there on the conventional side? on the conventional or unconventional conventional the conventional side okay sorry so the conventional side of Saudi which has been going on for four years right this is the normal frack operation again for the audience to understand these are nothing to do with the United States this is not unconventional this is exactly the frag that happens over the last 20 years in the Middle East these are like majority are single well single stage single frag you have this in Kuwait you have this everywhere in Saudi Egypt Libya Algeria so this is a much smaller footprint it's very good as well and and today we used to have we this contract completed for us we moved out of it now it's being retender for for several people but size wise is much much much smaller than the unconventional and today in the Middle East I would say there would be maybe 20 fleets running things like that in the different countries Oman is one of them much but very big as well but these are all for people education again this is one stage two stage three stage sometimes ten stage but nothing to do with the pad, four-well pads, five-well pads, six-well pads, which is basically now, as I say, Aramco managed to have a world-class unconventional operation in Jafura that is exactly the same style like you have in the Permian or Delaware or everywhere.
Great. Thank you, Sharif. I'll turn it back.
Operator
Our next question comes from Surab Ant with Bank of America. Please proceed with your question.
Hi, good morning, Sharif and Stefan.
Sharif, you talked about three pillars of your growth. I think we touched on the first two pillars in quite a bit of detail. But on the third pillar, you were talking about, Sharif, frontier growth, Neda and Roya. Maybe just talk to that a little bit and then maybe just clarify, Sharif, do you need a step change in those frontier endeavors to get to that 3 billion target? Or do you think you can get to the 3 billion target just with the first two pillars that you were talking about, the post-conflict opportunities and then the tender buy plan?
We have, yeah, thanks. So if you look at the third pillar, what we call it, this is part of our 3 billion, right? Based on what we have accomplished from the technology so far, right? So we've been investing, so let's let me a bit elaborate more. So if you have ROYA, which is the advanced drilling, which is basically MWZ, LWZ, and rotary stirruble, we've been investing on that now five, six years. So we did a lot of pilots, we did a lot of jobs, we have contracts already in three countries with those tools. Now we deliberately pass those tools or run those tools very in a very engineering detailed manner we don't expand fast we expand very slow because we wanted to make sure that the reliability of the tool I can call it commercial tool meaning the tool can compete with the established best-in-class tools in the world which is majority of them are with three service provider I can be an equivalent I can be me too I can be some the client can can take these tools and run it properly so we believe this will with it's already like a year late because of the deliberate testing but we believe that this will be part of the magnitude this is a two billion dollar market and today we don't play in it right so we are going to take share of that on the nether which is the decarbonization and mineral recovery water and I think we talked a lot over the past two three years about it it's been launched since 2021 we established we invested in a I would say dozens or ventures partnership etc today those pilots are reaching a maturity level that we believe we will be able to have a project and those projects have been discussed now for the last eight to nine months in details again that's what I call it the the the the conflict problem obviously if you are a client and you have a lot of other priorities to get back your production to export to open the the street of hormones you're not gonna go and let's look at the methane and let's look at the you know a water project etc so obviously this goes to the bottom of the list which would happen and but the negotiation and the discussion is ongoing and I believe we with the technology we already proven based on the pilot over the past three to four years we are getting to the economical model that we can make that a reality if this is a reality and we have a project then that project could start in 27 which mean it realize a very good revenue target in for example 28 right so if I have that then you know you fuel the the funnel or reward if you I don't want to use the same word but I mean you feel that the growth story by two three hundred million dollar that you can realize yearly based on those two that the technology is already just waiting to be commercialized so and that's why we are positive about it but I said we are going to talk in the coming quarters once I have an award or I have a technology breakthrough with the award being given in and then we can say publicly guys we just got this award and this is the the value of the contract yeah yeah no that makes sense right I mean I guess what I was getting to Sharif was that the funnel of opportunities for you is getting broader so you're not relying on on two things or three things because those three things in themselves are getting broader right so even if one of the things gets a little slower you still have more than enough in the hopper to get you to that three billion dollar target absolutely correct that's why we have three like arms and all of them I mean if everything works then we'll be three billion so much faster right so we always say okay one would work one will delay one there is a conflict one that is this but overall all of them put them together that's why we're very confident that we're gonna reach it faster.
Yeah, yeah, yeah. And then my follow-up, Sharif and Stefan, maybe you want to jump in on this one, is as we think about that, the $3 billion target, maybe it comes a little sooner now, how should we think about the margin side of that equation? And how are you preparing the organization for that $3 billion run rate? Because just for context, right, last year, 21, 21 and a half percent kind of EBITDA margin, is that what we should still think about?
Or do you think as you gain operational scale and get more operating leverage do you think your margins can even be accretive as you go from here to that three billion dollar number so there's two bits to that right in the short term for your own models and that use the same margins 21 21 and a half 22 percent right but obviously as we grow our revenue right our targets to get back to our historical margin rate right and we believe that with the extra revenues the extra you know you'll have activity efficiencies we've got low overheads right so the margins the margins should improve over the years to come right
whether we'll get back to the exact margins we had you know three or four years ago that's to be seen but that's our target right but it will improve over the years to come I got it okay Stefan thank you city for thank you I'll turn it back okay our next question will be from Sharif Elma grabby with BTIG please proceed with your question hi thanks a good morning maybe just starting with with supply chain I'm curious if you've been how you've been able to ensure uninterrupted operations I guess on the ground right you mentioned you guys
kept working and other people stopped that's one thing but particularly on supply chain side some of the larger service providers have specifically said they've been impacted and so I'm very curious what you guys are feeling so right thanks obviously we're not going to give you all the secrets but in a nutshell we had that establishment in the beginning and we treated this like the covet exactly so we we have all the CEOs of the main supplier we put the list from our CMT crisis management team this is the list these are the supplier these are the partners and again we we walk with the we talk to the guys like exactly like partners and we tell them guys this is what's gonna happen we need to who has a store where we need to have diversity if the road stops between country X and country Y you all of you cannot just depend on like Jebel Ali and and you know and then you cannot export anything because the things are blocked or the street is closed or something like that and we diversified our supply chain we put stored things in a different spots and we ensure that once we get back if this stops I have an alternative if this stops I have an alternative and as Stefan had mentioned we decided in some of them there is no way they can do anything so we took that initiative to air freight right and some people thought we are crazy some people said that guy this is gonna cost you a fortune and we said it's fun and we decided to load planes with a lot of stuff and shipped it to Saudi Arabia for example and ensure that we have those material critical material that we know in a place of a war will be an issue and it worked very well with us right so we worked we were able to do that we took the cost and we decided as well that we are not gonna do anything we told the clients this is part of our duty to be with you and even if it cost us more and it's not in there but we are happy to to take off this cost on ourselves because that's partner what my partnership and trusted advisor to our clients means right on this other side on their evacuation we decided that we have national people and we are not equating anything right so if you have a 90 percent 95 percent Iraqis in Iraq they stay there right so we stayed we ensured that the security is there we told the clients we're not going anywhere if anybody has a problem and we can capture this word because you know we we stand with our clients in terms of crisis so that's how basically we maintained our hundred percent and we capture some work from others and that's reflected in the results all right thanks Sharif and then just to follow up I want to turn to excuse me I want to turn to the opportunity set in North Africa are you seeing any project they're being pulled forward due to what's going on the Middle East and you know maybe that's part of 3b3 but I just wonder what you're seeing there look I mean so far the answer is it like in the ground is you don't see it like rigs coming in but what you see is all the project being signed you know this is again it takes time all the project has been signed you saw total you saw ConocoPhillips as well you saw E&I now Chevron is very heavy engaged so all these contacts been signed so once they sign the contract you know it will take three four months for you know the permits they move their stuff so things I would say could move faster but knowing North Africa and the way the you know there is a organization there is tender there's committee there are a lot of check the boxes that have to take place but I'm positive it's gonna happen faster once everything is signed because again this is a place where they have the pipeline not even full so they don't need to do anything they just need to drill wells get oil and gas they would put it in the pipe sell it to Europe and Europe is dying for gas and and oil so it's a no-brainer for North Africa especially Libya and Algeria to grow much faster than what they have okay thanks very much our next question comes from Jeff Robertson with water tower research please proceed with your question thank you good morning sure if you mentioned or you talked about the technology center in kuwait and i know you have one in saudi arabia can you export some of the learnings from those centers to um or leverage those in other countries and in your in the mina area yes absolutely absolutely that's the whole idea and and obviously people that work on technology uh know that's how we do on that's what you do in your research or technology application and we have a very strong as well alignment with the universities because that's the key so we have a very good alignment with the you know world-class KFUPM which is you know stellar away the way people should should study this under the leadership of dr. Saggaf but it is it's a it's a state-of-the-art and we're doing a lot of project together we're doing as well some with the Kuwait and we are going to establish the same kind of setup and all this then you can do with the ADNOC UAE so this is where you get a lot of learning across portfolio and cross you know technology and as well the key is the research doctors to have access to that they are excited about what you're doing that's where technology happens because if a research doctor like you know have an MIT or Texas A&M likes what he sees and you have as well the the apparatus which is basically you invested in in in some of the the particles and some of the equipment in this lab then they are they are happy to come and work with you right and then we have obviously I think all the mineral recovery and the advanced like the technologies a lot of it will be put there and people would really like to see and then some of the stuff will be for the future like I mentioned downhole separation this as an industry we've been working on this for the last 20 years with I would say zero technology breakthrough nothing really works we still separate everything on surface because we cannot intelligently separate water and everything downward. If we can reach that and have a research project, it might be two, three years, five years, but still people would be excited. So we definitely want to have the Saudi, the Kuwait, with the US, all this with a partnership and technology transfer, doctor going from here to there makes a big difference so those work as a magnet essentially for your open technology platform that you spoke about earlier correct is that correct yes okay thank you we have reached the end of our question and answer question answer section I would now like to turn the floor back over to management for closing comments thanks Maria thanks everyone we really appreciate your time and support and looking forward for a very very exciting journey going forward thank you so much this includes today's teleconference you may disconnect your lines at this time thank you for your participation
