National Energy Services Reunited Signals Strong 2026 Outlook

National Energy Services Reunited ((NESR)) has held its Q4 earnings call. Read on for the main highlights of the call.

National Energy Services Reunited’s latest earnings call struck an upbeat tone, as management highlighted record fourth quarter revenue, strong cash generation, and a solid balance sheet that leaves the company with low leverage and room to grow. While they acknowledged one-off charges, margin pressure from mix, and near-term seasonal softness, executives framed these as transitory against a multi-year growth runway in the MENA region.

Record Q4 Revenue Marks a New High

National Energy Services Reunited delivered record Q4 2025 revenue of $398.3 million, up 34.9% from the prior quarter and 15.9% year over year. Management credited the step-up primarily to the on-schedule mobilization of the large Jafurah frac program in Saudi Arabia and robust activity across North Africa.

EBITDA Holds Firm Despite Pricing Pressure

Adjusted EBITDA for Q4 2025 came in at $84.4 million, translating to a 21.2% margin that was broadly consistent with Q3 levels. The company emphasized that maintaining margin in line with the prior quarter, despite sharp revenue growth and competitively priced contract wins, reflects improving scale and operating discipline.

Full-Year Results Show Steady Progress

For full year 2025, revenue reached $1.324 billion, an increase of 1.7% from 2024 as new work offset headwinds in core markets. Adjusted EBITDA totaled $281.4 million with a 21.3% margin, while adjusted diluted EPS stood at $0.32 in Q4 and $0.81 for the full year, underscoring solid earnings power.

Cash Flow Engine Fires on All Cylinders

The company posted operating cash flow of $264.2 million in 2025 and free cash flow of $120.8 million, representing roughly 43% conversion from adjusted EBITDA. Management highlighted record collections in the fourth quarter and the lowest year-end days sales outstanding on record, pointing to better working capital efficiency.

Leverage Falls as Balance Sheet Strengthens

As of year-end 2025, gross debt stood at $310 million and net debt at $185.3 million, driving a net-debt-to-adjusted-EBITDA ratio of just 0.66. Interest expense declined to $32.5 million for the year, down $7.4 million from 2024, giving the company more financial flexibility for growth investments.

Jafurah Mobilization Unlocks Scale Opportunity

Management reported that the Jafurah unconventional frac program, described as the largest in the sector’s history, started on November 1, 2025, and is ramping according to plan. They expect operations to reach steady state by the second quarter, with potential to add fleets later in 2026 and long-term optimization that could deliver up to about 20% incremental efficiency.

MENA Tender Pipeline Supports Multi-Year Growth

Executives painted a constructive picture for the broader MENA market, citing sustained investment plans in Kuwait, ADNOC’s substantial 2026–2030 budget, and Libya’s long-term development outlook. Against this backdrop, the company has submitted $2–3 billion of tenders, which management believes could push revenue beyond its original $2 billion target and potentially double the business within a few years.

Disciplined Capex and 2026 Investment Plans

Capital expenditures totaled $150.9 million in 2025 and are expected to rise modestly to about $165 million in 2026 as the company supports growth programs like Jafurah. Even with higher absolute spending, management anticipates CapEx as a percentage of revenue will decline, while free cash flow conversion is guided to a healthy 35%–40% of adjusted EBITDA.

Margin Compression from Mix in 2025

Despite healthy profitability, the company’s full-year 2025 adjusted EBITDA margin fell by roughly 250 basis points to 21.3%. Management attributed the decline to country and segment mix shifts and to contract transitions, particularly in Saudi Arabia, that weighed on margins even as volumes grew.

One-Time Q4 Charges Cloud Profit Picture

Adjusted EBITDA in the fourth quarter absorbed $24.1 million in charges and credits that management framed as mostly one-off items. These included CECL provisions largely tied to Oman, impairments on two older technology investments, restructuring costs linked to contract mobilization in Oman, and a provision related to a vendor bankruptcy in Saudi Arabia.

Seasonal Soft Patch Expected in Q1 2026

Looking near term, the company warned that first-quarter 2026 will likely represent the low point for margins due to usual seasonal factors, including the impact of Ramadan. Revenue is expected to see only a muted seasonal dip, and margins are projected to improve sequentially after Q1 as activity normalizes over the rest of the year.

Saudi Transitions and Rig Count Limit Upside

While the broader regional backdrop is positive, management noted that lower rig counts and contract transitions in Saudi Arabia constrained growth in what remains its largest market. These headwinds tempered the full-year upside, though the company believes it is now better positioned to benefit as Saudi activity stabilizes and new work ramps.

Oman and Other Markets Highlight Execution Risk

The company’s experience in Oman, where mobilization issues and legacy contract items drove write-offs and provisions, underscored the operational and receivable risks inherent in some markets. Even so, management expressed confidence in collections and framed these as isolated challenges rather than structural problems across the portfolio.

Tender Competition and Timing Add Uncertainty

Although the $2–3 billion tender pipeline is a central pillar of the growth story, the company acknowledged that awards are typically spread among multiple winners and scheduled across several quarters. Some of the contracts may not materially boost revenue until the second half of 2026 or even into 2027, adding execution and timing risk to the otherwise bullish outlook.

Guidance Points to Stronger 2026 Growth

Management guided that 2026 should be the company’s strongest growth year yet, aiming to exit the year at an annualized revenue run-rate of about $2 billion. They expect full-year EBITDA margins broadly in line with 2025, Q1 as the seasonal low, free cash flow conversion of roughly 35%–40% of adjusted EBITDA, interest expense around $22 million, a tax rate near 22.5%, and leverage kept at or below 1.0x.

The earnings call painted a company leaning into a larger opportunity set with record revenue, sturdy cash flow, and a disciplined balance sheet providing room to maneuver. Despite country-specific hiccups, mix-driven margin compression, and near-term seasonal pressure, National Energy Services Reunited appears positioned for a strong 2026, with the Jafurah program and regional tenders at the core of its growth narrative.