Abraj Energy Services SAOG (ABRJ) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, everyone. It's a pleasure to meet with you in today's investor engagement session to present the company performance in the previous year 2024. My name is Saif Al Hamhami, the Chief Executive Officer of Abraj Energy Services and today, I have the executive management team available to present the company performance and to answer your queries. And shortly, I will introduce the team that is present in today's meeting. The presentation will be in English as we have foreign investors joining us from inside and outside Oman. However, we are more than happy to take any questions or make any clarification in Arabic. I would like to welcome you, and thank you for your participation in this engagement. I would like to also thank MSX for their continuous support and for enabling us to have this engagement with our investors. Please note that the meeting will be recorded. We have prepared a set of slides to reflect on the overall company business and its performance for the previous year 2024. The structure of this session is mainly two parts. The first part will be a presentation on the company operational and financial performance that will be presented by the CEO and the Deputy CFO and the second part will be an open Q&A session at the end. So we'd appreciate it if you can keep your questions to the end. We anticipate about 30 to 40 minutes for the presentation, and we will leave the remaining time for the questions and answers. So before we start, we would like to make the following disclaimer to note for today's session. The session will be recorded and will be posted later in both MSX and Abraj websites, so you can refer to the presentation and the discussions later on. The content has not been approved by any regulatory or supervisory authority. We don't intend to make any forward-looking or forecast statements. The session should be taken in the spirit of engaging and updating our investors on the overall company business dimensions and its performance in 2024. So as you can see here, today's presenters, myself, the CEO; and to my right, Sadiq Al-Lawati, the Deputy CFO, who will be presenting the company financial performance. We also have the CFO, Mr. Lakshmi Rajan present in this session. We also have Mr. Zahran Al Kindi, our Chief Operating Officer, who will be also present in this session and will be ready to answer any questions you might have. Mr. Hood Al Brashdi, our acting Business Development Director, is also present to answer any queries on the company business development and growth plans. Mr. Hilal Al Siyabi is our Chief People and Culture, who also can answer and support on any queries when it comes to people, training, CSR, ICV and social responsibility. As you can see, the management team is well equipped with rich experience that is diversified to support the company business and also to provide support and service to our clients and also to support the growth plans for the company going forward. So the content first, we will give an overall market position and the operational excellence of the company in the previous year. We will touch on the HSE, which is a key consideration for our operations in the oil and gas. We will talk a little bit about our operations, the main two segments being the Drilling and Workover and the Well Services. Later on, we will talk about the human capital side and the corporate social responsibility and the In-Country Value. We will also touch on the order book value and our market share and our plans. Later on, we will go into depth about the financial performance of the company and we will close our presentation with an outlook about the management focus and the company plans going forward. And then we will open the floors after the presentation to take your questions. So an overview about Abraj you might be aware, Abraj was founded in 2006, started operations in 2007, mainly in the drilling segment. Later on, the company managed to diversify its services offering to add workover and well services. Today, our fleet constitutes 27 rigs and 5 workover units. We also have 2 hydraulic fracturing units and we have about 9 cementing units. We also have other services, including coil tubing, flowback, chemicals and IM. So in Oman, Abraj represents the largest drilling service provider at a market share of 25%. And we managed to add 2 new rigs in our fleet in 2024, so to move from 25 rigs to 27 rigs. Those two additional rigs were the 2 new rigs in Kuwait. So 2024 was a highlight for the company by starting its international operations in the region. In terms of the number of clients that we serve. We serve 10 clients in all our service offering and one of the key competitive advantages of the company is that we have a relatively young fleet of around 9.4 years for the drilling and 11.4 years for the workover, which gives us competitive advantage when it comes to operational excellence and providing high quality service to our clients and also our fleet constitutes some of the latest technologies and mechanization in the industry. In terms -- and so basically, this also reflects in our operational excellence in terms of wells delivered in 2024, 340 wells. We have seen an improvement in the NPT or the longer name non-productive time where we have managed to reduce it from 1.24% to 0.76% and the lower the better. So this is the downtime for the assets. And so through operational excellence and through technologies and preventative maintenance, we managed to provide high quality and lower breakdown for our clients. In terms of rig utilization, we did dig a little bit in terms of rig utilization in 2024, where we had 4 of our rigs came out of service in 2024, mainly because of natural depletion of the contract and end of scope with various clients. However, we are actively retendering these rigs with various clients that we are working with and we are reaching final stages on some of these rigs out of the 4 to redeploy some of them within 2025. In terms of human capital, we have over 2,700 employees, and we have around 24 nationalities that serve the company. In terms of HSE, we had an excellent track record in HSE. One of the key metrics that is measured is the lost time injury frequency and lost time injury, and we managed to exceed 1,100 days close to 3 years or over 3 years of operation without injuring any of our employees or stakeholders on our worksites. And similarly, we've had an excellent track record when it came to the other metrics, including road traffic accidents. Thanks to the stringent and advanced HSE management systems we have in the company and also in the investment that we put in the systems and in the people to develop their competence to be aware about the risks of the industry so that we avoid injuring or impacting the environment during our operations. So when it comes to operational excellence, we will talk about the drilling rigs' performance. To the far left, you see the NPT, nonproductive time metric, where we have managed to reduce the nonproductive time in our units. Again, thanks to the stringent systems we have to the preventative maintenance to the competence of our people and also the investment in highly mechanized and technology in our assets, which provides high value to our clients. You can see that the industry benchmark is well above 2%, and we are sustaining our threshold well below that. In terms of utilization, as I mentioned that we managed to 2 rigs in Kuwait. However, because of the 4 rigs that came out of service in Oman and we are looking to redeploy our utilization went down last year. In terms of drilled wells, we have delivered the same number of wells in 2024 compared to 2023 despite the lower utilization of our assets. And this is to do with the improved efficiency in well delivery for our clients. And we have seen a positive impact in our financials that resulted in us getting more well incentives and also conducting more rig moves, which supported our revenue, and we managed to actually exceed the financial performance of 2023 despite the lower utilization because of improvement in efficiency. So we are having the focus there on operational excellence to sustain this. And as you can see to the far right, we ask for our customer feedback, and we are monitoring that on a monthly basis. And you can see the improvement on year-on-year. This is an independent survey that we sent to our various clients to seek their feedback on our service and to continuously improve it, which basically supports our performance and their trust to give us even more scope. In terms of well services, similarly, we see a similar trend when it comes to the nonproductive time, there is improvement in the performance of the segment. In terms of asset utilization, there is a slight improvement, and we've seen improvement towards the end of the year by mobilizing the second hydraulic fracturing unit, in terms of jobs, cementing, and fracking a key highlight. So you see that the number of jobs conducted have increased. And a key highlight for the segment is that we managed to position the hydraulic fracturing product line and the cementing product line of the company in the high-end scope with our clients in the gas scope, in the high-pressure, high-temperature scope, it's a more complex scope. So this means that you are competing more on the niche market where the margins are bigger, there is more technology and there is less competition. So this will support the segment growth going forward in trying to grow the segment and be more competitive in all the scopes that we serve our clients. We will now move to the human capital side of the business, which is fueling the performance of the company. Our greatest asset is the people and the company is committed to investing in the development of the people. We are committed towards national responsibility. The company continues to support or to employ over 92% Omani workforce in all the ladders, including the technical and managerial ladders. We also maintain a good percentage of international expertise and experts to support the company and ensure that we attract top talents globally to support the company operations and the growth plans. In terms of training as we may be aware that, the company has its own training institute where it focuses on developing tailored training programs and providing on-hand training for our employees to ensure they are ready basically for the challenges that keep on evolving in our operations. We are also supporting the national programs when it comes to providing internships and trainings and we have supported various programs as you can see at the bottom in yellow. We have our own program called Fursa. We also supported another 2 programs with 2 major clients in Oman, namely PDO and BP, called [indiscernible] and Ruwad and we have trained over 115 students, giving them internship programs and training, whether here or in the headquarters in Muscat or in the field to prepare them, but also to attract top talents that can be employed in the future for our operations and our business. On the other side, in terms of corporate social responsibility, I'm happy to disclose that Abraj spent the highest CSR amount in 2024. We spent over OMR 112,000 on CSR initiatives. So the CSR in the company is well governed. We have a committee that's been appointed by the Board of Directors that has a charter to work on various categories, and we receive the CSR applications through our website, and we try to balance it between the different categories. As you can see, it varies from community engagement to education to talent and youth empowerment to innovation and technology and of course, the environment. The target moving forward is that we further boost the CSR activities in 2025. In the AGM we held 2 days ago, it was approved that we spend OMR 150,000. So we increased our budget in CSR to have the presence of the company in the operations basically in the region that we operate in. Furthermore, when it comes to in-country value, we have metrics to support the in-country value. So in 2024, we boosted the SME spend from 17% to 21%, amounting to OMR 16 million spent on goods and services provided by SMEs in the country. So enabling and supporting the local economy and the national objectives and responsibility. Similarly on the ICV index, we maintained that about 60% and we scored 63% in 2024 and we have spent OMR 61 million on ICV projects in 2024. So moving next when it comes to the order backlog and the market share of the company, we maintain a healthy backlog in 2024. So despite the natural depletion of contracts in 2024, we managed to increase the order backlog of the contracts in both Drilling and Workover and the Well Services from OMR 521 million by end of 2023 to OMR 567 million by end of 2024, thanks to the efforts of our teams, operations teams and business development teams and all the supporting functions in the company to ensure that we have business continuity that we renew a lot of the contracts. And we have put some disclosures on MSX where we have successfully managed to renew some of the contracts, and we will continue that practice to keep you informed about the healthiness of the company backlog and business continuity. In terms of the segment by segment division in terms of backlog, drilling continues to be the dominating product line for the company at 89% by end of 2024 and 11% on the well services. When we do the breakdown of the Oman market by service line, as we mentioned earlier, Abraj occupies the largest market share on the drilling segment in the country with 25% market share. When it comes to hydraulic fracturing services, Abraj occupies around 33 or a 1/3 of the market share in the country, which puts us in the second position compared to our peers, which are international [indiscernible] companies. And similarly, when it comes to the cementing, we occupy 24% of the market share in Oman, and that puts us in the second or third position in the country. So we have a healthy presence in the country when it comes to the product lines we offer. So our strategy moving forward will be to defend our market position in the services that we provide by ensuring we maintain high standards in operational excellence, and we provide high-quality services to our clients, but also start working on growth avenues, either on geographical expansion, as you have seen in Kuwait, but also on tapping on new potential adjacent product lines that will support our product offering. With this, I will hand over to my colleague, Sadiq Al-Lawati, our Deputy CFO to take you through the financial performance of the company in 2024.

Thanks Saif. Good afternoon, everyone [Foreign Language] So we'll be discussing the financial performance for 2024. Year-on-year in 2024, our revenue grew by OMR 7.3 million, that's almost 5%. This was mainly driven by increase in rig activity, deploying additional rigs in Kuwait, increase in other income. This was offset by lower revenue due to stacked rigs and lower frack activities during the year. Quarter-on-quarter, our revenue increased by OMR 1 million, mainly due to improved Well Service activities. With regard to EBITDA, our EBITDA improved both in year-on-year and quarter-on-quarter by 2%. That's mainly due to revenue increase and our operational excellence. With regard to [indiscernible] year-on-year and [indiscernible] increased by 1.9%, in line with the revenue growth that we have seen despite the fact that we have provided a provision of OMR 2.7 million against impairment that is required as per IFRS. Cash flow bridge. In 2024, we saw an increase in operating activities by OMR 5 million compared to 2023. This is mainly due to a reduction in trade receivables. Our investment in PPE was higher in 2024. That's mainly related to our investment in 2 rigs that we deployed in Kuwait during the year and we saw a decrease in investment also due to -- in 2023, we saw a decrease in investment and that's mainly due to the encashment of fixed deposit that we had to pay our operating expenses and dividend. Financing activities. In 2024, we had normal schedule of repayment of loans followed by the 2023 swap loan where we have higher loan repayments due to the swap. With regarding to CapEx expense, as we see in 2024, our CapEx expenditure increased by 45% compared to 2023. That's mainly driven by the 2 additional rigs that we deployed in Kuwait. Our net debt-to-EBITDA ratio improved in 2024, reflecting a lower ratio and mainly due to higher EBITDA year-on-year was driven by our operational excellence despite securing additional funding during the year. Now we discuss the segmental revenue year-on-year. Our revenue grew by OMR 8.4 million in Drilling and Workover. That's almost 6% year-on-year. This is mainly driven by increase in rig move activity, deploying additional rigs in Kuwait and other income. This was offset by lower revenue due to stack rigs in Oman. Quarter-over-quarter, our revenue remained almost flat due to continued impact of the stack rigs. With regarding to Well Services year-on-year, we can see that we have dropped almost -- we dropped in revenue that's mainly rated from the lower activities from the frack. However, we have start picking in Q4 and the revenue about OMR 1 million where we are trying to catch up with these activities. With regarding to EBITDA year-on-year our EBITDA improved by OMR 6.6 million in workover and drilling increase mainly related to the increase in revenue and our operating excellence. With regarding to Well services quarter-on-quarter we are showing increase -- we have seen increase in our EBITDA that's mainly also driven by the increase of rig moves that we have in the last quarter of the year. With regard to well services year-on-year our EBITDA reduced by OMR 1 million due to the lower activities. Furthermore, it was flat quarter-on-quarter despite increase in revenue that's mainly related to the product cost increase.

Okay. So before we close our presentation, the first part and before we take your questions and answers. And so we wanted to give you a bit of an outlook about our plans in the future for the company. So in general, we believe that the demand for energy and especially the oil and gas will continue to grow globally. The MENA region will continue to be a strategic active energy area hub. So our growth plans will be focused in the region. We will continue to maintain and defend our leading market share for drilling and workover rigs in Oman and further grow the well services as well and also look at avenues to grow in the region. As we mentioned that we started our operations in Kuwait with 2 rigs we were awarded a contract for 3 rigs. So we are in advanced negotiations and discussions with the client to add the third rig. But also we have a plan to further grow in the country as the state of Kuwait is looking to boost its production and consequently, there will be a demand for more operations. And hence, us positioning the company there in 2024 will give us a platform to grow the company further in the future. Additionally, we are working closely with the clients in both Saudi Arabia and Algeria being 2 strategic and active energy oil and gas markets in the region. We are advancing discussions to position the company in the segments that we offer in drilling, well services, cementing, hydraulic fracturing and workover. And that will give us more platform or foundation to grow the company in the future. Additionally, as I mentioned earlier, we are looking at adjacent product lines that can complement our service offering that we can start in Oman and later on in the future. And there are some efforts that are going behind the scene. And once we have something, we can come forward and disclose to you in due time. With that, we conclude our presentation, and we open the floor to take your questions. [Foreign Language]

We are happy to take your questions if you have anything.

Raise your hands in case you want to ask.

Please raise your hand if you have any question. [ Mr. Jaish ], please go ahead. Let's go to the second maybe [ Mr. Lishan ].

My question is with regards to the dividend outlook. At the time of the IPO, the management of the company gave a 3-year guidance. And I think we're done with the third year of the dividend guidance, which was 6% incremental of 25% year-on-year or 85% of net profit. Now heading into FY '25 and FY '26, are there any sort of discussions that you can give us an update with regards to the dividend policy change question.

Yes. So as you mentioned correctly, we made a commitment for the first 3 years after the listing, which ends by 2024, and we will be providing or giving up the dividend in this month. So going forward, the dividend policy, we are reviewing it at the moment. I think the dividend policy will depend on the company financial performance as we are disclosing as you can see compared to the previous years and also the plans for growth in the future, if there is anything. So that discussion is ongoing with our Board to come up with a policy that we will disclose to the investors in due time to give more light and clarity about the dividend going forward. So in conclusion, depending on maintaining the same performance or growing the performance, we will be looking to build our dividend policy accordingly.

Okay. Further to that point is I look at FY '24 earnings, and I believe there might be a few one-offs here or there. So if I look at FY '24 as the base and I normalize your earnings when I sort of out the one-offs, whether it's on the expense on the income side, FY '24 if you want to maintain that number, 85% of that, I understand the policy you might apply, but 85% of that would not equate to 22.4 but that is what you paid this year. That I think is closer to 19. Is that a fair assessment?

I cannot disclose that because it's still under discussion. And the various options, as you mentioned 2 of them are being assessed. So we can only disclose once it's been reviewed and approved by the Board and then we present it to the investors. But on those options, we are assessing the various options, but again, as I mentioned, I cannot point to any of them because none of them is approved yet.

Understood. And I'm sorry, again, last question on the dividend, I promise. We've seen the recent IPOs that came out. I understand they are different companies completely. But the sort of linked to free cash flow versus the net profit, which is in your GM. Any sort of discussions on making future dividends to free cash flow? Or is it too early to even ask that question?

Again, I think the same answer, you have to excuse me. I mean we are looking at different options. We are talking to the other companies. As you are aware that OQ still share holds a 51% share in the company. So we do share some good practices and learnings from other IPOs and other companies, and we do look at any progress or any advancements in the market. We definitely take that into consideration. And then we will come out with something that is, I think, more fit for Abraj operations and business.

We can go to [ Mr Jaish ].

Ahmed, for the sake of time let's move to the next person. Please if you are done with questions you can raise down your hand. If you are not able to talk you can type in the chat, Ahmed then you can read the questions. You can open the chat. But Ahmed go through all the list at least if anybody wants to ask a question then we will do the chat at the end. Please whoever wants to ask a question you can go ahead. We can hear you.

[ Shereen ] from Westwood. I have a question, I saw Abraj plans to [indiscernible] Sorry, could you hear me?

You cut in the middle. Can you please repeat?

So I was saying that I saw that Abraj plans to commission 4 rigs [indiscernible] are there any plans to repeat [indiscernible] if so how soon [indiscernible].

So basically, that was not commissioning new rigs. Those were extension of existing contracts where the contracts expire, they were expiring in '24 and '25. And we helped in discussion and negotiations with the client and we were successful to redo the contracts for additional 3 years -- another 3 years. So we managed to extend the contract for another 3 years. So these are existing assets and we just extend the contracts.

All right. All 4 rigs will be operational until 2027?

Yes.

This is from [ Abbas Muslemi ] from Vision Capital. The chat has been disabled. I think that's why no one is able to type and even the unmute option is not with us. I think that's the reason you can't hear a lot of my colleagues. Just thought I will place that on record. Now if I can ask you in terms of what rigs are idle at the current time, how many are cold stacked versus hot stacked? And what's the outlook for the stacked rigs in the next 6 months to 1 year?

At the moment, we have 4 rigs stacked, 2 of them are cold stacked and 2 of them are warm stacked in between cold and hot stacked.

And the outlook Mr. Abbas, as I mentioned, we retendered all the rigs with various plants, the 10 plants we have mentioned we retendered with several of them for all the 4 rigs. We are advancing discussions for at least 2 to 3 rigs out of the 4 to be redeployed and to be redeployed within 2025. We cannot disclose because we haven't signed the final contract with them, but we are optimistic of redeploying the majority of those stacked rigs in the coming few months.

And what trends are you seeing given that oil prices have softened from an average of $80 that we saw in the last 2 years. So currently, it's around $70, it was $83 in '23 and $81 in '24. What sort of pressure are you seeing on day rates for the retendered rigs and even the existing contracts when they come up for renewal, what's your outlook on day rates.

I mean the day rates, it's always a continuous discussion and negotiations with the various clients. Of course, clients, they have 2 trade-offs that they want to maintain. They want to become more cost effective and improve their unit cost and delivery cost and they will be looking at the full well delivery cost, including the rig rate. A rig rate is about 30%, 40% of the total well delivery cost. So of course, there is always that ongoing pressure regardless of the oil price, the pressure from the various clients that we work with, we always see that they are pushing to reduce the well delivery cost. And that pressure is understandable because it's coming from their own shareholders and it's being cascaded down. So we work very close with them on the -- basically trying to optimize our operations, our efficiencies trying to reduce some mechanization, try to reduce the manpower, trying to also work on some of the specs with them and also work with our suppliers and the rig manufacturers all the way down the supply chain to ensure that we basically tighten the rig rates and also tighten any inefficacies. But then we aim to maintain the same profit margins. So rig rates will continue to fluctuate. We have seen some rig rates going down because of optimization. We have seen other rig rates going up because of investment in technology and investment in mechanization because you can increase the rig rate by putting more advanced machine. But on totality, on the well delivery, you can get quicker, more efficient, more reliable wells, so some of the clients, they are willing to actually invest more on the rig rates. So we have seen both of them, and we are working very closely with our clients. But the bottom line for us is that we maintain and improve our profit margins.

And what impact are you seeing on your backlog or your new tendering when it comes to this drop-off in oil prices from '23 and '24 levels? I'm talking holistic beyond -- what are the conversations are you having with your clients?

I mean there was a slide where we presented we actually grew the backlog of the company in 2024 end of 2024, 31st December versus 31st December 2023. We have actually grown our backlog despite we have completed or depleted a lot of that backlog in 2024. So the backlog continues to be healthy. And going forward, I think the outlook is positive. The operations in the oil and gas continues to be steady and growing in some of the regions. So for us to open new markets for to open new markets and to look at adjacent product lines, I think going forward, the outlook will be positive, but we will have to continue putting the effort going forward. If Abbas you are okay, we can move to the next person. [ Mr. Renee ] ?

I dialed in a bit late. So I don't mind if I ask a question about why the first quarter margin was so weak. Were there any one-offs in the fourth quarter?

Yes. So indeed, there was a one-off that we took in the fourth quarter. I will leave that maybe to my colleague, Sadiq to elaborate.

Yes, indeed, as mentioned by Saif there was one-off that we have taken additional provision for an impairment of a few rigs during the year. That's as per our IFRS requirement. Those rigs we've seen that these are like kind of the trending in the market is going really on the high mechanized and high technology and these rigs will be looking to not be working in Oman, and we are looking for it for outside Oman currently. So therefore, we have provided the provision to ensure that we are covered and this is part of our transparency and ensure that our financials are healthy and covered.

Okay. So this is part of the 4 stacked rigs that we took impairments on...

No. So these are different rigs. So basically, we have seen that the major clients in Oman, they are basically revamping refreshing their fleets and what they call it waves. They basically tender the waves, wave 1, wave 2, wave 3. And we have seen that there is a push towards more modern, highly mechanized rigs that some of our aging fleet in a few years' time will become more obsolete in Oman market. So fortunately and as per IFRS as mentioned by my colleague, we have taken this impairment provision it's around OMR 2.7 million for some of the rigs that will be coming out of service in the coming few years and we will need to remarket them in markets outside Oman. So this will protect our books and to be more conservative following the standards we have taken this provision. As I mentioned, it's about OMR 2.7 million in Q4, [indiscernible]. As for the other 4 stacked rigs, we are optimistic and we are advancing discussions. We have participated in tenders to redeploy them in Oman and outside Oman. And hopefully, we can disclose very soon to you once we sign the contracts with the various clients on the redeployment of these stacked rigs.

And the ones that you took impairments on, what's the number of those rigs [indiscernible].

4 rigs.

The one you took impairments on?

Yes. Are we done with [ Mr. Bilal ]. [ Mr. Jaish ]? [ Mr. Shaur ]?

So I wanted to inquire about the 2 rigs that were added in 2024 in Kuwait that you just mentioned in the presentation. I want to about the daily rates on those rigs are they operational? And if they are, what would be the rates? And are they better than the locally?

Yes. I think the rates we cannot disclose because of confidentiality and competitiveness. But they are on par with the Kuwait market rates. The T&Cs of the Kuwait rigs market is different from Oman, and we see different rates there. The requirement for localization, country value, SMEs, the different technical specs are different. So we cannot compare them to Oman. They are different. We have seen them different, but they are on par with the Kuwaiti basically rates. And I cannot disclose that, it's confidential.

But they are operational is what you're saying?

They are all operational. So basically, one of them was commissioned in March last year. The second one was in July. And both of them, they were commissioned ahead of the committed schedule with our clients and safely. And they are performing very well in terms of well delivery. And we are receiving very positive feedback from our clients. We stay very close to them. And given our excellent start-up of the 2 rigs are still operational with them, we are advancing discussions on adding a third rig with them. But again, as I said, it's still not firm yet, not signed yet. Once it's confirmed, we will disclose in due time.

So now you mentioned that this is quite impressive. What I wanted to inquire is going forward in the next couple of years in 2026, what is the management's aim to increase its rig count to? And also coincides with the already has a significant at least short level, [indiscernible].

Yes. So basically, we have an understanding with our Board of Directors that Abraj is a growth company. And so management is committed to that. So moving forward, we will be looking to grow not only in rigs, but also in other product lines that we offer today and also introduce new product lines that are adjacent to the product lines we provide today and open new geographies. So I cannot comment on the number of rigs. We do have a few scenarios that we are working on again, it's a 2-way thing. It's a capability of the company, both financially, operationally, organizationally, but also the market demand as well. We have done our own market intelligence for the Oman market and the region where there will be demand for growth in terms of rigs and associated services and other oil and gas services we can position abroad. And accordingly, we are aligning our business development plans to capture those opportunities, be it growth opportunities in Oman and the region or renew of natural contracts in the region. So we are committed to driving growth of the company. As I mentioned, there are different scenarios that we are looking at that will give different numbers in terms of growth. But at least in Oman, we want to maintain 2 things. We want to maintain the market lead and our market share and grow steadily and reliably. But also while doing this growth, we should not forget that we need to also maintain and improve our profit margins. Profit margin is not only coming from increasing the rates, but also to become more efficient and to focus more on operational excellence. So we have these plans to drive the growth. And we will definitely disclose in due time whenever something is material happening to you and to the investors. Let's check the chat, just go question by question Ahmed.

What you are citing about 36 rigs probably you have taken from the IPO prospectus. So if that is the case, the management is working in that direction. And I leave it to Saif to handle it.

Yes. So I think the simple answer to this question is yes. And we are really making some positive progress. But again, I think in due time, we will disclose, but we are on track with this plan. Next question Ahmed.

It's coming from domestic and international.

Hood, you can comment on the backlog, the 567, how much of it is Oman, how much of it is international?

For the backlog, majority is actually the local market but we have the -- for the international is around -- which is mainly Kuwait at this stage, is around 5% as the total backlog. The rest the 95% is mainly local as of now.

Yes. The answer is yes. I think we're going through a bit of a dip, which is normal in the market. And if we look at the clients that ended those contracts, one of them was Total, where they had an exploration campaign in Oman, and it was not successful. So they could not continue. We had another 2 rigs coming from PDO where it came to a natural basically completion of the contract and they went for a new wave. So that was the end of scope. And the fourth one was coming from BP, where they took a pause a year in their drilling activity and they're looking to come back at the end of the year or beginning of next year. So it is a bit of a dip in the market. We are still maintaining the highest market share. And we have plans and we are actively working to regain and improve -- go back to this 29% and even try to even go beyond that in the future. Rig utilization for 2025. As I mentioned, we have 4 rigs stacked as of now. We have advanced discussions on at least 2 rigs to be redeployed this year, yet to be confirmed once we sign the contracts and potential third rig also coming towards the end of the year or beginning of next year. And then the fourth rig, we are actually going to be using it within our fleet to optimize our operations to support the maintenance and major maintenance within the fleet. So we will improve the utilization going forward [Foreign Language] I think on the impairment...

This is based on the IFRS requirements which have a certain model. The model is linked to various parameters both globally as well as Oman country based. So nobody would be able to say that a further provision is required. As of now it is not required as we speak. So we will take it as the year progresses, that's what it is.

Again, I think the day rates we commented on this one. We cannot disclose day rates and day rates do fluctuate depending on the market dynamics, the supply and demand. And yes, there is pressure on trying to push on the day rates from the various clients, again, coming from their shareholders. What is, I think, key here is the margins. The day rate can be up and down as long as we can optimize our basic margins and we maintain them and we grow them, and that is what we are focusing on. So we need to also work and cooperate with the clients to understand where they're coming from, what is the pressure they're facing to give them a value service and what they are looking for. And we do actually discuss and negotiate rates with them. But then also we try to maintain the margins by optimizing the operations, the T&Cs of the contracts, et cetera.

We are [indiscernible] 1 rig to go for [indiscernible] inspection by the end of the year and we're going to utilize one of our staff machines to give us that period of time.

So as we mentioned, the contract in Kuwait for up to 3 rigs, it's on a call out basis. So they have 2 rigs and we are advancing discussions for the third rig. And if we conclude that it will be within, I think, 1 year of delivery. So that discussion is ongoing. As for the financials in Kuwait, I think we're just starting the operations. As I mentioned, we did not complete the full year. One of them started in March, the other one in July. But feel free to add more on this.

So if you see based on these 2 rigs on a full year basis, our aim is to ensure that we improve compared to what we have done in 2024. So that is the aim with which the management is working on these 2 rigs in Kuwait.

I think we are not -- for the outlook of Oman E&P drilling activities, I think we are not in a position to forecast, but the indications we have seen it's quite stable and robust. But again, it's a very dynamic market. We are yet to see. However, I think you have seen in the past that the Oman market in general is quite steady and stable compared to other regions in the world. And so [indiscernible]. However, we are watchful for any advancements or any progress in the market. What we have seen actually is the Omani market response, usually it's more of an inward driven than outward driven. So it's really more influenced by the scope and the reserves in the country than the oil prices and the markets in the world. So Oman is not really a swing producer. And we have seen that less sensitive to external market conditions and oil prices. So outlook, we anticipate that to continue, but we are, as I said, watchful, and we are observing anything that happens in Oman outside.

So the question -- the last question is talking about a large portion of the operating cost and the interest is fixed, how do you maintain the EBITDA margin? So to answer, the interest cost does not come in the EBITDA margin, it is below the EBITDA. So the operating cost, EBITDA rate goes down by 5% to 10%. We have seen during the low oil prices, how we could be able to manage our cost. So we are confident even if the oil prices go down, we would be able to maintain the performances of our -- the operating cost. We are confident of doing that. other.

Any other questions Ahmed? Can you go to the chat if anybody else has any more questions? Please feel free to speak up if you have any final questions or queries or clarifications. [Foreign Language] With this, I think we will conclude our session today. We thank you for your participation and active participation in this session, and we look forward to engage with you soon. We stay committed, as we mentioned, to drive the company growth plans and operational excellence to maintain its competitive advantage and to open new avenues for growth. And we will keep you updated if any material progress or update happens.