Abraj Energy Services SAOG ($ABRJ)

[Foreign Language] Good afternoon, everyone. We will start this earnings call. [Foreign Language] Good afternoon, everyone. It's a pleasure to meet with you today in this investor engagement session to present the company performance in 2025 with focus on Q4. My name is Saif Al Hamhami, Abraj's Chief Executive Officer. And today, I have the executive management with me to present the company performance and answer your queries and shortly, I will introduce the management who is present today. The presentation will be conducted in English, but we are happy to take any question or answer, any query in Arabic, if needed. I would like to welcome you and thank all participants for this engagement. I would like to extend our appreciation to MSX for their continuous support and for enabling us to have this engagement with our investors. Please note that the meeting will be recorded. It will be available later on, on both the company and MSX websites for reference in the future. The structure of the session will be two main parts. The first part will be a presentation on the company performance, both operational and financial. It will be presented by the CEO and the CFO. And the second part, which is the bigger part, is to take your questions and answer any queries that you might have about the company. We anticipate, hopefully, 20 to 30 minutes for the presentation, and we leave the remaining time for the Q&A. So before we start, this is the disclaimer. You can refer to it. It's a standard disclaimer. You can refer to it later. But key points to take from here, as I mentioned that the session will be recorded and [Foreign Language] will be posting it later in our website and also MSX website for reference. The content has not been approved by any regulatory or supervisory authority. We don't intend to make any forward-looking or forecast statements and their session should be taken in the spirit of engagements and updation between the management and the investors on the overall company dimensions and performance and to answer any query that you might have. So this is today's presenters and available management. I introduce myself. To my right here, we have Mr. Hubert, who is a seasoned CFO, and who joined us in Abraj earlier this year, and he will be co-presenting with me, the company performance. We also have the key management available with us, Mr. Zahran Al Kindi, our Chief Operating Officer; Mr. Hilal Siyabi, our Chief People Officer. We have also Sadiq, Deputy CFO; and Hood Al Brashdi, our acting Business Development Director. So the agenda, six main elements. First, we will present the main achievements in 2025 with key highlights on the financials. We will also touch on the operational highlights. We will also touch on the market share, the backlog and the utilization rate towards the end. And I'll be presenting the first four items. Hubert will be presenting in detail the financial performance, and I will be closing on strategic direction of the company, what's coming and what is -- what to expect in 2026 and beyond. [Foreign Language] Okay. Just a point of check. Can someone just confirm to us that the voice is clear, and you can see the presentation from your end, from the investors? We have confirmation. Very good. So we will start first with the key achievements in 2025, and we try to summarize them in six main pockets. We start with the first one on the top right. One of the key achievements and for the company in 2026, that we are very proud that we closed the year with the highest backlog on record for the company with a total backlog of OMR 880 million. This high level of backlog is explained by the remaining average contract tenure of almost 5 years to be more precise, 4.75 years. And this will take us all the way to 2030. So this level of backlog and contract tenure creates a strong visibility for our financials and long-term value, and it sets us on a good ground for further growth and supports the company's ambition. Another highlight in 2025 is the cementing success story, where the cementing segment has performed both technically, operationally and was reflected in the financial performance, where the -- our technologies were positioned on the high-end scope with the various clients, PDO, OQEP, and others. And we have seen that result in excellent financial performance of the segment. Another key highlight is that we have progressed the regional expansion ambition with a strategic partnership with signing a term sheet with Sonatrach in Algeria. And we are trying to finalize the shareholder agreement with them on how we work together. And this is mainly to develop a JV with the Sonatrach in Algeria to develop basically the hydrocarbons there, but also to develop a strong JV for both companies to deploy new assets and train local talents, which will also support the company's future growth plans. On the operational excellence, we have many showcases and highlights from our Kuwait team, where we have deployed our rigs. The team has performed extremely well since we started the two rigs in Kuwait. And in the short time, we have received, previously in last year, three prestigious awards that demonstrate the operational excellence, capability and HSE performance of the team, including the award of the Best Contractor of the Year from the WJO operations. Moving on, on the local content and as part of the Vision 2040, we are pushing the local content agenda. I'm happy to share that we have received the award for the Best Local Content Program for 2025, given by the Ministry of Energy and Minerals in Oman. And also Abraj was the first company in Oman to receive the In-Country Value Award that was given last year for the first time. Finally, another key achievement is that we managed to include Abraj stock as part of the MSX Shari'a-Complaint Index, which expanded our investor reach and supported the share appreciation, as you have seen in the last 2 to 3 months. Moving on to the key financial highlights. Hubert will give a more detailed presentation on the financial performance, but there are a few highlights that I wanted to mention here, starting from the left side with the full year variance. Our 2025 revenue and EBITDA were slightly lower than the previous year, mainly due to the lower rigs utilization. However, the -- in spite of that dip in the rigs utilization, which are reflected on the top line, we have shown some good resilience with an improved earnings and bottom line profits per share and the operating cash flow of positive 5%, as you can see in the bottom left. Also, 2025 have seen sizable CapEx utilization as we are pursuing our growth plan and our fleet expansion program. The 2020 -- comparing on the right is a comparison of Q4 compared to Q3. Q4 was strong with a 7% quarter-on-quarter increase compared to Q3. However, we have also seen some additional charges and some one-off and seasonal expenses that have eroded our profitability. The Q4 CapEx was significantly lower, as you can see, 77% lower compared to Q3. But that is mainly to a timing difference or a phasing difference in the execution for our fleet expansion plan. So this slide summarizes the key operational highlights. First, we closed 2025 with a rig utilization of 85.5%, which is unusually low and due to the fact that we've had 47 non-active rig months in 2025, which is equivalent to almost three rigs being stuck throughout the year. However, since then, we have been successful in redeploying almost all of the rigs, three out of the four rigs, and we expect the utilization to improve in Q1 2026. Despite of the lower utilization we have performed very well in 2025 in terms of wells delivery, with 307 wells delivered, which is more than what we drilled in 2024, a demonstration of our improved drilling efficiency. And we have also seen that in our non-productive time, which was solid at 0.73%, much lower than the global threshold or average of 2%, again, showcasing the company operational efficiency and drilling execution capabilities. One of the key enablers in our business is our ability to move the rig from one well location to another in record time, which provides big value to the -- to our customers. And we have conducted an excellent track record of 358 rig moves in 2025 with an average rig move duration of less than 1.5 days per month, which is on the really high side in terms of average and in terms of well delivery. Finally, our HSE statistics, we have a rolling lost time injury frequency of 0.4, which is outperforming the industry average of 0.58. Another success story in the HSE front is that the fact that we have driven over 14 million kilometers in 2025, a very or extremely low frequency of traffic and road accidents. Moving on. So this slide summarizes the backlog, the market share and utilization rate. As I mentioned, this is one of the key highlights in 2025. Starting from the top left graph, we are showing the backlog trend over the last 3 years. As you can see, we have significantly increased our backlog position with an impressive compound -- compounded annual growth rate of 30%. As I mentioned, we closed the year with a backlog -- as I mentioned, we closed the year with a backlog of OMR 880 million, which is the highest record for the company since inception. Approximately 76% of our backlog are firm commitments and the rest are optional extensions. As I mentioned before, the remaining average contract tenure is around 4.75 years, which means that most of our rigs are locked until 2030. The bottom left graph is showing the backlog bridging from the year end of 2024 to the end of 2025 position. In 2025, we have secured a total of OMR 460 million of new contracts or contract extensions, which is mainly coming from, and I will summarize them, the main contracts that we have secured and this, we have disclosed throughout the year -- last year, six newbuild rigs with PDO Wave III for a total contract value of OMR 215 million, four land rigs with PDO of which -- of which one is a newbuild, and the rest are redeployment of our assets either stacked or coming from other clients. We managed to secure an extension of four land rigs with Oxy with a total contract value estimated of around OMR 85 million. And we have managed to add one new rig to our fleet in the Wafra Joint Operations in Kuwait, which ramps up our rigs in Kuwait to three rigs. And that happens to be our first 3,000 horsepower rig with expected contract value of around OMR 20 million. The top right graph is showing the market share in different service offering. In our Drilling segment, we have currently a market share of 26%, which corresponds to 23 active rigs with a total market of -- out of a total market of 86 rigs in Oman. Our market share is set to increase in 2026 and beyond, as we are deploying assets -- new assets and newbuilds, and we will be repositioning as well some of our stacked rigs. The bottom right graph is about the rig months and utilization rate. As mentioned before, our utilization rate was 85.5%, which is relatively low compared to the previous years. However, we expect this to improve. It was about 92% in 2024. In 2025, we had 47 inactive rig months which correspond to an average four idle rigs. However, on the highlight, we managed to secure contracts for all the rigs except one. And we are in negotiations, in direct negotiations with a client to redeploy it in 2026, and we will keep you posted on the success of that negotiation. With that, I will hand over to my colleague, Mr. Hubert, our CFO, to take you through the financial performance in 2025. And I take this opportunity to welcome Hubert to Abraj and this is the first time we expose him to the market, but you probably know him, if you are familiar with the industry and the region drilling activities. To you, Hubert.

Thank you. Thank you very much, Saif. I'm very happy to be part of the team and looking forward to meet each and every one of you on the call face-to-face shortly. So I'm going to go through the financial performance for the company for the year-on-year and Q-on-Q. The first thing that I would like to do is maybe look back since 2020 and see how Abraj has grown over the years. Now if you look at the left side graph and the revenue trend, you can see that we have grown our top line steadily with a solid revenue compound annual growth rate or CAGR of 7% over the last 5 years. And it is part of Abraj's DNA that we create long-term value and selective growth opportunity. However, because we are also in a capital-intensive industry, it is also critically important that we uphold strong financial discipline in the execution of any expansion plans. So the financial discipline element is inseparable from the long-term value enhancement. As you are aware, we have two different segment, reporting segments. One is Drilling and Workover that comprise of 27 rigs and 5 workover units and the other is Well Services with our frac and cementing units. The left graph -- sorry, the right graph is showing you the revenue and gross profit breakdown by segment. As you can see in our Drilling segment, our 2025 revenue decreased roughly by OMR 7 million from OMR 135 million to OMR 128 million or minus 5%. And this is in line with the rig activity decrease that Saif has mentioned, which was roughly minus 4% year-on-year. As mentioned earlier, we had a total 47 inactive rig months in 2025, which is equivalent to, roughly, four rigs not being working throughout the year. So similarly, the gross profit has also decreased by OMR 3 million, largely reflecting the fall-through impact of the four inactive rigs. Now on the other hand, in our Well Services segment, 2025 revenue has increased by OMR 3 million from OMR 16 million to OMR 19 million or plus 19%, which was mainly driven by the higher cementing activities in this -- which was -- sorry, by the higher cementing activity with high-end jobs, which has also reflected in the gross profit with a OMR 1 million increase. Next slide, please. So this slide is showing some key financial metrics, and we'll compare year-on-year and quarter-on-quarter. So the quarter-on-quarter comparison will be Q4 with the prior quarter Q3. So first, let's have a look at the top left graph, which is the revenue buoyance. So year-on-year, we have had a contraction of 3% from OMR 151.6 million to OMR 147.2 million, which, again, the 3% needs to be put in parallel with a 4% rig activity decrease that we have seen. The impact of the stack rig has created a revenue shortfall of OMR 11 million compared to 2024 which was partially offset by the additional contribution of the second rig that we added in Kuwait with an upside of OMR 3.4 million as well as the cementing activity with an additional upside of OMR 3.3 million. If you look at Q-on-Q, that is Q4 versus Q3, we have seen an increase of plus 7% from OMR 35.9 million to OMR 38.4 million, mainly coming from the higher frac activity as well as one rig that was stacked in Q3 and started a new job for BP in Q4. Now moving on to the top right graph, you can see our 2025 EBITDA was OMR 49.4 million. which was OMR 2 million less than our 2024 EBITDA of OMR 51.4 million. The impact of the stack rig was approximately a negative OMR 6 million and this was partially offset by a few other upsides, namely, we have the Kuwait rigs, the cementing as well as some G&A cost optimization for a total of approximately plus OMR 4 million. So minus OMR 6 million from the stack rigs, offset by plus OMR 4 million of other upside, give you a net difference of minus OMR 2 million. Consequently, our EBITDA margin profile has also slightly decreased from 33.5% in 2025 whereas 33.9% in 2024. Now if you look at our Q4 EBITDA, we reached OMR 12.1 million, which was 3% lower than that of Q3. So in spite of the revenue increase of 7% Q-on-Q, that should have generated about roughly OMR 0.8 million of additional EBITDA. Our EBITDA was impacted in Q4 by some one-off seasonal additional costs that we have incurred as well as the impact of one rig activity -- one rig being inactive in the transition period and mobilizing from one client to the other, which collectively represents minus OMR 1.2 million of additional costs. So plus OMR 0.8 million of additional revenue, minus OMR 1.2 million of additional costs give you the difference in the quarterly EBITDA. If you look at the bottom left graph, is showing our profit after tax or PAT. So in spite of the OMR 2 million EBITDA shortfall that we have just seen, we still have managed to increase our full year PAT by OMR 0.8 million from OMR 16.9 million to OMR 17.7 million which is a 5% increase between 2024 and 2025. So the EBITDA shortfall was offset mainly by the year-on-year impact of impairments as well as some timing difference on major overhaul activities of plus OMR 0.5 million, and we'll go into more detail as we are going to show you EBITDA PAT bridging. The last graph on the bottom right is showing our CapEx position. In 2025, we spent OMR 26.4 million in CapEx, which represents a 5% drop compared to 2024. So in 2025, we had OMR 14.4 million for the newbuild program, which is mainly the PDO Wave III as well as OMR 9.5 million, on upgrade for five existing rigs. In comparison, in 2024, we spent OMR 27.9 million of CapEx, most of which was coming from the Kuwait newbuild rigs for OMR 17.6 million. Now if you look at the Q-on-Q, we spent in Q4 roughly OMR 3.8 million of CapEx, which is 77% less than what we spent in the prior quarter, in Q3, which included a OMR 10.8 million contractual milestone payments related to the new PDO rigs. So the next 2 slides are bridging. We are going to show a PAT, profit after tax and a cash position bridging from 1st of Jan to 31st of December. And I believe that both are very relevant information to articulate the full year story. So the profit after tax bridging detailed some of the components that we have already mentioned. So again, our PAT increased by OMR 16.9 million to OMR 17.7 million in 2025. Now the major downside was the non -- the impact of the non-active rigs for OMR 4.2 million negative. And everything else is just an upside. So it was more than offset by a number of things. So namely, we have the increase in the cementing for OMR 1.4 million. We have the additional contribution for the Kuwait rigs for OMR 0.6 million. We also had some cost optimization and major overhaul and manpower collectively for OMR 0.9 million as well as the year-on-year after-tax impact of the impairment of OMR 2 million, as I mentioned. The next slide is the cash bridging. Next slide, please. So again, the next -- we're showing the cash bridging. So we started in 2025 with a cash position of OMR 5.5 million. Then you add your profit before tax of OMR 28 million -- OMR 21 million. Then you add your non-cash items. So typically, this is your depreciation, amortization, your provision and asset impairments. Then we have a negative variance on the net working capital of OMR 4.8 million, which is mainly coming from the decrease in trade and other payables. Then we have our CapEx spending of OMR 26.5 million that we have already seen. The proceeds from loans of OMR 48.8 million includes OMR 9.8 million of long-term loans, OMR 17 million of short-term loan as well as OMR 22 million of loans swaps from floating to fixed rates through IRS hedging. Then on our repayments on our loan and leasability repayment, we have OMR 41.5 million, which includes OMR 11.5 million of repayment of long-term loans, OMR 7 million of repayment on the short-term loans, OMR 1 million of lease payments as well as the OMR 22 million of loan swap for IRS that I just mentioned. The other elements of the cash bridging includes the net interest paid, which was OMR 5.7 million, with an average cost of debt of approximately 5.5%. Then we had OMR 17.3 million of dividend paid in Q1 of 2025 in connection with 2024 periods. We also have our tax -- our cash tax payment during the year of OMR 2.2 million. We carried an effective tax rate of 15%. And finally, the category others net mainly relates to the deferred income received and the deferred expense paid mainly on rig mobilization activities. The next slide relates to our net debt position and some leverage ratio. As of 31st of December 2025, Abraj net debt was OMR 95 million, which included OMR 89 million of long-term loans, OMR 10 million of short-term loans and OMR 3 million of lease liabilities, less OMR 7 million of cash. It is worth mentioning that 95% of our long-term loan balance of OMR 89 million are held evenly across four different commercial banks. Over 2025, our leverage ratio or net debt-to-EBITDA was slightly over 2 and is expected to increase in the coming quarters as we will draw down additional debt to finance the ongoing fleet expansion with PDO. We expect our net debt to EBITDA to increase as we go through the peak of our CapEx cycle, particularly in 2026 and 2027, and that should normalize in the out years south of 2 multiple. As I mentioned before, we will uphold strong financial discipline in our growth strategy as we want to keep our balance sheet moderately leveraged to leave us some headroom for further CapEx growth or opportunistic acquisition. The bottom graph is showing the net bridging between the opening and the closing. So we started with a net debt of OMR 90 million and we ended up with a net debt position of OMR 95 million in -- as of 31st of December. The OMR 5 million increase is mainly due to the short-term debt increase of OMR 10 million. So we drew OMR 17 million in Q1 of 2025, of which we repaid OMR 7 million in Q4, therefore, leaving a net increase of OMR 10 million, as you can see on the graph. As we have seen in the previous slide, our cash position increased by roughly OMR 2 million, which is translating into a negative OMR 2 million on the net debt bridging. So this cash increase of OMR 2 million is coming from OMR 12 million of free cash flow plus OMR 7 million of net proceed repayments from loan and lease liabilities less the OMR 17 million of dividend payout that happened in Q1 of 2025. And this now concludes my session, and I will hand over the floor back to Saif for his closing remarks on our 2026 strategic road map and guidance.

Okay. Thank you, Hubert. So this is our final slide, just to give you a feeling about the focus area and what is to expect from the company in 2026 and beyond. So as we mentioned earlier, one of our biggest highlights was the securing of numerous contracts and increasing our backlog, so 2026 will be more into the translation of these contracts at hand into execution and mobilizing these units. So the full deployment of all Abraj rigs, we are expecting that, excluding one rig, as we mentioned, 306. But we are, as I mentioned, having direct negotiations with a client to also redeploy this rig. So we will be looking at a relatively higher rigs utilization compared to last year. [Foreign Language] We will be looking to deploy the first batch of the Wave III rigs, the newbuild for PDO starting towards the end of Q3 and Q4. We will continue the focus on expanding our presence in Kuwait, and as we speak, we are commissioning our third rig in Kuwait, and we are targeting to start the operation sometime in Q2. Hopefully, if the situation is stabilized. On the Well Services, we are looking to expand the Well Services. As we have disclosed last month, we secured a new growth opportunity with OQEP in cementing and coiled tubing services. We are looking at improving our utilization rate for the integrated hydraulic fracturing with various plants, including BP and others. On the international collaboration, we will continue the work to progress the collaboration that we have established with Sonatrach with the intention of creating a JV company, hopefully, throughout this year, we get to that. To give you a bit of more perspective on what to expect in 2026, the revenue somewhere between OMR 145 million to OMR 155 million. In terms of EBITDA, we are looking at the similar averages of low to mid 30 percentage points. And as Hubert mentioned, this is a heavy cycle of CapEx utilization. So we will be looking to deploy around OMR 70 million to OMR 90 million, including both new rig build and also sustaining the current CapEx. If we look at beyond 2026, the company is committed at increasing the value for the investors and we are looking at further growth for the company. The avenues for the growth of the company is either diagonally, which is regional expansion as we have started in Kuwait, we are touching area. But also, we are having active discussions in other countries to progress prequalification to expand our services, but also to diversify our portfolio, which is a second focus for the company to introduce new product lines, either through organic or inorganic growth. So with that, we will conclude our presentation, and we will open the floor for your questions, and we are happy to take any questions. [Foreign Language]

You can type your question if you want. Or you can raise your hand and we will go in order. So, I think there is one question Mr. Boris. Please, Mr. Boris, you can go ahead.

Yes, two questions from my side, please. Firstly, sorry if I missed it, but could you please share your planned net increase in the number of active drill rigs for Oman for 2026?

So basically, we are looking at starting the Wave III. And the Wave III is six rigs, which will be through Q3, Q4 and also running into Q1 and probably beyond in 2027, the introduction of six new rigs out of which three of them will be replacing our existing rigs. So the net will be three, and that will be distributed from Q3, Q4, and there is a phasing with that. In addition to that, we will be deploying four additional rigs to the same client, out of which three of them are redeployment and one of them will be a newbuild. So the net by the close of the cycle, which we will be seeing, not necessarily end of '26, it depends on the phasing and the project mobilization probably towards Q1 or Q2 in 2027, it's about three to four rigs net increase with potential higher side, if we are able to redeploy some of the rigs that will be coming out as well.

Just to follow up this. So basically compared with 21 active, right? So you are targeting like 24, 25 within the next few years, right, for Oman only?

Currently, we have 25 rigs in Oman, out of which 24 are fully contracted. And as Saif mentioned, by end of the cycle of Wave III, we are looking at adding three to four rigs additionally. So we will close at 29 rigs.

Fair enough. So you basically -- sorry, '21, I meant basically by the end of 2021. So you assume that basically you -- like some of the idle rigs you already are going to have in place this year. Is it correct?

Correct. Yes.

Okay. Okay. Okay. Got it. And then my second question, actually, based on the first one. So you have these three -- so let's start to build up from the idle rigs. So you have basically three idle rigs going online this year, plus if I heard you correctly, a few more from Wave III. So you have quite a sizable uplift of number of active rigs. Can you please explain why in this case, you don't really expect an increase in revenue in 2026 versus 2025?

We do expect an increase in revenue, and we gave the range. But then as I mentioned at the beginning, we don't want to make any forecast. We want to give you the indications of what's happening, but we do expect to growth during this year. If you want, you can type your question if you are not able to [indiscernible] I think let's start from on the first one. Okay. All right. Okay. And then the second one, do you expect recent deploy [indiscernible] answer the CapEx first and then we can talk about regional. So, you want to take the CapEx?

Yes. So for the CapEx, as I said, '26 and '27 is going to be quite heavy in CapEx, so we're going to -- we have a clear peak ahead of us. So in terms of the CapEx remaining associated with the PDO rigs, I mean, I believe that we have in the region of OMR 70 million -- OMR 60 million to OMR 70 million of CapEx. The cost is in the range of USD 30 million. Sorry, OMR 60 million to OMR 70 million, and the cost is in the range of USD 30 million, so OMR 11 million to OMR 12 million. I just -- I speak under the control of OMR 12 million to -- OMR 11 million to OMR 12 million unit price.

Yes, yes. On the second question from Mohamed, given the current geopolitical concerns, particularly the U.S. Iran tensions, do you expect the recently deployed Kuwait rigs to face any operational logistical or security impacts in the near term? So yes, we have seen operational interruption in Kuwait, but that was minor. Some of our rigs have been asked to go on hot stacking in terms of financial impact. It doesn't have a big financial impact. However, if this situation prolongs, it might have a bigger impact on us financially. So we are watching the situation. Logistical, there is no immediate impact as we do have in-country stocking of critical spare parting. But then again, if the situation goes for many months, then the impact will be on all the industries, not only Abraj. We might face some logistical issues. But for the near future, we have enough security, spare parts that support our operations, both in Oman and Kuwait. So we don't expect a major interruption in the short term, which is -- I'm talking about a few weeks and maybe up to 2 or 3 months. But beyond that, that's where probably we will get into bottlenecks. And -- but we are looking at different options, and we are looking at different suppliers, different routes where we can get that. Our teams are working around the clock to ensure that the operational continuity is supported. In terms of security impact, I mean, so far, nothing major, [Foreign Language] touchwood, that we have experienced. But again, just like all of us, we are monitoring the situation. And hopefully, things deescalate and doesn't cause any security concern. But again, it is a valid concern that we are basically sharing. We have mobilized our internal crisis management and business continuity process that around the clock, we are monitoring the situation. The most important thing for us is the safety of our people and our stakeholders and then comes after that, the assets. And then after that, the operational continuity and the security of our people and our assets. Okay. What is the new dividend policy? Do you want to take that?

Yes, sure. So we have declared a dividend payout that was close to 75% of the profit after tax, which is a very reasonable amount. Now, in absolute value, the dividend has reduced, but reducing the dividend today is not a reduction in the value we deliver. It's more like a shift in the timing that will allow us to deliver greater value tomorrow. I mean, we are choosing long-term growth over short-term payout just because we have this huge CapEx cycle which is coming in front of us. And at the end of the day, our goal remains the same. We really want to maximize the shareholder value. And to achieve that, we just need to allocate capital where it generates the highest and most sustainable return. So in terms of policy, we're in discussion with the Board. We have -- we are in advanced discussion with the Board. We have come up with a couple of schemes that the Board is considering. And as soon as the Board has made the decision, then we will come out and publish what the dividend policy would be, which hopefully will set us for the next couple of years.

Okay. So we'll take the first -- the next question with ADNOC Drilling expanding into Oman's Drilling Services. Should we expect any pressure on day rates considering the competition? So first, the addition of ADNOC Drilling or any other company in the country is normal business. It happens all the time. We have seen many previous acquisitions that has occurred in the industry. So as the addition of a new company, it's normal. Of course, it's going to add pressure to the daily rates, and that's continuous, whether it's ADNOC Drilling or another company. We are faced with a continuous pressure on costing, and that's why we rely on our efficiency, our operational excellence, our investment in our people to be more innovative in providing the services to the -- to our clients. And the clients, they have realized it's not only about the daily rate, it's about the total product that they get or the full integrated services that they receive. And we have that excellent client relationships. We have delivered. And today, we serve more than seven or eight clients, including IOCs -- NOCs and IOCs. And we have worked with different clients. We have seen different competition. So with the addition, there is a bit of an extra pressure, but that's normal. And we need to just continue the focus of the company on operational excellence, on innovation, on people capability, to ensure that the company does not stay stagnant in one position and that we push the boundaries and we continue pushing the boundaries. So to me, it's a healthy challenge and healthy competition, and we welcome them. Okay. So from the chat, we addressed all the questions. But then if there is anything else, you want us to elaborate more on or if you have any further questions, please go ahead. [Foreign Language]

I mean, I think, if there is no further question, it doesn't mean that you might not have one tomorrow or in the next couple of hours. So please feel free to reach out. I mean myself and Sadiq, our Investor Relations Officer, will be more than happy to entertain any further clarification that you may have after this call. We want to make sure that we are very open, forthcoming, and we welcome any questions and happy to take questions either now or later.

Thank you very much. Do you hear me?

Yes.

Yes.

I'm trying to make a question. Can you hear me?

Yes, please go ahead. We can hear you. Go ahead.

Thank you. I am Salem Al-Maskari. Thank you very much for a very clear presentation of the fact that project is really striving very hard to hedge its way into the business of drilling. My question is on really the dividends. You have reduced the dividends quite significantly. You have distributed first year 21%, the second year 22%. And we took it as this is the benchmark. We are looking for a dividend over 20%. Taken over 7% in 1 year is a bit problematic for quite a number of your shareholders. Is there a way of reexamining this policy?

Are you done? Or do you want me to answer or you have a further question?

No, this is -- my question really is centered on the dividends, especially for the small holders, minority holders, they do consider dividends. Long-term planning, of course, is very good. No one is going to argue against long term. But how long this long term?

Okay. Very good. So two things that I would like to say. First, I mean, you've seen the backlog, the level of the backlog that we have and that level is supported by new contracts. And those new contracts relates to new assets, right? So again, as I said, I think that reducing the dividend today is not a reduction in the value that we deliver. It's just that we also protect long-term value by adding and growing and delivering future earnings. So the way I see it, it's just a timing in the way we deliver it. Short-term dividend payout, this is creating long-term value with growing the fleet, expanding the fleet and having an expansion on the revenue, which will mostly come in '27 and '28 because as we have seen the contribution in '26, it's only going to start by the end of 2026. Q3, Q4, we're going to start delivering a couple of rigs on the PDO. So the full contribution effect on the revenue increase and enhancement will not be in 2026, it will be slightly later due to the timing of the deployment of those new assets. So that's one thing. The one thing is that at the end of the day, we have to balance out short-term payments. This is creating long-term values and future earnings. That's one thing. The second thing, maybe that I would like to point out is that you have to look at the total shareholder returns, right? So when we talk about the dividends, it's not the only component of the shareholder return. You also need to look at the share appreciation. And as you have seen, our share has appreciated quite significantly over the last year. And the amount of dividend that we pay, if you look at -- if you put that in perspective of a total shareholder return, including the share appreciation, whether we pay a little bit more or a little bit less, it actually has a very, very limited effect on the total shareholder returns. So I think these are two things that are important to note. I don't know, Saif, you want to add?

No. No. I think I hear you, Mr. Salem, that, we took all this into consideration, and we have consulted. We looked at the company position, as Hubert mentioned. This is about balancing the short-term reward versus the long-term sustainability and growth of the company. As we speak today, we are building seven rigs. As we speak, we just delivered the Kuwait the third Kuwait rig recently in Q1, it's in the commissioning phase. In terms of the project delivery, we are at the peak. So we are at the peak of the CapEx requirement, which will probably occupy us for the next 1 to up to 3 years. But then we will be seeing that in the growth of the top line and the bottom line of the company, very soon. [Foreign Language] And this dividend stands. It is, as Hubert mentioned, it is to cater for the current circumstances of the company, but then overall, as mentioned, we look at the total shareholder basically value and the share appreciation. And we will maintain the dynamics, the Omani market, we are aware that it has been motivated by high dividend payout. We are seeing a bit of a shift or a change in the market in the last few weeks or that may be the last 1 to 2 months. But the last few weeks, you've seen what's happening in the market and it's impacting all the companies. So that story about the dividend, it is going to change with time as the market matures, as more liquidity has been pumped into the market. But then at least from our side, we can't give you the commitment as management. We are aware about the expectation of all the shareholders, the minority shareholders, the majority shareholders and we are having this active engagement to ensure we maintain a balance between the quick returns in terms of dividends, but also not jeopardizing the company future growth. Abraj, as a company, it has a huge potential for growth. It is a growth company, both in Oman with diversification and also regionally. So we also need to safe guard that. So it is a balance of that, and it is a phasing thing. And then we will continuously keep monitoring this and take your feedback and ensure that -- we make sure that we make informed and responsible decisions and we maintain also the shareholder value and protect the company. So that is the rationale behind the dividend, and we will also continue with this review revision, and we'll keep updating you if there is any change.

I think our goal remains the same. I mean, we want to maximize value to -- and return value to shareholders. So the goal hasn't changed. It's just a question of allocating the capital where we believe it makes the more sense in terms of growing future earnings. And in that particular case, some of it has to be -- has to balance that against the CapEx plan and the expansion plan. That's it.

I hope I'm audible. I just had a question regarding the total count of rigs. So if my understanding is correct, you -- Abraj currently has 23 active rigs and 4 inactive that takes us to a total of 27 rigs. Now with the additional new contracts with PDO that were announced, you guys will be deploying those rigs to those contracts. So if I'm right, you will require additional 10 rigs for PDO itself, right? And four will be the currently inactive rigs that will be deployed, and out of the six remaining, three will be redeployed that are already there and three will be new rigs constructed. So by next year, by 2026, the total number of rigs that Abraj has will be increased from 27 to 30. Is that count correct? Or am I missing something here?

No, that sounds correct.

One thing maybe -- sorry, one thing maybe that I wanted. So we've talked about, on average, four rigs idle through 2025 throughout the years, right? So out of those four rigs today, three of them have already found a new contract as of today. And one of them, we are in advanced discussions. And then we have the six rigs coming, of which three are brand new and three are replacement of existing units. Yes, so you are correct from 27 to 30, yes. And we expect -- and we also expect the utilization rate to increase as for the reason explained there.

Great. That helps. And out of these 30 rigs, three will be in Kuwait and the rest are in Oman. Is that correct?

Yes.

Perfect. Now my next question is the -- in 2026 and 2027, you guys have obviously mentioned a huge backlog, which is great for the company and the shareholders. My question is, are there any contracts expiring in the next couple of years against which you guys don't have any contracts? So basically, are there any -- is there any risk of rigs going idle in the next couple of years due to their contracts expiring?

Yes. I mean, I think a big -- another big highlight, which we have disclosed, I think, 2 weeks back earlier in March, maybe towards end of February, that we have four rigs that go -- they expire towards end of 2027. And the team here managed to secure a 6 years contract for them, and we signed the contract earlier this month. So in terms of rigs stability, we are well in a good and stable position. We have secured long-term contracts, 5 years and 6 years contracts for the majority of our contract -- of our rigs. So we are in a much better position.

If I can add a comment. So we said remaining tenure of 4.75 years, which means that most of the rigs are locked until 2030. So as far as I can remember, we don't have a huge cliff whereby all of a sudden, half of the fleet is going to be off contract in the next 12 months. Now most of them are secured -- most of them are secured on the long term. Yes, I don't think there is any -- there is nothing.

There is nothing. Until 2030, majority of our rigs are secured.

Yes. No, I think overall, if I recollect, we have built resilience. We have built a strong foundation where we are today. We have cleaned a lot of our -- I mean, the rigs business, it's cyclic, you know that. I mean they expire, you go and you get new contracts, you try to renew. But we are in a position where we have some stable backlog and it puts us more -- to focus more on more value-added growth opportunities rather than trying to maintain the same scope. So that is where we are today. And the focus will also be on really deploying these rigs, the project management, the chain management, managing the growth, Abraj in the management as well. So it's really we are set up for a growth from this point moving forward. We will start seeing that on the top and the bottom line [Foreign Language] in 2026, but the bigger impact will be coming in '27 and beyond.

[Foreign Language] That helps a lot. And my final question is just to understand the operations for myself. Now when we hear the mention of day rates, right, I'm assuming that Abraj when they contract a rig, it's for a long term, it's for 3 to 4 years, maybe 5 years. The rates, the day rates don't change, that they are not variable of the sort. They are fixed, am I correct? And only when you secure a new contract, only then the day rates actually come into play?

Yes. No. I mean, the rates they are varying. We cannot say they are fixed. We cannot say that they are changing all the time. It really depends on each contract. It depends on the clients. It depends on the situation. What we focus on is to maintain the margins, yes. And of course, the clients, they want -- because if you look at our clients, they also -- we need to put ourselves in their position. And I myself come from the client background. I used to work with the client 4 years back. And there is a continuous pressure globally from governments, from the supply chain, cost pressure. They want us to be more innovative. So of course, there will always be continuous pressure on the day rates. What we need to be as a responsible business, we need to be agile. We need to be innovative to ensure that we cater for the clients' demands and the pressures, but not to compromise our margins. This is where innovation, technology, mechanization, automation kicks in, operational excellence to ensure that we deliver the value to the clients, what they require, but also ensure that our margins are protected and where possible, we also grow them with efficiency.

Great. And my last question is actually a follow-up on that. So if I may summarize this whole thing or maybe ask how sensitive is Abraj to changes in the day rates, for example, due to the ongoing conflict, we know that the oil prices have gone up significantly. I'm assuming that it would have some impact on the day rates as well, right? So how is Abraj affected if the day rates suddenly go up by, say, 25% or if certainly, they go down by 25%, how sensitive are you guys and how does that impact you?

I think, again, each contract varies, and I think we built enough resilience in the company that a single contract does not have a big impact on the overall company performance, and we have ways to offset it wherever it happens. The fluctuations in the oil prices does not mean automatic changes or fluctuations in the daily rate. They are not directly linked in the majority of the contracts. We have some contracts where above certain thresholds that it can impact it. But so far, we don't see a big impact on the daily rates. So overall, it is, I would say, it's a resilient business, yes. The same thing can be reflected on the utilization as well. Sometimes -- the Middle East in general, Oman in particular, it's quite a stable market, despite the fluctuations in the oil prices. And even if we hit some of the crisis, with the COVID that we've seen it. The level of the operations are semi maintained. And that is also reflected, and we've seen it in the daily rates. But again, if that comes to us, we have a good discussion. Sometimes even if we want to support a client with a daily rate, we have to also review continuously our cost structure and see how we can optimize it, responding to the request if it comes to ensure we maintain the margins. We don't see something major as of now. And we have the resilience in the company to manage any small fluctuations if they occur.

I can see, I think there's a question on the PDO Wave III. So just to be clear. So PDO Wave III is six newbuilds and then there is one other newbuild. So we're talking about seven newbuilds in total. And what we said is that out of the six newbuild from the PDO Wave III, three of them are going to replace existing units and three of them will be pure addition to the rigs. Just to make sure this is clarifying.

So in terms of newbuilds, it's not four newbuilds, it's actually six newbuilds for Wave III plus an additional one. So seven going to PDO. So seven newbuilds and three of them will be replacing our existing assets. So the net will be four. Yes. With the current scenario, you expect substantial changes in cost? I think we answered this. But again, I mean, we are talking as of what is happening today. Assuming if things don't escalate further or they don't prolongate, nobody knows what's going to happen tomorrow. We pray that things stabilize, as we pray for the safety of everyone, not only in our industry, but in our region and in the world. And we don't have to answer what if things keep on escalating. I think we can all anticipate different scenarios. But just to give you the assurance from our side, as management, we have mobilized the crisis management protocols and the business continuity as well protocols. We are in active engagement with the different authorities, the clients, our key stakeholders, again, to reemphasize to ensure the safety of our people, our assets and then after that, the continuity of our supply chain and our operations. I mean, these rigs are marketable. So we are also, again, actively discussing with various clients to redeploy these assets. So we don't expect them to be salvaged. We do expect to redeploy them. It might take some time. But we already started that process. And we have some good interest from various clients. Again, I mean, we cannot disclose until we have secured agreements and then we can come to you. But what I can tell you, it is in our focus to ensure that we redeploy these assets as well. We just give one last chance. If anybody wants to ask any final question before we close? Want to type? [Foreign Language] Okay. Then, I think, it's been a very interactive session. We really enjoyed interacting with you. I hope we gave you a clear presentation and we answered your questions to the best. We thank you for your time, for your interest to join us in this session. And as Hubert mentioned, this is not it. We will be engaging with you frequently on investor engagements or road shows, but please do reach out to our Investor Relations Officer, Mr. Sadiq, any time, if you have any question or you want any clarification, and we are more than happy to provide that any time. With that, we conclude our session. Thank you. And I wish you blessed Ramadan for what has been left from it. And in advance Eid Mubarak to all. [Foreign Language]