National Energy Services Reunited Corp. (NESR) Earnings Call Transcript & Summary

Good morning. Thank you for joining us today for a fireside chat with Sherif Foda, Chairman and Chief Executive Officer of National Energy Services Reunited. I am Jeff Robertson, Managing Director for Natural Resources at Water Tower Research. Before we begin our discussion, I'd like to remind participants that we -- our discussion today could include forward-looking statements as of today, April 10, 2025. NESR's disclosures regarding such statements can be found under the Investor Relations tab of its corporate home page. NESR is the largest publicly listed pure-play diversified oilfield services company that's solely focused on serving national oil company and international oil company customers in most of the major MENA region markets. Saudi Arabia contributes more than about -- more than 50% of NESR's revenue. And together with Oman, Kuwait and UAE, the 4 countries contribute about 75% to 80% of total revenue. Sherif, I'd like to take the opportunity to thank you for joining us today.

Thank you, sir.

Let's -- to start out, I'm curious how NESR, headquartered in Houston has been able to build relationships with the largest NOCs and IOCs in the world to access some of the largest and most stable oil field services markets in the MENA region.

So if you look back on the idea or the ideology was always to form a very strong local Middle East home grown, if you like, company that serves the entire MENA region and at the same time, connect the capital market of the U.S. to it. So a lot of the time, especially from my background in a multinational company, a lot of the investors wanted to link or wanted to invest into this Middle East region but there is nothing to buy because there's nothing publicly listed. So -- and that's what we created. And that's -- and we said we are going to be national in every country. So we're Saudi in Saudi, UAE in UAE, et cetera. We have our office there, we have our local people. And at the same time, we have a representative office in Houston, where basically the client and some of the investors and some of the technology can have a easy reach to us, doesn't have to fly to Saudi, doesn't have to go to UAE. We have a representative office. And that's why if you look at it -- at our, when you call it headquarter, it's not really a headquarter. I mean you have -- we have 7,000 people and we have 6 people in Houston. So it is -- we have a very nice office in the Post Oak and people can come and join. But we do a lot of the deals. We'll do a lot of the M&A and we have a lot of the technology research, which we -- I'm sure you're going to ask me about it, that we do it in Houston.

So you're really a local MENA-centric oilfield services company who just happens to be headquartered in Houston. Is that -- that's, I guess the way to think about it?

Representative office in Houston. That's what I keep saying it, yes.

Okay. Let's talk a little bit about the volatility in the market that we've seen in the last couple of weeks. Oil markets have turned lower in response to OPEC+'s decision on April 3 last week to return about 411,000 barrels of oil to the market beginning in May of 2025. And some of the economic uncertainty around the administration's on again, off again tariff strategy. Can you talk about how the markets that NESR operates in react to price volatility?

So this is actually 1 part of the fundamental why we formed the company that this is a market that is very stable, that is very long term, that is characterized with a very long-term contracts, which means in the cyclic business like the oil and gas, which happened 4 times in my lifetime, we don't get affected as much as the U.S. We get affected but not as much. In some cases, we don't get affected at all actually because it's activity linked. So if you look today on the current environment, that cycle, which is characterized by drop of oil, drop of demand, however, activity is the same. Why? Because all these OPEC countries wants to maintain a certain capacity and they want to increase their capacity. So you have excess capacity where people can what we call open and close the tap, which is Saudi Arabia really is the leader on that. They have 3 million barrels today they can play on, which means they can open and close and the rest of the guys want to have the same. And that's why you have growth in Kuwait. What -- so why they do that? Because they want to have that capacity to be able to play, I can close and open the tap, which means for us, it's good because my activity is not affected. So today, my activity is not affected at all, actually, right? So I'm serving the same region. The only thing if you saw, we grew, for example, what we always say we're going to double the growth of the region because we are small, we can grow faster. So if the region was growing at 10%, we grew 20%. At 5%, 6%, we grew 12%,15%. And the same thing is going to happen in '25 over '24, where the region is going to grow maybe 3% to 5%, we're definitely going to grow in the 10% region. And that's why we have that -- sorry, go ahead.

And you're referring to CapEx growth in the region and revenue growth for NESR?

Correct. Absolutely. And that's why you see the whole price war or you call it tariffs, whatever but in the U.S. and that's why the audience, when they are from the U.S., they don't understand because that's unconventional. Unconvention is, you have to keep drilling, keep producing and a CapEx burning money. And it is not the same in conventional in the Middle East. You have a well that produce 10,000 barrels per day, it keeps producing. So your activity, yes, will get affected a bit as a service company but the intensity is different. In the U.S., you have to shut down because you lose money, you lose cash. Below $50 in the Permian, you -- I mean, the rig count in the U.S. is going to drop to half if the oil price goes to $50, right? So -- but it's not the same in the Middle East.

Right. One thing I wanted to ask you about since just given your history operating there, OPEC said in their announcement that they will continue to monitor market conditions. From your perspective, do you have any color on how they might react to Brent around a $60 level with the return they talked about?

In my personal view, they are going -- they are not going to keep pumping if the oil keeps dropping. So in a sense, basically -- and that's why they put the disclaimer, if you like, right? So obviously, there is a geopolitical kind of messaging between the U.S. and GCC that is obvious to show support to the U.S. administration. And that's why you have the oil and the flow of production. If start to go below $60, then go to $50, they cannot afford it. So they will not just pump oil because they are -- they want to look good. They will have to shut down. And that's why I think they put a very clear -- depending on the market condition, they are going to stop that flow, minimize it, restrict to what it used to be to ensure that the price doesn't just collapse. I mean [indiscernible] oil, these countries, all the country will have a serious problem. Obviously, the U.S. will have to shut down, right? Because at $40, nobody makes money in the U.S., right [indiscernible]. But in the Middle East as well, we'll have a problem because their budget is based on a much higher number with a commitment of social spend between all the countries. They cannot afford it.

It sounds like from their remarks, they're committed to market stability.

Correct.

Let's just close out on tariffs. Since NESR operates in the Middle East, do you all have any exposure to tariffs that -- from -- that have been put on by the U.S.?

0. I mean I have no impact whatsoever. The difference would be -- obviously, you have the U.S. and the GCC or the Gulf -- Saudi, UAE, et cetera, almost have no custom, no tariff, nothing. I mean, now, obviously, they have this minimum 10%. But from my perspective, it's so small. It's negligible. If you think about it, if you buy equipment, 8% of your numbers and that become 10%. So it's like nothing, 1%, right, cost, right? So it's not really -- it's not an issue. I think the -- and the stuff that will come outside the U.S. to GCC, nothing has changed from Europe, nothing has changed. So -- and we obviously procure a lot locally. So -- and that's the whole idea. So no, there's no effect at all, almost on our business as NESR.

With -- just on restoring production, if they move ahead and bring production back into the market, does that translate into capital spending that means business for NESR or does that translate into, as you said earlier, opening the tap? Or is it some combination of the 2?

I mean if you think about it, if they increase production and they want to increase capacity even more and they go to, again, the same, if you like the -- flooding the market, right, which was a strategy that did not work before. Let's say that for the sake of argument, this happened. Meaning what, meaning I'm going to have more work, right? So my activity will increase. But I still don't like it. Why? Because the client will not make any money or their money, their margin will be small. Even if I have more activity, they will have to come and squeeze me. So the way it works, they don't squeeze me the same way they squeeze the U.S. because U.S. becomes like very bad in a downturn because people work actually for loss. But in the Middle East they -- what they will ask you, I have a contract with you for 5 to 7 years. I want a discount because of that price. I have to honor the contract but I need to give a discount because now there is a flood of the market of equipment and they know that they have to squeeze. So you're going to get a squeeze on price. So your margin will -- but activity, you will not have a problem. On the contrary, we'll have actually more activity.

So am I right in taking away that lower oil price and ultimately, you'd rather have your customers be Saudi people -- companies like Saudi Aramco and Kuwait Oil Company, than U.S. unconventional producers?

No-brainer And every downturn, that's exactly what happened. I mean, if I look at the, again, the big oilfield diversified company, we -- in the serious downturn and people actually were shocked about that, in the -- one of the worst downturn, some of this multinational company made money only from 7 countries in the whole world. The 6 GCC plus Russia. Everything else lose money. Deepwater lose money, Europe lose money, U.S. lose a ton of money. So yes, absolutely. So our focus area is the best.

You compete with the likes of Schlumberger and Halliburton. As a smaller company, how do you -- how does NESR carve out a niche and compete with larger global diversified oilfield services companies?

So look, I mean, our philosophy or DNA from the start was, we have to operate in a top quartile, which is what I call the top 3 in service quality, service delivery, HSE, health and safety, operation efficiency, et cetera, right? And I have to be that far that good, right? So now the clients think about it as a client, right? Today, you are Mr. Big NOC. And you have all these, if you like, foreigner or multinational company that you are very happy to work with, by the way, for a lot of years but you want to diversify your supply chain, right? So you have this national champion or a local company that performs exactly the same level or even better in those services. Their people are local, their quality is impeccable, et cetera, so you start to say, okay, let's give them 5%, 10% of the work. 20% of the work, they still perform even better. And they are cost effective. They are not much but there are maybe a couple of percentage points cheaper and they are more effective and they're local. No-brainer I give them as much work as I can. So being small, like us is easier. So if I have overall market share today of 5% to 10%, I can still keep growing at this double digit because I'm small. If I become 50% market share, I will not outgrow that. I will have to grow with the market and drop with the market. So today, because I've performed so well in quality and I am national and I perform even better with a bit of a cheaper price or similar price, the client is very happy to keep giving me work. And the proof of that is just not talk. Today, we are the largest service company in 4 segments, are not for nothing, right? Today, I am the #1, I think, in coil, in top -- in slickline, top in -- top 3 in cementing. So that's where we want to be, top 3 in market share in our area. And then the other part that is what I call lucky that we can be choosy, meaning in a segment of the market where the pricing is very bad, I can afford not to participate because I know I won't make a difference in quality and the price is already very bad. So I cannot even compete with the price. So actually, I don't even penetrate that market. Again, being small, you can.

So you're a local company who competes in the higher-margin parts of the market and that helps drive your revenues faster than overall -- and your margins for that matter faster than the overall industry in those local markets. Is that -- am I summarizing it correctly?

Yes, absolutely.

In 2024, your revenue grew about 14% and your gross profit margin expanded by a little over 300 basis points. Adjusted EBITDA grew 18% in 2024 and the adjusted EBITDA margin expanded by over 90 basis points. Can you maybe expand or build on that of how you all have been able to turn out very solid growth and margin expansion in a market where, as you said earlier, customers are trying to claw back some margin?

So if I look to be quite frank and a lot of these people just don't know, right, because they don't have visibility on that market. This is the margin of the Middle East, right? So we are not like doing so much better than others. No, this is the margin. So if people look at the big guys, that's their margins, right? So it's an acceptable margin. And by the way, this went down significantly from the past history because, again, people talk about the U.S., right? They are not used to it but we used to do a normal 40%, 50% margins, right? Because, again, if you look at that from a holistic view, the total cost of operation of OFS versus the price of oil is very low. So if you are today a customer, right? And you're -- let's say, you produce at a total cost of $6, $7 per barrel, the OFS service cost is maybe $2, right? If the oil price is $100, why do you care the $2 to be $1.5? I mean what you care is that this $2, part of their cost, has a good technology, has good delivery, trained people, takes part of the whole geopolitical and the whole environment and ecosystem. More important than the $2 become $1.5 because it's irrelevant for your total costs, right? Now obviously, that margin decline from the client or the cost of operation becomes bigger, you still want the price to be better but you don't squeeze as much because the other social impact of your -- the service industry is more important, right? So I think we are part of that ecosystem. Again, I'm not better than the others. We are like kind of that. It's the same margin. We are better of being -- growing and that's why I want to grow faster, which I can and we can maintain those margins fixed because that's how we can operate at a much larger scale. So today, as I said, when we formed the company and we combined, we said we're going to double the company every 2 to 3 years, which we managed to do that, I mean, more or less. And what we need to do is we think we can go and reach the $2 billion mark which is very important for us. And I think we can reach that at even in a market with tariffs, lower demand and all the stuff, we can still reach that, which is if you are big, it's almost impossible to do.

You talked in the -- earlier about having an office in Houston that helps provide access to Middle Eastern markets for people who may not otherwise have it. NESR has grown through strategic acquisitions and co-investments with technology innovators, which have brought capabilities to the markets that you serve. Can you talk a little bit about how investors should think about your -- the open technology platform that NESR talks about and how that translates into bringing technologies and growing the addressable market?

Yes. So one very important aspect of the innovation of our industry was the access to research, access to university, access to client to be able to test the technology and obviously being strong financially that you can spend on this R&D, right? So if people try to think about what is that cycle, you're talking about 8 to 10 years, some of the technology innovation, right? I mean, by the way, the oil and gas industry has some very cool stuff, right? I mean it's NASA that took some of our innovation. I mean, there is a lot of technology because you are downhole at 20,000 feet in the ground with temperature of 400 degree and all the electronics has to work. If you have your iPhone and it goes a bit in the pool or something, it doesn't work or you cannot go to the steam room with it, right? So today can NESR do all this? Absolutely not, right? No way, right? So we adopted a very different approach to all the service industry. We said we're going to be an open platform. I have the best infrastructure today in the Middle East. I'm exactly the same like the best 2 service company from the structure, research center, offices, yard, custom clearance. I know everything about the Middle East. So now there is a lot of innovator here which is basically between the U.S. and, I would say, Canada and Europe that have a lot of like cool stuff, right, like very innovative technology, very, very -- but small, small like a venture capital, small guys with a lot of very good ideas, right? Then what they need? They need access. They need some funding and they need, obviously, knowledge to understand how does this work. I provide them all this. They have the cool technology. So we team together and I tell them, guys, you can keep your IP because I know that's what's the most -- you're going to be so scared that I steal, no. We are open. We don't hide you. We are not an agent. No. We actually come and take your hand and I take the CEOs and I give them access to some of the most prominent people in the Middle East. And we tell -- but after I do my due diligence and I believe that their technology is good, right? So I'm not -- sorry to say, a taxi driver on a Uber, right? No, I go technically. I have a very good, solid technical people with hundreds of years of technology knowledge. We test, we check, we make sure. Once we test this company and we say this is very good, either I invest in them, which I have today 8 investments in, like a venture capital. So I -- and I become -- I have a Board seat, I take ownership, I change some of -- even their path to technology and become part of the company but they stay independent and obviously, they have the access or the company is very well established, right, very well established. They don't need me. They don't need me in funding. They don't need me in technology but they need me in access, I do as well a partnership. So you see we have the both model and today, we have almost 20 of those. The client from the other side, if I -- it -- loves it because the client, let's say, you are an ADNOC or KOC, they know this company, they heard about it, they would love to see this company come. If they go to the big guys, they would never allow them. They come to me and I allow them and they love it because now I give them that open source without saying, if you don't take it from me, I will not have it. No, I will bring. I will help them. I will set them up if you guys want them. So it worked very well so far. We have, as I said, like 20 of those between investment and partnership. And I think that serves both of us and serves the client.

As a part of that strategy, you built and operate a research and development center in Saudi Arabia and recently you signed an MOU with Kuwait Oil Company to set up a research facility in the Al-Ahmadi Innovation Valley. How critical are having research facilities in Saudi Arabia and building one now in Kuwait to that strategy of providing a bridge or developing technology locally that your customers need?

Absolutely crucial. Why? Because if you want to elevate yourself from being a local outfit to a national company with a vision to be as good and as strong as the big guys that has everything, you have commitment, you develop people, you train them, you have research, you go with the academia, you are long term, you have the financial muscle to spend money, they look at you totally different. Right? So -- and that's why I go back to the same vision since the start of the company, why local company did not succeed in the Middle East for the last 75 years? Because of lack of that kind of vision of long term and establishment the anchor of your research, knowledge, people, if you like, pedigree, or you see what I mean. So if I have PhD guys that are working in Saudi Arabia on a project that is for 5 years, the client knows that I'm here to stay. And the client knows I am doing that because I'm investing for the future. And I believe in Saudi Arabia and I believe in this and that's why I'm hiring local people in research because that's basically money, I don't make any money out of it. It's a cost. It's like a levy, right? So that sort of commitment gets you to the table to a different degree than the rest. And even I always like it when I'm in Saudi or Kuwait and the client says, the big 4, the big 5, I'm from that crowd, right? So the AIV we did in Kuwait, which is Ahmadi Innovation Valley, which is orchestrated by the very -- my dear friend, the CEO of KOC, who is very visionary. We were selected, companies that will make a difference. And selected meaning, I'm going to, again, bring some technology, bring some people and we'll be able to even invest and build that facility, so I can house those people to come and develop something that is what I call fit for purpose for the reservoir of Kuwait. That will translate in the longer term in a lot of activity and a lot of stuff. So If you are a very short term, if I talk to this, for example, to a banker and I tell them this is the return and he'll say are you crazy? Why are you spending all this money? When are you going to get your return? And I said, no, no, this is very long. And if you look at it at what is the percentage, this is like my R&D budget that I do but I do it nationally.

You're essentially you're fostering a local entrepreneurial culture to develop new technologies, specifically geared toward the reservoir issues that your customers are dealing with country by country.

Yes. Obviously, you have to have the scale and you have to have that kind of agreement with the leadership of the country. You cannot do this in every one because you will never be able to succeed, right.

Natural gas has gotten -- is getting more attention in some of the MENA countries as they look for ways to displace oil from their power generation system. How is NESR positioned to benefit from that trend and especially in Saudi Arabia, where Aramco aims to significantly expand production capacity at their Jafurah unconventional gas field?

So if you look at the Middle East and the vision of their leadership, they want to move to, what they call, 50% renewable, 50% gas for their internal consumption. So the drive in the Middle East for gas is different than the rest of the world in the sense that they're doing this for internal consumption. That's why it's regardless if the gas price goes, Henry Hub a $1, they're still going to continue with the project, 0 effect. And that's -- the best proof is Saudi Arabia with Jafurah. So even if they drop the oil rigs, they dropped all the stuff, they did not touch the unconvention. So it's a vision to maintain, that you do not burn crude for power and become environmental friendly with climate, so even with COP27, COP28, which is, again, long term of the Middle East, not just because now people don't like ESG as much. I'll drop it, I'll go burn coal, no. I have that commitment to -- for the climate and for the internal consumption to be gas and renewable because I always said gas is transition fuel, it's a fuel to stay. And that's where we become part of that equation because obviously, we service the customer for that gas. So our exposure to offshore, onshore gas, oil, it's the same with the client spectrum. We work on all. And obviously, we are actually more leveraged to gas, especially in Saudi. So we will benefit more because we will be not affected by the drop, if they drop more rigs for oil.

Does some of the requirements or services that you supply for, or that you -- that customers need for gas, does it differ much from what they need for conventional oil? And is there any margin impact?

No. Not at all. The only thing you have -- if you look at this from a surface or if you are a generic, you're not -- you don't know what is oil and gas business, if you are in the service business, it doesn't make any difference. The only thing on the unconventional versus the conventional that you need a lot of frac for the unconventional. So the tight formation of oil or gas, obviously, nobody is doing unconventional oil in the Middle East because there's a lot of conventional oil. But the gas because they need it again for internal consumption, you -- yes, the profile is very similar to the Permian, which is multipad wells, a lot -- very fast drilling, manufacturing [indiscernible] which is [indiscernible]. So you have a lot of frac, margins are lower, but activity is higher.

Along those lines, we talked about bringing technologies to the region. You all, or NESR introduced the Roya drilling platform, I think, in 2024 and won some contracts for directional drilling. Are there -- is that one of the instances that was developed through your technology platform? And are there other technologies that you see being used maybe in the U.S. or Canada that you think could be next to be introduced into Saudi Arabia or Kuwait or one of the other countries you work in?

Yes. This is unique, Roya, in the sense of -- that's the only technology that we developed basically, right? So as I said, we do a lot of -- people develop the technology already. We team up with, we give them some money, et cetera. In that instance, it's a little a different. Obviously, it was people that came to us with ideas, which we liked. And we said, okay, let's put money with one of our very close private equity. And we said we are going to sponsor basically this and we are going to build and change direction, that we enter from the R&D side from the beginning and change -- and we brand the tool, test them, et cetera, right? So that's very important. Why is that? Because we look outside, we didn't find anything. There is nothing in the market today that can compete with the big, I would say, big 3 on a same level. And if you take back from what I said from the beginning, I don't want to be a second generation or poor performer or low technology. And that's why we said let's invent the stuff with our partners, the company that we put a lot of money on and spend the money and that's why we think it's going to be a big differentiator. The beauty now is we won the contracts for it. So it's a matter of deployment. So today, what I'm doing, what we are doing, what we call a deliberate, extensive testing and deployment, which means I deploy when I know it passed Stage A, Stage B, Stage C, Stage D. I don't -- I make it a very scientific deployment to ensure the success of the tool. And then I call it, what I call a commercial success. So today, we know it's a technology success. We know we are deploying already. We drilled 70,000 feet in the U.S. So now we need to make sure we are in Saudi, in Kuwait, in Oman. And we are going to deploy in those 3 countries over the next 18 months to make sure that good to go. It's beautiful. We can gain a lot of share and then we go expand outside those.

Can you describe the adoption process as you test that system in each country? Let's just -- let's say, Saudi Aramco says, we like this, it works. Does that -- does Kuwait run its own adoption system testing and Oman?

Each one does its own field testing, each one does its own TTR, what they call trial test. And if you are not present there it's almost impossible to do it, right? So -- and that's the barrier of entry in some of those technologies and being established there, obviously makes a difference. And anyway, I have to say, I have to be honest, I like it because if it's easy, everybody will do it, right? So it's in a way, it's a long process. Now the development of the technology is very complicated of that, what we've built, which is the rotary steerable and LWD because a lot of electronics, a lot of moving parts and it's -- it takes time, right? So it's not something that you can repeat, right? In a big company, this is again, 8 to 10 years. So we spent now 5 years on it. So -- and we have tools and we deploy it. I think we can have a very nice story to tell towards the end of the year.

I think -- so the market share for that system comes from bigger companies?

Yes, only big companies, not -- I'll call it big 3 only, to be honest. The rest is irrelevant.

And I think you said at least in your slide deck that, that could be a -- or the $2.5 billion per year type of market. That's your total steerable in Saudi Arabia?

No, no. That's the total market in MENA for that market. So that's why I keep saying 10% of that is $250 million, yes.

Okay. And how long does it take to commercialize a product like that? And how long do you think it will take to run through the rest of your commercialization work with Saudi Aramco? Is that -- I think you said maybe end of the year?

Yes. I already have been working on this for -- yes. It's -- I mean, I can call it commercial today but I don't because I call it -- until I am satisfied with the extensive testing, then I call it still what I call E&P 2, right? I mean, I would call it 100% commercial. It's on the -- in Amazon, you can buy. Then I say it's good to go.

Then lastly on that, can you share any color on what you think the revenue pathway would look like over the next several years as that product is adopted more widely?

Yes, our target is to make $150 million to $200 million next year.

Okay. One of the other -- you mentioned shifting away from oil and power for -- partly for environmental issues. In 2024, NESR consolidated its ESG impact segment into NESR Environmental & Decarbonization Applications, which you call NEDA. Can you talk about how NEDA can help -- these help your customers and countries further their ambitions of continuing to be the lowest carbon intensity oil supplier to global markets?

Yes. So I'm very passionate about that. We started this before ESG was like a thing because it's -- because we believe it, right? We believe that if you are part of that ecosystem in a country, part of your responsibility is the people, the local knowledge and the client, right? So -- and today, if I look at our energy sector, they do a lot of talk of, again, lowest carbon footprint per barrel. But the outside, we produce a lot of water. We still emit. We still flare. We should stop that, right? And I think in COP27, when the industry started to become part of that dialogue, which was good, then you had the COP28 with the methane pledge, 2030, 0 and you had the water. So it's a good story. And we have a very strong enabler of those tools that I want to provide to the client to tell him, I can make this economical, right? Because I know at the end of the day, again, let's just be frank and straight. If I'm going to pay more because I love the climate, it's not going to happen. So I want to make sure that the client knows, by the way, today, you dump water in the sea, right? And it should only be, let's say, 4 ppm or whatever it is, the rule of every place. I can take that water instead of you dumping it and cleaning it to that level to be able to dump it. I'll take it, recycle it, use it for all the villages around you and you're going to give them water to do their agriculture, drink and build trees and is it going to -- today, it costs you how much, $0.30. I'm going to charge you $0.30, right? Sorry, we have echo, right?

Yes.

Okay. Okay. So now all the clients -- if you are a client, no-brainer you're going to give me the contract, unless you are [indiscernible] person or something. You tell me, okay, Sherif, $0.30, I pay $0.30, take it. What is the problem today? It doesn't cost you $0.30. It costs you $0.30, my solution or the solution of the industry costs $0.80, right? So that's why nobody doesn't because it's economically not feasible. What I'm doing with [indiscernible] which, again, means call to action in our rig, is say, guys, I am going to enable technology. And I will close the [indiscernible] with other industry to make that circular economy feasible. And I know nobody else is doing that, right? So we took technology from outside oil and gas, adopted inside and created some other market for the, if you like, for selling some of our products to them, then the entire holistic story become economical. This takes time, obviously, we've been developing it. But we have an amazing client, which is again, Saudi Aramco, right? And they are a real believer of climate, a real believer of can we make a difference? And today, we did 2 pilots with them on water. And we are doing a pilot on mineral recovery. We're going to even do something on lithium, right? So imagine if I can put all this together, this can be a bigger business than my oil and gas business.

So it's really geared to serve the Saudi Arabia and Saudi Aramco's goal of diversifying the economy with other industries because everybody needs water and you operate in an area where there's not a lot of freshwater. And so you close that loop between recycling produced water for use in other industries and it really fosters growth outside of the traditional oil and gas industry for the country. Is that -- am I following it correctly?

I mean I would characterize it a bit differently, if you allow me. It's not to diversify and be a water business. No. It's to make the water that we dump economical enough to serve your internal, so you don't use -- you keep the RO plant water because the desalination has to happen in Middle East, there's no water, as you said., But then I can -- I do not need to use that desalination water in my oil and gas industry. I keep -- I prevent to take from the desal plant internally. But I get minerals that I can sell and I make that project economical. So it's really to make the lowest carbon footprint more feasible for the oil and gas industry and have an equivalent. I'll tell you [indiscernible] Saudi Arabia, the whole Middle East. So another project we did in Iraq where basically we took the place where they don't use some of what they call the underground water is already very [ soft ]. So why can't they take that and use it for, again, oil and gas and prevent using desal water for oil and gas. So decarbonizing really, decarbonizing in a bigger scale, the energy sector, the oil and gas sector. And I think we are -- I would say, I think we are the only one really working on that from that holistic view. If we have projects at a scale successfully done, I think it's going to be a really game changer in the world.

Can you talk about the path to commercialization on some of those technologies?

Yes, pilot success, economic success, then it's commercial. I think if I can get the economics to work by next year, I will not have enough supply for the demand I'm going to get. As I told you before, it's going to become a no-brainer. It costs you $0.30 to dump it, it costs you $0.30 to give it to me. You're going to get rid with $0.30 and you give it to me. And there is 6 barrels of oil -- 6 barrels of water for every barrel of oil. So that business is 6x the oil sector.

So you're kind of back to the notion of displacing oil, you're displacing the industry's demand on desalinated water. So that stays where it needs to be and you're closing the loop in the oil industry to keep that water and reuse it.

Correct.

Okay. Very good. Sherif, we're getting towards the bottom of the hour. And I'd like to maybe close by -- you're clearly exposed to some very dynamic markets with customers that are looking for complex solutions to their oilfield and gas field operations but also some of the other issues that they deal with around decarbonization that we spoke about. Can you just kind of maybe summarize for us how you think the exposure that NESR has in the Middle East really positions you to build value and compare that to some of their peers that are more North American centric?

Yes. Look, if I would simplify it, today, this market is $20 billion to $25 billion, is going to here to stay forever, meaning it's going to be the last produced barrel in the world, for sure, right? You're talking about the factor of [ 5 to 6 ] of cost. So you produce anywhere between $6 to $10 barrel, $10 per barrel, worst case is $20, right, versus anywhere between $30 to $70, right? So that cost curve will always be there. So the last drop of oil will be there. If you are a believer that the oil demand will start to go down and EV will be a huge success and everything, you're talking about 50 years, that 50 years will be the Middle East. So we are exposed in that region. The market service industry, as I said, is $20 billion to $25 billion. We are $1.5 billion today. So our growth profile to go to $2 billion, $2.5 billion is very clear, very steady. And therefore, we are in the best neighborhood for oil and gas, the least affected by the cycles, the least sensitive to oil price. The gas always in demand for internal consumption. We are perceived in performing nationally and locally with a lot of interest to the government and to the oil sector and to the NOC and the IOC as well that's working there. So I think the resistance or the viability of our company and resilience to change is very strong. So we are here to stay and we are not part of this, oh there is tariff, Trump changed his mind, the price goes down, the 5 service company went out of business. We don't have that problem.

So in that sense, the markets that you operate on are like Boardwalk and Park Place in the Monopoly game?

I wouldn't say at all. I mean, it's not Monopoly at all. I mean -- it's a multi -- it's actually every contract, if you look at, at the tenders, every tender and the clients are very small. They award 5 or 6 or 7 or 8 even suppliers. And they give you your market share, obviously, based on the price and quality. So you have a 5-year contract and based on that, you can maybe become #2, #3, #1. So they made the fact -- the formula, price, quality. So if your quality is terrible and you're very cheap, you're going to get new work because you're very bad, because you cost the client money, right? But they want a multi-award, a multi-contract. Once you have that, very strong. Today, look at the Middle East, if you look at a company like Schlumberger, for example, they are 80 years, 90 years in every country. So it's actually very stable. They build a lot of infrastructure. They have a lot of local people. Similarly, you have local company. You have now as National Champion, which we are unique because again, publicly listed on U.S. but operate solely, mainly in the 15 countries with a lot of diversity, et cetera. So, no, I think it's, again, resilient, long-term compliant and we provide some unique technology or unique feature, which we spoke about over the last 45 minutes that I think make us resilient and here to stay.

And I guess just to close back to your comment earlier about activity levels in the U.S. dropping with oil prices, a lot of contracts, I think that companies here work with are pad to pad or, in some cases, well to well. So you have a 5-year -- you have 5-year type contracts. You have a lot more duration in your business than probably some of your North American-centered companies have to deal with.

Oh, absolutely. I mean I have what I call a backlog or a very good view or you call it a funnel. So I know exactly, the worst-case scenario if this happened, when it happen, I'm going to lose what, some 20% of my business because it's going to -- they're going to shut it down and the other is at stake, right? So I know I have a very good visibility of what happened. When I used to work in my older life in North America and I used to -- the client, they told me, Sherif, next week don't come. That's it. That's as simple as that. When you finish the well, don't come, just park home. And I talked to some of my dear friends, the CEOs of companies here in the U.S. in the last conference. And they told me, yes, at $50, we're going to shut down 50% of our fleet. So -- and they can do that as fast as shutting down the pad -- finish the pad and end of story and release the rig at the end of the well. And you don't have that. You have a very stable. But again, you have to think about it. The client do that because the client is the country. And that, that whole -- the whole issue is, you have supply chain, you have employment, it's totally different. And it is the -- the country is dependent on that business. I mean, all the exports and all the money comes from oil and gas. I mean oil and gas in the U.S. is a small, tiny part of GDP but it's like 80% of these guys. So there is nothing else to do, right? So it's a fundamental for their business and survival.

Sherif, I think we'll leave it there today. It's interesting to talk to you about NESR's business. But it's also the concept that you do operate in a -- in markets that have a lot of visibility into your future cash flow and earnings power. And with growing technology, there's room to expand that. I'd like to thank you for taking the time to join us and we look forward to hosting another fireside chat with you in the near future.

Thank you. Thank you very much. Appreciate it.

Thank you.