20-F: National Energy Services Reunited Corp. Reports Annual Results for Fiscal Year 2024

National Energy Services Reunited Corp. reports increased revenue and net income for the year ended December 31, 2024, driven by strong performance in both Production Services and Drilling and Evaluation Services.

Summary

• National Energy Services Reunited Corp. (NESR) reported its annual results for the fiscal year ended December 31, 2024.
• Revenue increased to $1,301.7 million, compared to $1,145.9 million in 2023.
• Net income rose to $76.3 million, a significant increase from the $12.6 million reported in 2023.
• The company operates through two segments: Production Services and Drilling and Evaluation Services.
• Production Services revenue was $878.1 million, up from $785.6 million in the previous year, driven by increased well stimulation and hydraulic fracturing services.
• Drilling and Evaluation Services revenue increased to $423.6 million from $360.3 million, due to higher activity in Saudi Arabia and Kuwait.
• The company had cash and cash equivalents of $108.0 million as of December 31, 2024, compared to $67.8 million in 2023.
• Outstanding borrowings were $382.8 million as of December 31, 2024, down from $452.2 million in 2023.
• A material weakness in internal control over financial reporting persists, and remediation efforts are ongoing.
• The company settled a civil administrative proceeding with the SEC, paying a $400,000 penalty.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook due to increased revenue and net income. However, the persisting material weakness in internal control and the SEC settlement temper the overall sentiment.

Positives

• Significant increase in revenue and net income year-over-year.
• Strong performance in both Production Services and Drilling and Evaluation Services segments.
• Improved cash position.
• Reduction in outstanding borrowings.
• Remediation of previously disclosed material weaknesses related to balance sheet account reconciliations, accounts payable functions, and accounting system privileged access and segregation of duties.

Negatives

• A material weakness in internal control over financial reporting persists.
• The company paid a $400,000 civil monetary penalty to the SEC.
• High effective tax rates are mainly driven by recording valuation allowances against current year losses and recording liabilities on uncertain tax positions in various jurisdictions.

Risks

• The persisting material weakness in internal control over financial reporting could lead to inaccurate financial reporting or fraud.
• Failure to successfully remediate the material weakness by August 28, 2025, will result in an additional $1.2 million penalty to the SEC.
• The company's operations are concentrated in the MENA region, exposing it to political and economic instability.
• Fluctuations in oil and natural gas prices could affect customer demand for services.
• The company is subject to complex U.S. and foreign laws and regulations, including anti-bribery and sanctions laws.
• The company is exposed to credit risk of its customers and counterparties.

Future Outlook

The company believes that its cash on hand, cash flows generated from operations, and available credit facilities will provide sufficient liquidity to manage its cash needs. The company plans to pursue strategic acquisitions as an element of its business strategy.

Industry Context

The report reflects the cyclical nature of the oilfield services industry, with NESR's performance tied to global commodity prices and E&P spending. The company's focus on the MENA region, known for its low production costs, provides some resilience against oil price volatility. The company is also expanding into environmental and decarbonization applications.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Comparable companies in the oilfield services sector include Schlumberger, Halliburton, and Baker Hughes.
• These companies have a global presence and offer a wide range of services.
• NESR's focus on the MENA region differentiates it from these larger, more diversified competitors.
• Without specific financial metrics for these competitors, a direct comparison is difficult.

Corporate Governance

Legal Proceedings

• The company settled a civil administrative proceeding with the SEC related to the restatement of previously issued financial statements, agreeing to a cease-and-desist order and paying a $400,000 penalty.

Related Party Transactions

• The company purchased products and rentals from Nine Energy Service, Inc., where one of NESR's directors served as a director until February 28, 2025.

Stakeholder Impact

• Shareholders: Improved financial performance may positively impact shareholder value, but the material weakness and SEC settlement create uncertainty.
• Employees: The company's performance may lead to increased job security and potential for bonuses, but the need for improved internal controls could increase workload.
• Customers: The company's continued operations ensure the availability of oilfield services in the MENA region.
• Creditors: The company's improved financial position enhances its ability to meet debt obligations.

Next Steps

• Continue remediation efforts to address the material weakness in internal control over financial reporting.
• Monitor and manage risks associated with operations in the MENA region.
• Pursue strategic acquisitions to expand the business.
• Monitor the developments of the GloBE rules and will perform an assessment for 2025 and disclose the expected impact in its first quarter 2025 interim financial information.

Key Dates

Keywords

financial results, oilfield services, NESR, revenue, net income, material weakness, internal control, MENA, Drilling and Evaluation Services, Production Services