MENA Risks Will Curtail Demand But Value May Appear

Key Takeaways

• Heavy reliance on a few regional clients and delayed projects exposes NESR to significant earnings volatility from policy, regulatory, and geopolitical shifts.
  
• Pressures from larger competitors, uncertain tech adoption, and capital-intensive investments threaten long-term margin improvement, cash flow, and market opportunity.
  
• Decarbonization trends, regional instability, aggressive competition, and rising compliance costs all threaten NESR's growth, profitability, and long-term competitiveness in its core markets.

Catalysts

Provides oilfield services in the Middle East and North Africa region.

• Although NESR stands to benefit from ongoing energy demand growth and diversified upstream investment across the MENA region-particularly visible in Kuwait's multi-year capacity expansion and a robust tender pipeline-many of these long-term projects are vulnerable to delays or abrupt curtailment if governments respond to structural price weakness or accelerate their transition toward renewables, exposing NESR's future revenue growth to external risks.
  
• While the company's ability to capitalize on digital transformation and advanced in-house technologies like ROYA and NEDA offers a route to higher-margin service offerings, achieving scale and widespread adoption is uncertain, especially as larger global competitors can deploy similar-or superior-platforms more rapidly, exerting pressure on NESR's earnings resilience and margin improvement over the long term.
  
• Despite deepening relationships with national oil companies and recent contract wins driving multi-year revenue visibility, NESR's significant exposure to just a handful of MENA customers leaves its recurring revenue base acutely susceptible to policy swings, regulatory changes, and geopolitical shocks in the region, potentially creating substantial volatility in earnings and cash flows.
  
• Although NESR is front-loading investment in growth technologies and infrastructure to position itself for counter-cyclical outperformance, continued high capital intensity-especially if contract awards are delayed or pricing softens further-risks straining free cash flow generation and could undermine the company's ability to reduce debt and reinvest in future earnings growth.
  
• While the push for enhanced oil recovery and brownfield development should sustain service demand in aging fields, increasing pressure to reduce emissions and manage operational footprints may drive governments and NOCs in MENA to internalize more services, reducing NESR's addressable market over time and threatening long-term revenue growth and profitability.

National Energy Services Reunited Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on National Energy Services Reunited compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming National Energy Services Reunited's revenue will grow by 4.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 5.9% today to 11.4% in 3 years time.
• The bearish analysts expect earnings to reach $171.9 million (and earnings per share of $1.68) by about July 2028, up from $76.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.5x on those 2028 earnings, down from 8.5x today. This future PE is lower than the current PE for the US Energy Services industry at 11.3x.
• Analysts expect the number of shares outstanding to grow by 0.99% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.28%, as per the Simply Wall St company report.

National Energy Services Reunited Future Earnings Per Share Growth

Risks

• The long-term global transition toward decarbonization and renewables threatens sustained demand for oilfield services, meaning NESR's core business could face structural headwinds that erode revenue growth and contract visibility over time.
  
• Heavy concentration of business in the MENA region exposes NESR to significant geopolitical, political, and security risks; instability in key countries like Saudi Arabia, Libya, or North Africa could disrupt operations and result in volatile or declining revenues and earnings.
  
• Intensifying competition for large, long-term contracts in the Middle East-especially as downturns create aggressive pricing environments-may compress NESR's net margins through reduced pricing power and higher operational costs to win or retain business.
  
• The persistent emergence of larger, globally scaled competitors with greater technological differentiation increases the risk that NESR's offerings become less competitive, threatening both future market share and profitability as customers potentially favor more advanced or integrated solutions.
  
• Rising regulatory requirements, ESG pressures, and client-driven sustainability initiatives could materially increase NESR's compliance and technology investment costs, thereby impacting net margins and requiring continuous investment just to sustain current earnings levels.

Valuation

• The assumed bearish price target for National Energy Services Reunited is $10.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of National Energy Services Reunited's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $171.9 million, and it would be trading on a PE ratio of 7.5x, assuming you use a discount rate of 8.3%.
• Given the current share price of $6.5, the bearish analyst price target of $10.0 is 35.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.