Daniel Kutz

Daniel Kutz asked for a quantification of NOV's historical revenue in Venezuela, both pre-sanctions and in recent years, to better understand the potential opportunity in the country.

Answer

CEO Jose Bayardo stated that historical revenue figures for Venezuela are not entirely relevant due to changes in pricing and market environment. He emphasized that if proper governance and conditions are established, the neglected oil field assets could create 'massive opportunities for new capital equipment,' potentially 'meaningfully larger' than past levels, with NOV capable of scaling up quickly across all business lines. CFO Rodney Reed highlighted NOV's strong free cash flow conversion of 85% for the last two years, driven by structural improvements in DSOs, progress billings, and inventory turns (from 3.1 in 2023 to almost 4 in 2025). For 2026, he guided to a 40%-50% conversion with CapEx in the $315M-$345M range and flat to slightly up working capital, confirming the 40%-50% conversion as a good through-cycle marker.

Daniel Kutz (Morgan Stanley) asked for quantification of NOV's revenue potential in Venezuela, specifically pre-sanctions revenue and recent equipment/spares streams. He also inquired about NOV's through-cycle CapEx and free cash flow framework, asking if the 50%+ free cash flow conversion assumption is still valid and how CapEx is considered.

Answer

Jose Bayardo (CEO, NOV) stated that historical Venezuela revenue isn't entirely relevant, but if proper governance and security are established, neglected oil field assets could create massive, "meaningfully larger" opportunities for new capital equipment. Rodney Reed (CFO, NOV) highlighted 85% free cash flow conversion over the last two years due to system improvements. He guided to 40%-50% FCF conversion for 2026 with CapEx in the $315-$345 million range, confirming 40%-50% as a good through-cycle marker.

Daniel Kutz requested a directional outlook for NOV's consolidated book-to-bill ratio in 2025. He also asked about the capital allocation strategy, specifically the rationale for using a supplemental dividend for the shareholder return "true-up" instead of incremental buybacks.

Answer

CEO Clay Williams outlined a mixed outlook for 2025 orders, with challenges in North American stimulation equipment but strength in international markets and deepwater production. He noted that a potential turnaround in wind turbine installation vessel (WTIV) orders could be a significant positive contributor. CFO Jose Bayardo explained that the supplemental dividend provides a clear and accountable framework to meet their minimum 50% return commitment, while adding that the company still anticipates being aggressive with share buybacks given the stock's current value.

Dan Kutz with Morgan Stanley inquired about the drivers of improved utilization in 2026, including normal incrementals, fleet demand resilience, horsepower per fleet increases, and market share gains.

Answer

CEO Ron Gusek agreed that normal incrementals are fair but noted puts and takes. He mentioned continued demand for continuous pumping, increasing intensity and larger fleets (e.g., Western Haynesville), and the goal of 24/7 pumping, offset by efficiencies gained through AI and digiTechnologies.

Daniel Kutz sought clarification on Ron Gusek's earlier comment about frac pricing being down in the low to mid-single-digit range, specifically the timeframe for this impact, and asked about the drivers behind improved utilization in 2026, including continuous pumping, intensity climb, and market share gains.

Answer

CEO Ron Gusek clarified that the pricing impact for 2026 reflects RFP season against a second-half 2025 backdrop. Regarding utilization, he noted that while normal incrementals are fair, continuous pumping and increasing intensity (e.g., Western Haynesville) are key drivers, partially offset by AI-driven efficiencies and digiTechnologies deployment. He also acknowledged the 'flight to quality' reinforcing Liberty's market leadership.

Dan Kutz asked for clarification on financing options, specifically if previous color applied only to the incremental 600 MW and if the initial 400 MW was still planned for organic/revolver financing, including contingencies. He also inquired about the puts and takes on frac profitability per fleet.

Answer

CFO Michael Stock clarified that financing is holistic, not segmented by initial/incremental MW. Early-stage deposits are funded, but once equipment is assigned to an ESA, it's dropped into a project company with non-recourse debt (30% equity, ours or partners). He emphasized building a generational company. CEO Ron Gusek reiterated a long-term view on the frac business, maintaining headcount despite short-term blips. He acknowledged pricing pressure due to competitors defending market share but noted Liberty's full utilization, expecting to navigate headwinds and be well-positioned for future improvements.

Daniel Kutz from Morgan Stanley inquired about international opportunities beyond Australia, such as in Argentina or the Middle East, and the associated costs. He also asked for the current thinking on shareholder returns, particularly the balance between share buybacks and other capital priorities.

Answer

CEO Ron Gusek confirmed Liberty is evaluating opportunities globally, including Argentina and Queensland, and is prepared to deploy capacity when it makes sense. He noted deployment costs vary by region. On capital allocation, Gusek described the approach to buybacks as opportunistic, stating the company paused in Q2 to assess the volatile market but will continue to evaluate repurchases. CFO Michael Stock added that investing in growth offers great potential to increase long-term EPS.

Daniel Kutz inquired about the customer pipeline and contracting progress for the power generation business and asked whether the full-year consolidated EBITDA guidance of $700 million to $750 million remains intact.

Answer

CEO Ron Gusek expressed strong confidence in the power generation business, noting the opportunity pipeline significantly exceeds ordered capacity. Regarding guidance, he stated it is too early to make changes, citing a strong Q2 outlook but acknowledging uncertainty for the second half of the year pending clarity on tariffs and OPEC+ strategy.

Daniel Kutz of Morgan Stanley inquired about the expected useful life and maintenance cycle for the power generation units and asked for the implications of a flat lateral footage forecast on Liberty's horsepower demand.

Answer

CEO Ron Gusek estimated the useful life of the gas engines to be measured in 'decades and decades,' with major overhauls only every 80,000 hours. He explained that while flat lateral footage might imply fewer fleets due to efficiency, this is offset by the increasing intensity and horsepower requirements of simul-frac operations. This dynamic suggests the underlying horsepower market could tighten more than headline fleet counts indicate.

Dan Kutz of Morgan Stanley asked for a breakdown of maintenance CapEx for U.S. versus international rigs by segment. He also inquired about H&P's plans and conversations regarding leveraging its technology profile, such as drilling automation and rig floor automation, outside the U.S., particularly in the Middle East, Argentina, Australia, and Europe.

Answer

CFO Kevin Vann stated that domestic maintenance CapEx is around $1 million per rig (slightly lower now), and international is $1.3 million-$1.5 million per rig. Executive VP of Western Hemisphere Mike Lennox added that NAS CapEx focuses on upgrades for longer laterals and rig floor automation. President Trey Adams confirmed a strong focus on transferring U.S. unconventional technology to the Eastern Hemisphere, citing significant customer interest in drilling automation and rig floor automation for safety and performance in regions like the Middle East, Argentina, and Australia.

Dan Kutz with Morgan Stanley asked for details on maintenance CapEx per rig for U.S. versus international operations and an update on H&P's strategy and conversations regarding leveraging its technology profile outside the U.S., particularly in the Middle East.

Answer

CFO Kevin Vann estimated domestic maintenance CapEx at around $1 million per rig and international at $1.3 million-$1.5 million per rig. EVP of Western Hemisphere Mike Lennox added that NAS CapEx focuses on upgrades for longer laterals and rig floor automation. President Trey Adams confirmed strong customer interest in H&P's technology in the Eastern Hemisphere, especially for drilling automation and rig floor advancements.

Dan Kutz (Morgan Stanley) asked for an update on the Emerald fleet size, specifically the horsepower capacity after the latest direct-drive delivery, and the projected capacity once all currently ordered deliveries are completed. He also requested a comparison of Emerald electric fleets and direct-drive fleets regarding build cost, maintenance cost, fuel/operating cost, and operating efficiencies.

Answer

President and CEO Andy Hendricks stated the Emerald fleet is currently around 250,000 horsepower, with more 100% natural gas direct-drive units being delivered this quarter, pushing the total slightly over 250,000 horsepower. He explained that Emerald electric fleets, especially for simul-fracs, require significant capital for turbines ($40-45 million for 35 MW, $15-20 million for smaller). In contrast, the new high-horsepower (3,600 HP) 100% natural gas direct-drive engines offer a 25-30% reduction in overall capital cost for the same horsepower at location, with projected lower OpEx compared to maintaining both electric pumps and turbine generators.

Dan Kutz asked for an update on the size of the Emerald fleet (100% natural gas-powered equipment) after the latest direct-drive delivery. He also requested a juxtaposition of the differences between Emerald electric fleets and direct-drive fleets in terms of build cost, maintenance cost, fuel/operating cost, and operating efficiencies.

Answer

Andy Hendricks, President and CEO, stated the Emerald fleet is 'around that 250,000 level right now,' with more 100% natural gas direct-drive units being delivered and deployed this quarter. He noted that overall horsepower has decreased from 3.3 million to 2.8 million, which he views constructively for the completions market, and will provide an updated exact number on the next call. Mr. Hendricks explained that Emerald electric performs well but requires significant capital for turbines (e.g., $40M-$45M for a 35MW turbine). The new 100% natural gas direct-drive engines (3,600 HP) offer a '25%, maybe 30% reduction' in overall capital cost for the same horsepower at location compared to electric with turbines. While direct-drive OpEx is higher than diesel, it's projected lower than maintaining electric pumps and turbines.

Daniel Kutz of Morgan Stanley inquired about frac supply dynamics, asking if diesel equipment retirements would roughly offset new Emerald fleet investments, keeping total horsepower flat. He also asked how the choppy macro environment has impacted the company's ability to sell its bundled and integrated services.

Answer

President & CEO William Hendricks confirmed the company's total horsepower has declined from 3.3 million to 2.9 million and could continue to decrease as older Tier 2 equipment is retired without new investment. Regarding integrated services, he noted that the digital backbone keeps them competitive, and while the softening market makes it harder to show growth in the bundled offering, activity is holding steady.

Daniel Kutz requested an estimate of the 'Tier 1 super spec' rig supply for the broader industry and asked for details on the regions driving international growth for the Drilling Products segment.

Answer

CEO William Hendricks and CFO C. Smith pivoted away from rig specifications, arguing that performance, embedded technologies, and processes are now the key differentiators, not just mechanical capabilities. For international growth, Hendricks highlighted opportunities in Latin America (Argentina), the Middle East (upgrading a Saudi facility to manufacturing and expanding in Oman), and a long-term focus on North Africa to supply natural gas to Europe.

Daniel Kutz from Morgan Stanley asked about emerging opportunities in shallow water gas plays, referencing positive developments in the Netherlands and New Zealand. He also inquired about trends in the type of work the fleet is performing, specifically the mix between development, exploration, and mature field work.

Answer

CCO Bruno Morand confirmed that a sizable portion of Borr's fleet works on gas projects, citing examples in Congo and the North Sea. He noted that while the majority of the company's work is development in mature fields, there has been a noticeable uptick in exploration projects, particularly in Asia and West Africa. He stated the company is well-positioned to participate in both development and the expected increase in exploration investment.

Daniel Kutz of Morgan Stanley asked for clarification on what Perimeter Solutions defines as a 'normal' wildfire season, inquired about the inverse correlation between acres burned and revenue per acre, and sought an update on fire suppression resource availability.

Answer

CEO Haitham Khouri defined a normal U.S. fire season as 6-7 million acres burned (excluding Alaska), noting 2025 is trending within this range. CFO Kyle Sabol explained that the inverse correlation between acres and revenue per acre is due to resource constraints; during peak fire seasons, air tanker availability becomes a bottleneck, muting the impact of incremental acres. Sabol also highlighted California's fleet expansion and the importance of federal contract structures for increasing overall resource availability.

Daniel Kutz from Morgan Stanley Investment Management asked about the business implications of the Southern California wildfires and the potential impacts from the new U.S. administration's policies on tariffs and EV adoption.

Answer

CFO Kyle Sable noted the recent wildfires had a modest near-term financial impact. CEO Haitham Khouri added that long-term, such events will likely attract more resources to wildland firefighting, benefiting the industry. Khouri also stated he anticipates negligible impact from tariffs due to a resilient supply chain and dismissed any significant effect from changing EV policies on the Specialty Products business, calling it a 'rounding error'.

Daniel Kutz of BMO Capital Markets asked for clarification on the relative intensity of fire suppression spending per acre across different U.S. regions, inquired about the company's M&A strategy regarding synergies and industry focus, and questioned the $10-$15 million CapEx guidance in light of significant air base investments.

Answer

CEO Haitham Khouri advised against over-analyzing the geographic location of fires, stating that jurisdictional mix is more important and regional spending differences are minor. On M&A, he reiterated a strict focus on businesses meeting their five economic criteria where their operational value drivers can be applied, emphasizing that industry and synergies are not primary concerns. CFO Kyle Sable clarified that the $10-$15 million CapEx guidance reflects an increased appetite for high-IRR growth projects, like the Albuquerque airbase upgrade, beyond the historical high single-digit maintenance spend.

Daniel Kutz of Morgan Stanley asked about the drivers for Q1 financial performance, the operational and financial impact of the new Delaware Basin plant, the company's outlook and guidance amid market uncertainty, and the status of the Pathfinder project.

Answer

Executive Kristen Shults detailed a strong Q1 with $594M adjusted EBITDA and a 4% distribution increase to $0.91/unit, despite a slight gross margin decrease from lower throughput. She noted the new 250 MMcf/d Delaware plant is full, which will reduce offload fees but increase OpEx. Shults reaffirmed guidance, stating WES is prepared for a downturn with a strong balance sheet (<3x leverage) and capital flexibility as the first response lever. She also confirmed the $400M-$450M Pathfinder water project is moving forward as planned, underwritten by a large commitment from Oxy.

Asked for an overview of the economic sensitivity across the company's business lines, whether macroeconomic concerns are affecting the transition to fluorine-free suppressants, and if there are any adjustments to the full-year 2025 financial outlook.

Answer

Management confirmed that the retardant and suppressant businesses have very low economic sensitivity, while the specialty products business has a modest link to miles driven. The transition to fluorine-free products continues unabated by macro concerns so far. The full-year financial assumptions remain unchanged, with strong Q1 working capital performance viewed as a timing benefit.

Daniel Kutz from Morgan Stanley asked about the economic sensitivity of Perimeter's business lines, whether macroeconomic uncertainty is slowing the customer transition to fluorine-free suppressants, and for any updates to the full-year 2025 long-term assumptions.

Answer

CEO Haitham Khouri detailed that the retardant and suppressant businesses have very low economic sensitivity, while the Specialty Products segment has a modest link to miles driven. He confirmed no slowdown has been observed in fluorine-free conversions. CFO Kyle Sable stated that the company's full-year assumptions remain unchanged, noting strong Q1 working capital was a timing benefit.

Daniel Kutz from Morgan Stanley asked for a breakdown of the economic sensitivity across Perimeter's business lines. He also questioned if macroeconomic uncertainty was slowing customer conversions to fluorine-free suppressants and sought clarification on whether any of the company's long-term financial assumptions for 2025 required adjustment.

Answer

Chief Executive Officer Haitham Khouri explained that the retardant and emergency suppressant businesses have virtually no economic sensitivity, while the new-install suppressant and P2S5 businesses have only modest exposure to new construction and miles driven, respectively. He confirmed there has been no slowdown in fluorine-free conversions. Chief Financial Officer Kyle Sable added that the company's full-year financial assumptions remain unchanged, with strong Q1 working capital performance considered timing-related noise.

Daniel Kutz asked for a more specific second-quarter outlook beyond the directional guidance, referencing a 10% consensus decline. He also inquired about the capacity of ProFrac's electric frac fleet and the remaining contract terms for these assets.

Answer

Executive Chairman Matt Wilks responded that the Q2 outlook remains uncertain and is being evaluated on a customer-by-customer basis, though he highlighted the company's strong momentum. Regarding the electric fleet, Wilks confirmed that all seven e-fleets (with a horsepower equivalent of nine fleets due to two Simul-Frac setups) are fully utilized under long-term contracts with no anticipated changes.

Daniel Kutz asked for a more specific second-quarter outlook beyond the directional guidance, referencing a 10% consensus decline. He also inquired about the deployed electric frac fleet capacity and the remaining contract terms for these assets.

Answer

Executive Chairman Matt Wilks explained that the Q2 outlook remains uncertain and is being evaluated on a customer-by-customer basis, with any pullback expected to be concentrated in West Texas. He noted that the company's seven electric fleets, equivalent to nine in horsepower, remain fully utilized under long-term contracts with strong, unabated demand.

Daniel Kutz asked for a more specific second-quarter outlook beyond the directional guidance, referencing consensus estimates. He also inquired about the deployed capacity of ProFrac's electric frac fleets and the remaining term on their contracts.

Answer

Executive Chairman Matt Wilks responded that the Q2 outlook remains uncertain and is being evaluated on a customer-by-customer basis, with some pullback expected. Regarding electric fleets, he confirmed they have seven total e-fleets, equivalent to nine in horsepower, which are fully utilized under long-term contracts with no anticipated changes.

Daniel Kutz asked for more specific guidance on the second-quarter outlook, referencing consensus estimates, and inquired about ProFrac's electric frac fleet capacity, including the number of deployed fleets and the remaining term on their contracts.

Answer

Executive Chairman Matt Wilks responded that the Q2 outlook remains uncertain and is being evaluated on a customer-by-customer basis, particularly in West Texas. He confirmed that ProFrac's seven electric fleets, equivalent to nine in horsepower, are fully utilized under long-term contracts and that demand for all fuel-efficient assets remains strong.

Daniel Kutz sought to confirm the active frac fleet count, asking if it was around 30 fleets, and inquired about the drivers of the Proppant business improvement, including the role of market share gains, mine shutdowns, and the internal versus external sales mix.

Answer

Executive Chairman Matt Wilks confirmed that an active fleet count in the 'low 30s' is a safe assumption for the near term, emphasizing that any further ramp-up depends on achieving adequate economic returns. Regarding the Proppant segment, he noted that one Haynesville asset remains idle but could be reactivated if demand increases. He stated the company has a robust order book and is focused on securing long-term commitments rather than pursuing immediate price hikes, even as opportunities arise.

Daniel Kutz sought to confirm if the active frac fleet count is now in the low 30s and if that is a reasonable expectation for 2025. He also asked about the Proppant business, questioning if market share gains are anticipated, whether any mines were fully shut down, and what the outlook is for internal versus external sales volumes.

Answer

Executive Chairman Matt Wilks confirmed that a low-30s fleet count is a safe assumption for now, emphasizing that further growth depends on achieving target economic returns. Regarding Proppant, he noted one Haynesville asset remains idle but could be reactivated with market demand. He reiterated the focus on securing long-term customer commitments to derisk cash flows rather than pursuing immediate price hikes, highlighting that many operational mines are seeing record utilization.

Daniel Kutz requested a more detailed breakdown of the expected contributions from SLB's New Energy pillars (CCUS, geothermal, lithium, etc.) and data center business toward its 2030 revenue target. He also asked about the future of the Asset Performance Solutions (APS) portfolio following the planned Palliser divestiture.

Answer

CEO Olivier Le Peuch identified carbon capture (CCS) as the largest component of the New Energy target, with geothermal showing strong momentum and lithium presenting an exciting, albeit smaller, opportunity. CFO Stephane Biguet clarified that after the Palliser sale, the APS portfolio will consist solely of projects in Ecuador. He described these as cash-flow positive, service-like contracts that are core to their business in the region and are expected to be retained for their contractual term.

Sought to confirm the active frac fleet count is now around 30 and if that is a reasonable number for 2025. Also asked about the Proppant business, specifically if market share gains are expected, whether any mines are fully shut down, and the outlook for the internal versus external sales mix.

Answer

Management confirmed the active fleet count is in the 'low 30s' and that is a safe assumption for the year, noting they will not grow further without supportive economic returns. Regarding proppant, they confirmed one Haynesville mine remains idle from 2024 while seven others are operational and seeing high utilization. They emphasized a focus on securing long-term commitments over short-term price gains, without detailing market share or sales mix targets.

Daniel Kutz sought to confirm the company's active frac fleet count, asking if it was now around 30 fleets and if that was a sustainable number for 2025. For the Proppant business, he asked if the expected improvement includes market share gains, whether any mines were fully shut down to manage costs, and what the outlook was for the mix of internal versus external sales.

Answer

Executive Chairman Matt Wilks confirmed that a fleet count in the 'low 30s' is a safe assumption for 2025, but emphasized that any further growth would depend on achieving appropriate economic returns, not just market demand. Regarding the Proppant business, he stated that one Haynesville asset remains idle but could be reactivated. He stressed that the current focus is on securing long-term customer commitments to derisk cash flows, rather than pursuing immediate price hikes, even as opportunities arise.

Daniel Kutz from Morgan Stanley sought to reconcile the full-year 2025 guidance to derive a standalone EBITDA figure and asked for details on the SANAD newbuild budget, including the drivers for the increased EBITDA per rig.

Answer

CEO Anthony Petrello indicated that SG&A and R&D costs are expected to be lower in 2025, contributing to overall EBITDA being higher than in 2024. CFO William Restrepo clarified that the $360 million SANAD CapEx figure is based on construction milestones, not a simple per-rig cost. Petrello added that the cost for five new rigs is now closer to $310 million due to spec changes and inflation, which is compensated by their partner through higher day rates to maintain a five-year payback, thus increasing the EBITDA per rig to approximately $13 million for recent units.

Daniel Kutz inquired about reports of Saudi Arabia seeking pricing concessions from service companies following rig suspensions. He also asked for broader commentary on international pricing trends and the cadence of the SANAD newbuild program.

Answer

Chairman, President & CEO Anthony Petrello stated that Nabors is in a strong position in Saudi Arabia, with most of its rigs on gas-directed wells or long-term contracts, and confirmed there has been no change in the rates or cadence for the high-return SANAD newbuild program. He noted the suspended rigs were lower-margin performers. Mr. Petrello also confirmed the newbuild pace is five rigs per year and the next order tranche is anticipated in 2025.