Eric Carlson

Eric Carlson asked about the potential impact of a marginal rebound in the U.S. rig count on Forum Energy Technologies' business, given its recent diversification. He also inquired about the opportunities and scale of non-oil and gas markets, such as subsea defense, data centers, mobile power, and coiled line pipe for renewable natural gas. Carlson further questioned current M&A valuation multiples and how FET weighs share buybacks against acquisitions, considering the known benefits of internal investment versus external risks. Finally, he asked about the potential for Variperm products in Venezuela and the broader implications of that market opening, as well as the net impact of the recent tariff ruling and the incremental benefit of FET's deferred tax assets.

Answer

President and CEO Neal Lux stated that a U.S. rig count rebound would provide 'tremendous torque' due to significantly higher revenue per rig and increased service intensity driving demand for activity-based consumables. He also noted growing customer interest in upgrading older capital equipment (drilling rigs, frac fleets) with FET components. For non-oil and gas markets, Lux highlighted subsea defense as a long-term growth opportunity, mobile power generation (data centers) using adapted heat exchangers, and coiled line pipe for renewable natural gas. He viewed data centers as a 'second derivative growth' through increased gas demand. Regarding Venezuela, Lux confirmed Variperm products have been sold into Latin America for heavy oil and noted recent legal approval for a coiled tubing order, indicating participation through customer equipment deployment. On tariffs, Lux explained that the Supreme Court decision only struck down IEEPA tariffs, while the more impactful Section 232 and 301 tariffs (affecting steel supply) remain in place. CFO Lyle Williams addressed M&A valuations, confirming elevated enterprise value to EBITDA multiples compared to historical levels, but still lower than public comps. Lux explained that acquisitions are viewed as a way to 'supercharge' the FET 2030 organic growth plan through revenue and cost synergies, evaluated against strict criteria and the compelling alternative of share buybacks. Williams discussed taxes, noting increased profitability outside the U.S. leads to higher tax bills there, while U.S. deferred tax assets create a 'wonky tax rate,' with future focus on optimizing taxable income location.

Eric Carlson asked about the potential impact of a U.S. rig count rebound on Forum Energy Technologies' business, opportunities in non-oil and gas markets (Subsea defense, data centers, coiled line pipe), acquisition multiples versus share buybacks, the applicability of Variperm products in Venezuela, and the financial implications of the recent tariff ruling and deferred tax assets.

Answer

President and CEO Neal Lux stated that a U.S. rig count rebound would provide 'tremendous torque' due to significantly higher revenue per U.S. rig and increased service intensity driving demand for consumables. He also noted aging U.S. equipment needing upgrades. For non-O&G markets, Lux highlighted Subsea defense as a long-term growth area, providing heat exchangers/radiators for mobile power generation (data centers), and coiled line pipe for renewable natural gas. CFO Lyle Williams noted that M&A deals are seeing elevated enterprise value to EBITDA multiples, while Lux emphasized M&A must 'supercharge' FET 2030 and meet specific criteria. Lux confirmed Variperm products have been sold into Latin America for heavy oil and that FET is seeing opportunities in Venezuela through consumables. Regarding tariffs, Lux clarified that the Supreme Court decision only struck down IEEPA tariffs, while more impactful Section 232 and 301 tariffs remain. Williams explained that growing international profitability leads to higher tax bills outside the U.S., while U.S. deferred tax assets provide a shield, making the effective tax rate 'wonky'.