James Rollyson

James Rollyson from Raymond James asked about the expected timing of delivery and field deployment for the 105,000 horsepower capacity additions budgeted for 2026. He also inquired if the continuously stretching lead times for compression equipment, particularly for Caterpillar engines, are expected to translate into higher equipment costs beyond typical inflationary increases.

Answer

Clint Green, President and CEO, and Chris Wauson, SVP and COO, clarified that the majority of the new horsepower additions for 2026 are expected to be delivered and deployed in the back half of the year, primarily late Q3 into Q4. Clint Green further explained that extended lead times are mainly driven by Caterpillar engine demand from data centers, and while no immediate price increase has been announced, he anticipates some form of increase later in the year from manufacturers.

James Rollyson asked about the rationale for lower 2025 growth CapEx despite a bullish outlook, and inquired about the long-term potential for distribution growth given the steady increase in distribution coverage.

Answer

President and CEO Micah Green explained that the disciplined CapEx approach is driven by a focus on maintaining the company's leverage ratio, which they do not want to see increase significantly. CFO Chris Paulsen added that while growing the distribution is a goal, the priority is to first establish a sustainable coverage level that can withstand market cycles before committing to a specific growth target.

James Rollyson of Raymond James inquired about the rationale behind the lower 2025 growth CapEx budget despite a bullish outlook, and also asked about the long-term prospects for distribution growth given the steady increase in distribution coverage.

Answer

President and CEO Micah Green explained that the disciplined CapEx approach is driven by the desire to maintain and control the company's leverage ratio as new assets come online. Regarding the distribution, CFO Chris Paulsen stated that while growth is a goal, the immediate priority is to improve coverage to a sustainable level that can withstand market cycles before considering an increase to the underlying distribution.

James Rollyson sought more detail on the significant increase in CapEx, asking about the specific circumstances and magnitude of the event. He also inquired about the return profile on this spending and the reason for the higher-than-usual related-party revenue during the quarter.

Answer

President and CEO Clint Green clarified that higher-than-budgeted costs for reworking equipment were a primary driver of the CapEx increase. COO Eric Scheller added that opportunistic, unbudgeted purchases of third-party units also contributed. Regarding related-party revenue, executive Christopher Porter explained it was driven by Energy Transfer's acquisition of WTG, making them a larger customer, a trend expected to continue.

James Rollyson requested a holistic 2026 outlook on spending and activity levels, including expectations for North America and international markets, and the company's overall financial priorities for the year.

Answer

Girish Saligram, President and CEO, indicated it's early for specific 2026 guidance but broadly expects a 'tale of two halves' with a soft first half and a rebounding second half driven by offshore and key international markets. North America is expected to be flat to down. He highlighted offshore markets (Brazil, Norway) and production enhancement as positive, with a focus on healthy margins and free cash flow conversion north of 40% for the year.

James Rollyson sought a holistic 2026 outlook on overall spend and activity levels, asking for a full-year perspective beyond the first half/second half commentary.

Answer

Girish Saligram, President and CEO, indicated it's early for specifics but broadly expects North America to be flat to down, while international markets (offshore, Brazil, Norway, production enhancement) will be positive in the second half. He emphasized maintaining healthy margins (above 20%) and free cash flow conversion north of 40% as key metrics for 2026.

James Rollyson from Raymond James inquired about the specific drivers behind the company's $100 million in annualized cost savings beyond headcount. He also asked about the potential for additional cost-cutting measures if the current market conditions continue.

Answer

President and CEO Girish Saligram detailed that cost savings come from headcount reductions, cuts to discretionary spending, and efficiencies from their multi-year fulfillment network modernization. Looking ahead, Saligram stated that even in a flat market, they believe they can improve margins by 25-75 bps annually over the next 2-3 years through ongoing productivity gains.

James Rollyson of Raymond James asked about Weatherford's long-term strategy for Mexico, specifically its willingness to ramp up activity again once the market recovers. He also inquired about the capital return program, asking if the company might increase share repurchases beyond the minimum commitment given the current stock price.

Answer

CEO Girish Saligram stated that while Weatherford believes in Mexico's long-term potential and will be well-positioned for a recovery, the immediate focus is on margins and cash flow, maintaining a prudent approach to risk. EVP and CFO Arun Mitra addressed the capital return program, noting that the company is already ahead of its run-rate commitment for share buybacks and will continue to be opportunistic. However, he stressed a holistic approach to capital allocation that also includes debt paydown and potential M&A.

James Rollyson from Raymond James followed up on gross margins, asking if costs associated with new unit deliveries could negatively impact the 60%-plus rental margin. He also asked about the planned use of proceeds from asset monetization, specifically whether funds would be for organic growth or shareholder returns.

Answer

CEO Justin Jacobs acknowledged a potential for a temporary, minor dip in rental margins due to installation expenses for new units, but he expects it would not be significant. Regarding the use of proceeds, Jacobs stated the immediate plan is debt paydown followed by funding organic growth, while also confirming that the Board is actively evaluating the timing and method for initiating a return of capital to shareholders.

James Rollyson of Raymond James asked about the future margin profile for 2025 and beyond, the impact of electric drive units on margins, and the potential amount of cash that could be unlocked in 2025 from the tax receivable and real estate sales.

Answer

CEO Justin Jacobs projected that the rate of margin growth would slow, citing a more stable fleet mix and rising labor costs. He noted electric drive units do not materially change the margin profile beyond being large horsepower. He expressed cautious optimism about receiving the ~$11M tax refund in 2025 and confirmed the company is actively working to monetize real estate.

James Rollyson asked about the future margin profile for the rental business beyond 2024 and the expected trend for asset utilization as more large horsepower units are added.

Answer

CEO Justin Jacobs stated that the company has increasing confidence that the recent rental adjusted gross margin of around 61.3% is sustainable. He anticipates a modest increase in margins in the second half of 2025 due to a mix shift toward higher horsepower units. On utilization, Jacobs explained that the high-horsepower fleet is effectively 100% utilized, and the unutilized assets are almost entirely in the small and medium horsepower categories, which is a medium-term initiative to address.

James Rollyson shifted focus to the recently acquired power business, asking about the opportunities and future growth potential Atlas sees in that segment. He also inquired about the broader sand supply market, asking if soft pricing is forcing competitors to reduce output or close mines, as seen in previous downturns.

Answer

CEO John Turner responded that while it is still early, the integration of Moser Energy is going well, and Atlas sees a significant opportunity to disrupt the inefficient power market, similar to its strategy in sand. COO Chris Scholla addressed the sand market, confirming that capacity additions have peaked and some high-cost competitor mines are being idled. He stated this rationalization is long-term constructive and reinforces Atlas's advantage in total delivered cost.

James Rollyson inquired about the specific operational issues at the Kermit facility, the timeline for improvements ahead of the Dune Express ramp, and the expected trend for operating expenses per ton over the next several quarters given new equipment delays.

Answer

CEO John Turner and executive Chris Scholla explained that a recent fire catalyzed a comprehensive operational review, leading to process improvements and record production volumes in recent months. CFO Blake McCarthy added that while Q3 OpEx was high due to Kermit, he expects sequential improvement. He projects OpEx will trend towards the low double-digit range in 2025 with higher volumes, but the final step-down in costs will not occur until new dredges arrive in early 2026.

James Rollyson asked about the potential impact of a Permian Basin slowdown on Archrock's business, considering the strong long-term outlook for natural gas, and inquired about the potential effects of tariffs on equipment pricing.

Answer

President and CEO D. Childers explained that Archrock's 2025 growth is secured by a fully committed backlog, mitigating short-term impacts. He noted that even with an oil slowdown, Permian gas production is expected to grow, and Archrock's diverse basin footprint allows for operational flexibility. Regarding tariffs, Childers stated that pricing for 2025-2026 orders is locked in, and the estimated low single-digit cost impact is already incorporated into the company's 2025 guidance.

James Rollyson inquired about the key drivers of the strong Q3 gross margin performance, the sustainability of these margins, and the future allocation of growth CapEx between the legacy and electric motor drive (TOPS) businesses.

Answer

President and CEO D. Childers clarified that the margin outperformance was primarily driven by the legacy business through strong utilization, pricing, and technology investments, not just the single month of TOPS results. He stated that margins are not only sustainable but are expected to expand further with the full integration of TOPS. Childers also projected that the allocation of newbuild CapEx to electric motor drive would increase from a historical 20-30% to a future 40-50%.

James Rollyson asked if the positive long-term outlook for offshore activity in late 2026 and 2027 is translating into current customer conversations, and inquired about market dynamics in the North Sea and Asia.

Answer

Chief Commercial Officer Piers Middleton confirmed that pre-tender discussions for 2026 and 2027 remain active and positive. He noted that Tidewater expects to benefit from vessels moving from the North Sea to Brazil, which will tighten supply. He also mentioned that the Malaysian market is recovering, which should absorb local supply by Q3/Q4 2025, creating a favorable environment for Tidewater.

James Rollyson of Raymond James & Associates, Inc. asked if the market's anticipated pause in 2025 alters Tidewater's long-term outlook and questioned the company's confidence in its 2025 guidance after missing 2024 targets.

Answer

President & CEO Quintin Kneen affirmed that the long-term outlook for 2026-2027 remains strong, viewing 2025 as a temporary "sideways movement." He expressed high confidence in the 2025 guidance, noting it was developed with more visibility and that 81% of the revenue target is already covered by existing backlog.

James Rollyson asked for a high-level overview of the puts and takes for the 2025 outlook, focusing on day rates, utilization, and drydocking. He also inquired if the current market pause could create more favorable M&A opportunities.

Answer

Executive West Gotcher confirmed that despite lower near-term visibility, the combination of expected day rate increases and fewer drydocks should make 2025 better than 2024. CEO Quintin Kneen added that it is too early for the market uncertainty to lower seller asking prices for M&A, so the company will remain patient and focus on share repurchases.

James Rollyson of Raymond James asked about the durability of strong international and offshore project bookings amid macro uncertainty. He also inquired about the drivers of the significant sequential margin improvement in the Completion and Production Services (CP&S) segment and its sustainability. Finally, he questioned the company's capital allocation priorities between share repurchases, reducing convertible debt, and holding cash.

Answer

President and CEO Cindy Taylor explained that long-cycle development drilling programs, particularly in Brazil, are resilient to short-term price volatility, supporting a strong backlog and guidance. She attributed the CP&S margin jump to a recovery in Gulf of Mexico activity and 2024 cost-cutting efforts, with a goal of maintaining 20-plus percent margins. EVP and CFO Lloyd Hajdik confirmed the Gulf recovery was the key driver. Regarding capital allocation, an executive stated that given the low stock price, the priority is opportunistic share repurchases, followed by reducing debt ahead of its 2026 maturity.

James Rollyson asked for more detail on the margin profile for the Completion and Production Services segment in 2025, considering the recent divestiture of underperforming assets that had significant operating losses. He also inquired about the margin trends in the Offshore/Manufactured Products backlog and the company's preference for deploying free cash flow between stock buybacks and building cash reserves.

Answer

President and CEO Cindy Taylor projected that EBITDA margins for the Completion and Production Services segment could improve from the mid-teens in 2024 to a target range of 19% to 20% in 2025, driven by the cleaner portfolio and a better business mix. For the Offshore/Manufactured Products segment, she noted that margins have been consistently solid and that growth comes from higher revenues driving absorption and incrementals, rather than from a backlog of previously low-margin work. She reiterated a preference for share repurchases over holding excess cash, stating, "No shareholder pays us to sit on cash."

James Rollyson asked about the forward-looking margin profile for the restructured Completion and Production Services and Downhole Technologies segments, and inquired about the demand outlook for the Offshore/Manufactured Products business amid recent oil price volatility.

Answer

President and CEO Cindy Taylor stated that following the exit of underperforming businesses, the Completion and Production Services segment is expected to achieve EBITDA margins of 23% to 25% in 2025. For Downhole Technologies, CFO Lloyd Hajdik projected low double-digit EBITDA margins, driven by new EPIC technology and international expansion. Cindy Taylor also noted that the offshore business remains robust, as it is tied to long-term production infrastructure projects for already discovered fields, which are less sensitive to short-term price swings. She anticipates mid-single-digit growth for this base business, supplemented by new technology offerings like MPD.

James Rollyson inquired about the long-term outlook for the North Sea P&A market and the potential timeline for that work. He also asked how recent market volatility affects the company's capital allocation strategy between M&A and share repurchases.

Answer

CEO Owen Kratz stated that Helix is actively tendering for three large P&A projects expected to begin in 2026, providing a strong future outlook despite near-term softness. Regarding capital allocation, Kratz explained that due to market uncertainty, the company is prioritizing share repurchases over M&A, as closing deals has become more difficult.

James Rollyson of Raymond James inquired about Helix's capital allocation strategy, asking how the company plans to use its significant free cash flow, what M&A targets it considers given inflated asset prices, and how Well Intervention pricing is trending.

Answer

CEO Owen Kratz indicated a high probability of M&A activity in 2025, targeting geographic expansion and the wind market where valuations have pulled back. He noted current vessel prices are too high for acquisitions. CFO Erik Staffeldt added that spot rates in Well Intervention are still increasing slightly, though not as rapidly as in the past two years, while Robotics rates are seeing strong upward momentum.

James Rollyson of Raymond James inquired about the visibility for a rebound in the Shallow Water Abandonment business in 2025 and the outlook for free cash flow generation next year, including plans for capital allocation.

Answer

CEO Owen Kratz indicated that while budgeting is ongoing, initial views show a 2025 improvement for the Shallow Water segment, potentially returning to its historical $40-$60 million EBITDA range. CFO Erik Staffeldt added that 2025 free cash flow should improve, projecting it could be in the $200 million range, with CapEx between $70-$80 million. Kratz reiterated the capital allocation priorities as growth investments, share repurchases, and building cash reserves, noting a softer market could present more rational M&A pricing.

James Rollyson inquired about a slight sequential dip in average revenue per horsepower, the current premium for leading-edge pricing, and the potential margin impact from new cost-saving initiatives like AI and predictive maintenance.

Answer

CFO John Griggs clarified the revenue per horsepower metric was skewed by the divestiture of low-margin noncore assets and would have otherwise increased. CEO Mickey McKee confirmed that leading-edge pricing still commands a 15-20% premium over the fleet average. McKee also explained that new technologies, such as condition-based maintenance, are expected to extend service intervals and drive tangible margin expansion over time.

James Rollyson requested a comparison of leading-edge pricing for new units versus the fleet average and asked about the future trajectory of fleet utilization.

Answer

CEO Mickey McKee estimated that spot prices for new units are currently 20-25% higher than the fleet average, driven by increased capital and labor costs. He also stated that while the goal is to return overall fleet utilization to the high-90% range (e.g., 99%+), the focus remains on securing 'the right utilization' with quality customers and contracts, not just utilization for its own sake.

James Rollyson inquired about Select's new Colorado municipal water venture, focusing on its investment timeline, return profile, and margins compared to traditional recycling projects. He also sought clarity on the Water Infrastructure segment's 15-25% revenue growth guidance for 2025, its exit run rate, and whether the mid-50% margin range would resume after Q1.

Answer

CEO John Schmitz, CFO Chris George, and EVP of Strategy Mike Lyons detailed the Colorado venture as a high-margin, long-term resource development opportunity with contracts potentially lasting 50 years. They noted that while paybacks are longer, the returns are expected to be very competitive. Regarding the Water Infrastructure segment, Chris George confirmed that the 2025 exit growth rate would be substantially higher than the full-year average, with the second half potentially doubling the full-year growth rate. He also expressed confidence in maintaining margins in the 50-60% range after a temporary dip in Q1.

James Rollyson from Raymond James inquired about the future margin trajectory for the Water Infrastructure segment, noting it has already surpassed the 50% target. He also asked for an outlook on the segment's revenue run rate by late 2025, based on contracts already secured.

Answer

CEO John Schmitz stated that the long-term margin profile for the Water Infrastructure business is expected to be in the 50% to 60% range. CFO Chris George added that margin drivers include increasing utilization on existing assets, efficient integration of acquisitions, and accretive new contracts. Regarding the revenue run rate, George framed the growth in terms of returns on capital investment, pointing to the ~$150 million in growth capital slated for the segment, which is expected to generate returns consistent with a 3-to-4-year cash-on-cash payback and mid-to-high 50s margin profile.

James Rollyson inquired about the financial benefits and customer traction of Patterson-UTI's performance-based contracts and asked for an update on the outlook for natural gas activity based on customer conversations.

Answer

CEO William Hendricks explained that performance-based contracts are gaining traction, particularly with mid-tier E&P customers, and drive value through operational efficiencies and the pull-through of additional services. Regarding natural gas, Hendricks noted that while customers are measured in their 2025 plans, the long-term macro outlook for 2026 and beyond is very favorable due to growing LNG and industrial demand, suggesting a future need for more activity.

James Rollyson asked about the potential magnitude of NOV's consolidated margin improvement in 2025 and inquired about the company's free cash flow outlook and capital return strategy, particularly if the return percentage could exceed the 50% baseline.

Answer

CEO Clay Williams detailed margin drivers, citing improved backlog quality in the Energy Equipment segment and cost-saving initiatives in the Energy Products and Services segment. CFO Jose Bayardo suggested a 50 to 150 basis point margin improvement was a reasonable possibility for 2025. Regarding capital returns, Bayardo confirmed a strong free cash flow outlook and stated that with the balance sheet restored, NOV expects to return the "vast majority" of its excess free cash flow to shareholders in 2025.

James Rollyson of Raymond James inquired about the outlook for NOV's subsea flexible pipe business and the company's revised revenue growth expectations for 2025 given recent market shifts.

Answer

Chairman, President and CEO Clay Williams confirmed strong demand for flexible pipe, with deliveries extending into 2026 due to FPSO supply chain constraints. He noted that while the near-term is more challenged, NOV has strong momentum from its backlog and is bullish on deepwater and international unconventional projects, with North American gas being a potential positive catalyst for 2025.