Jeff Robertson

Jeff Robertson asked about the expected trajectory of the Subsea business in 2026 and 2027, and the potential benefits for Forum Energy Technologies from increased unconventional oil and gas development globally.

Answer

President and CEO Neal Lux highlighted Subsea's strong 2025 bookings (190% book-to-bill) and multi-year submarine program, anticipating strong demand in energy and defense. For international unconventionals, he cited the DuraLine system delivery to Argentina and opportunities in Saudi Arabia, emphasizing the adoption of U.S. technology like Artificial Lift internationally. Robertson also inquired about M&A targets, to which Lux responded that another downhole type business, similar to the successful Variperm acquisition, would be interesting, prioritizing differentiated solutions in targeted markets that are accretive without stressing the balance sheet.

Jeff Robertson inquired about the expected trajectory of Forum Energy Technologies' subsea business in 2026 and 2027, and where the company anticipates the biggest benefits from increased global unconventional oil and gas development. He also asked about potential acquisition targets, specifically product lines or adjacent industries with industrial logic for FET.

Answer

President and CEO Neal Lux highlighted the strong 2025 subsea bookings (190% book-to-bill) and multi-year submarine program, expecting 2026 to focus on backlog conversion and 2027 for new additions in energy and defense. For international unconventionals, Lux pointed to the DuraLine system delivery in Argentina and potential in Saudi Arabia's gas projects, emphasizing the strategy of exporting U.S. technology like Artificial Lift internationally. Regarding acquisitions, Lux stated a preference for downhole-type businesses, emphasizing criteria such as differentiated solutions, targeted markets, accretion to FET metrics, and not stressing the balance sheet, similar to the successful Variperm acquisition.

Jeff Robertson of Water Tower Research LLC inquired about the scale of the global defense market opportunity, the nature of its revenue streams, the importance of remote operating systems, and the characteristics of the "growth markets," including adoption patterns and margin profiles.

Answer

President & CEO Neal Lux described the defense opportunity as significant, citing the recent submarine rescue vehicle order and demand from global navies for underwater vehicles. He confirmed the revenue stream includes both initial vehicle sales and long-term service and spare parts. Lux highlighted the Unity remote operating system as a key selling point for both defense and offshore customers seeking cost efficiencies. He characterized growth market adoption as a gradual ramp-up of consumable sales rather than chunky, with margins expected to be comparable to or better than leadership markets.

Jeff Robertson from Water Tower Research LLC inquired about the global defense market opportunity, whether revenue includes long-term servicing, and if the remote operating system is a key selling point. He also asked if growth in new markets is 'chunky' or gradual and about the margin profile of growth markets versus leadership markets.

Answer

President and CEO Neal Lux described the defense opportunity, citing the recent submarine rescue vehicle order and growing demand from global navies for underwater vehicles. He confirmed that revenue streams include both the initial sale and long-term spare parts and service. Lux also affirmed that the Unity remote operating system is a significant selling point for customers looking to reduce offshore personnel costs. He clarified that growth market margins are comparable to or better than leadership markets and that revenue growth would be a gradual ramp-up of consumable sales rather than 'chunky' from single approvals.

Jeff Robertson asked if increased utilization in the Northern Delaware Basin is expected to positively impact water infrastructure margins in 2027 compared to 2026. He also inquired about the effect of increased utilization on infrastructure margins in gas basins like the Haynesville, and the need for Select to expand its footprint there. Finally, he questioned whether integrating beneficial reuse into the Northern Delaware system would attract more customers by enhancing water balancing capabilities.

Answer

EVP and CFO Chris George confirmed that incremental barrels through infrastructure are accretive, expecting margin enhancement with increased utilization and commercial volumes, while also noting the future impact of low-cost royalty streams from existing investments starting in late 2026/early 2027. EVP and COO Michael Skarke highlighted strong performance in natural gas basins (Haynesville, Marcellus) with leading disposal positions, anticipating some expansions outside the Permian in 2026 due to renewed customer interest. Michael Skarke affirmed that integrating beneficial reuse into the Northern Delaware system would indeed attract more customers by enhancing water balancing capabilities and providing an environmentally responsible, cost-effective solution leveraging their existing infrastructure and treatment capabilities.

Jeff Robertson (Water Tower Research) questioned Select Water Solutions on the potential for increased utilization in the Northern Delaware Basin to positively impact water infrastructure margins in 2027. He also asked about the effect of increased utilization on infrastructure margins in gas basins like the Haynesville and opportunities for footprint expansion, and whether integrating beneficial reuse into the Northern Delaware system would attract more customers by enhancing water balancing capabilities.

Answer

EVP and CFO Chris George (Select Water Solutions) confirmed that increased utilization in the Northern Delaware Basin is expected to enhance water infrastructure margins over time, with incremental barrels being accretive, and new build-outs targeting a 50-60% margin profile. He also noted that incremental royalty streams from existing capital investments, coming online in late 2026/early 2027, will provide meaningful margin accretion. EVP and COO Michael Skarke added that Select is seeing strong demand and expansion opportunities in natural gas basins like the Haynesville and Marcellus, with expected expansions outside the Permian in 2026. Skarke also affirmed that integrating beneficial reuse into the Northern Delaware system would indeed attract more customers by enhancing water balancing capabilities and offering a unique, end-to-end solution.

Jeff Robertson asked for color on the margin profile of the $2 billion-$3 billion tender pipeline and whether most of those awards would impact 2027-2028 or 2026. He also inquired if the tender volume across the region is expected to increase over the next several years, given the production capacity goals.

Answer

Sherif Foda (Chairman and CEO, NESR) indicated that the company's overall margin level would remain consistent despite the new tenders. He clarified that all awards from the current pipeline are expected in 2026 (Q1, Q2, Q3, Q4), with revenue impact starting in the second half of 2026 or Q1 2027, supporting the goal to double the company by 2027. Foda emphasized that Middle East NOCs are strategically taking advantage of a soft service industry to secure five to seven-year contracts at better prices, leading to 2025-2026 being one of the highest tender value periods ever. He expects the pipeline to remain solid until 2031-2032.

Jeff Robertson asked about the margin profile of the $2-$3 billion pipeline tenders NESR referenced. He also inquired about the expected impact of these tender awards on 2026 versus 2027/2028 and beyond, and whether the tender volume across the region is expected to increase in the coming years.

Answer

Sherif Foda (Chairman and CEO) stated that the company would maintain its current margin level. He confirmed all tenders would be awarded in 2026, with revenue impact starting in H2 2026 or Q1 2027, supporting the goal to double the company by 2027. Foda also projected 2025-2026 to have the highest tender value ever in the Middle East, as NOCs capitalize on a soft service industry to secure long-term (5-7 year) contracts, ensuring a solid pipeline until 2030-2032. Stefan Angeli (CFO) did not directly answer these questions.

Jeff Robertson sought updates on NESR's NEDA projects, particularly the water initiatives in Saudi Arabia, and their progress.

Answer

CEO Sherif Foda stated that NEDA projects, including water, mineral recovery, and lithium initiatives, are currently in the pilot phase in Saudi Arabia. He expressed excitement about the potential for sustainable production and new materials, aiming to provide more detailed results and color on these pilots in the next earnings call.

Jeff Robertson (Water Tower Research) requested an update on NESR's NEDA projects, particularly the water initiatives in Saudi Arabia.

Answer

CEO Sherif Foda stated that several NEDA pilots, including water, mineral recovery, and lithium initiatives, are currently in the testing phase in Saudi Arabia. He expressed excitement about the potential for sustainable energy production and mineral recovery, promising more detailed results and color on the next earnings call.

Jeff Robertson asked about Nessar's scale in Algeria following recent contract wins and whether there is broader regional interest in the NEDA segment's pilot projects.

Answer

CEO Sherif Fota stated that recent awards in Algeria provide a runway for significant growth, positioning the country to become a sizable market for Nessar in the >$100 million range annually. Regarding NEDA, Mr. Fota confirmed 100% interest from other countries, emphasizing that the key to widespread adoption is proving the economics of solutions like water treatment and mineral recovery. If the pilots are successful, he expects rapid rollout across the region.

Jeff Robertson inquired about the impact of mineral acquisitions on Evolution Petroleum's natural decline rate, the expected production levels and timing from Haynesville-Bossier acquisitions, the company's valuation comparison between non-operated working interest and royalty opportunities, the sustainability of lower gathering and transportation costs, and the CapEx outlook for the remainder of the fiscal year.

Answer

Kelly Loyd, President and CEO, explained that mineral acquisitions add incremental, cost-free production, offsetting decline, and confirmed Haynesville-Bossier production impact in fiscal Q3 and Q4. Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer, added that the cash flow impact from royalties would be more significant than production. Kelly Loyd further noted that royalty opportunities are competitive on a cash flow basis compared to non-op working interests. Ryan Stash later clarified that lower gathering costs are partly sustainable due to restructured contracts and commodity price ties, and reiterated the $4 million-$6 million full-year CapEx guidance, dependent on attractive SCOOP/STACK AFE activity.

Jeff Robertson asked about the impact of recent mineral acquisitions on Evolution Petroleum's natural decline rate, the expected production levels from Haynesville-Bossier acquisitions in fiscal Q3 and Q4, and management's perspective on valuation comparisons between non-operated working interest and royalty opportunities in the current market. He also inquired about the sustainability of lower gathering and transportation costs and the projected capital expenditure for the remainder of the fiscal year.

Answer

Kelly Loyd, President and CEO, explained that mineral acquisitions add incremental, cost-free production from numerous locations, which will help offset declines, though individual well declines vary. He confirmed that Haynesville-Bossier acquisitions would impact fiscal Q3 and Q4, with production ramping up from both PDP and DUCs. Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer, added that while production impact might be less, the cash flow impact from royalties would be significant due to higher margins. Kelly Loyd further noted that royalty opportunities are currently more attractive on a cash flow basis than non-op working interests, and the company's new network allows for proactive, tailored acquisitions. Ryan Stash clarified that some gathering and transportation cost reductions are tied to commodity prices and a restructured Barnett contract, making some sustainability likely, but costs could rise with prices. He reiterated the full-year CapEx guidance of $4 million-$6 million, noting that SCOOP/STACK AFEs are attractive and generally consented to.

Jeff Robertson from Water Tower Research asked how long it would take for production in Côte d'Ivoire's Baobab field to return to its full rate once the FPSO is back and reconnected. He also questioned the impact of the July Gabon maintenance work on preparing the facilities for the upcoming drilling campaign.

Answer

CEO George Maxwell estimated 6 to 8 weeks for the Côte d'Ivoire FPSO hookup and commissioning, with details on the startup sequence for wells to be provided in the next call. CFO Ron Bain explained that the Gabon maintenance included significant upgrades to the TAMI platform's power and water handling capabilities, ensuring the facilities are ready for the drilling campaign.

Jeff Robertson sought clarification on whether the $20 million CapEx reduction was permanent due to efficiencies or lower costs. He also asked if the efficiency gains in Egypt were sustainable for 2026 and about the rationale behind increasing the RBL commitment to $240 million in January.

Answer

CFO Ron Bain confirmed the $20 million CapEx reduction was permanent, stemming from Canadian drilling CapEx removal and other discretionary cuts. He affirmed that Egypt's efficiency gains, particularly in reducing spud-to-online cycle times, are sticky and expected to continue into 2026. Regarding the RBL, he stated the increase reflects the current market and the strategy to secure liquidity from a position of strength.

Asked about the impact of the FAST-41 critical minerals project designation on offtake and financing, the capital spend runway for the Southwest Arkansas (SWA) and East Texas projects, potential objections to the proposed royalty rate, and whether this rate could become a benchmark for future phases.

Answer

The FAST-41 designation provides comfort on regulatory timelines and boosts confidence for potential customers and financial institutions. The Equinor funding carry for East Texas will likely run out by Q2/Q3 2025. The SWA project's CapEx will be funded by project debt, a DOE grant, and partner contributions, with current liquidity being sufficient for near-term needs. The company has engaged with stakeholders on the proposed 2.5% royalty rate, believes it is fair, and expects it to set a strong precedent for future projects, despite anticipating some minor objections at the hearing.

Jeff Robertson asked about the in-service timing for the midstream project, how its financial benefits would be reported, whether Q4 production is dependent on its progress, and if the new infrastructure creates an M&A advantage.

Answer

COO John Suter estimated the midstream in-service date could be as early as late 2025 but is more likely in the first half of 2026, contingent on regulatory and right-of-way approvals. CFO Philip Riley stated the financials will likely show midstream revenue and OpEx with an intercompany elimination. He and CEO Bobby Riley confirmed that the timing of new well production in New Mexico is dependent on the project and that the infrastructure provides a distinct strategic advantage for potential acquisitions in the area.

Asked about the number of permitted locations at Beta, the requirements for booking PUD reserves, the nature of the acreage involved in the East Texas monetization, and visibility on future non-operated capital expenditures (AFEs).

Answer

The company has sufficient permits for near-term plans at Beta and is permitting more; permits in hand are not required to book PUDs. The East Texas monetization involves non-producing Haynesville rights on HBP acreage, with a plan to generate cash while retaining some non-op participation. Visibility on non-op AFEs for the rest of 2025 is limited, but more activity is possible.

Asked for details on the future direction of Lease Operating Expenses (LOE) at Beta following electrification and increased volumes, and inquired about the potential outcome of the upcoming RBL redetermination and its impact on liquidity.

Answer

The Beta electrification project will significantly reduce LOE by eliminating diesel usage and the need to purchase NOx emission credits, and per-BOE costs will decline as production ramps up. Regarding the RBL, it's too early to speculate, but the company is generating free cash flow and doesn't have a pressing need to increase the facility. A potential Bairoil sale would not meaningfully impact the credit facility.

Asked about the factors contributing to improved drilling efficiencies and lower well costs, the potential for using different lateral lengths to enhance capital efficiency, and the role of the downhole assembly in staying within the target zone.

Answer

The company attributed drilling efficiencies to using improved downhole assemblies like rotary steerables, operational experience, and achieving single-trip drilling, which saves time and money. They are considering 2-mile laterals in specific areas but noted challenges with staying in the zone due to steep dips. The downhole assembly was confirmed as critical for providing real-time data to stay in the target interval.