Marc Bianchi

Marc Bianchi asked for clarification on NOV's M&A intentions, specifically whether the company is in a better position to pursue acquisitions given recent internal improvements and market responses.

Answer

CEO Jose Bayardo clarified that NOV is shifting its mindset from defense to offense, leveraging efficient internal processes (manufacturing, supply chain, back office) to better justify and integrate M&A. He emphasized that while they will be more aggressive, they will remain disciplined, focusing on core expertise areas and ensuring acquisitions are the best use of capital compared to share buybacks. He also highlighted significant excitement for organic growth opportunities from new technologies. Regarding the order outlook, Jose Bayardo expressed confidence in winning a fair share of FPSO opportunities, noting a healthy backlog of $4.34 billion. He anticipates a Q1 book-to-bill below 1x due to a cautious start but expects it to even out to around 1x for the full year.

Marc Bianchi (TD Securities) asked about NOV's M&A intentions, specifically whether the company's recent internal efficiencies position it better to pursue acquisitions. He also inquired about the order outlook, asking if a doubling of FPSO FIDs in 2026 would lead to a book-to-bill comfortably above one, and how Q1 2026 is shaping up.

Answer

Jose Bayardo (CEO, NOV) clarified that while internal focus on cost-outs and efficiencies prepares NOV for growth, including M&A, the company will remain disciplined, prioritizing organic growth from new technologies. He expressed confidence in winning a fair share of offshore opportunities, noting a healthy $4.34 billion backlog despite a 91% book-to-bill in 2025. He anticipates a slow Q1 2026 with book-to-bill below one, but expects it to even out to around one for the full year.

Marc Bianchi of TD Cowen questioned the confidence in the second-half growth outlook for the rig-count-sensitive Energy Products and Services segment, given cautious macro commentary, and asked about the potential impact of tariffs on near-term cash flow.

Answer

Chairman and CEO Clay Williams clarified that all second-half guidance is 'more directional than precise' due to heightened macro uncertainty, though he expects deepwater projects to be more resilient. CFO Rodney Reed did not specify a direct tariff impact on cash flow timing but reiterated confidence in achieving a 50% free cash flow conversion of EBITDA for the full year.

Marc Bianchi of TD Cowen questioned the flat-to-down Q4 margin guidance despite higher revenue and asked about the severity of headwinds impacting the 2025 outlook, specifically for offshore aftermarket services.

Answer

Chairman, President and CEO Clay Williams attributed the Q4 margin pressure to adverse mix shifts in both segments. He explained that while disappointed to miss the 2024 margin target due to North American weakness, improved backlog quality and cost savings are expected to drive margin expansion in 2025. He characterized the offshore drilling outlook as "in flux," with some customers delaying spending due to "white space" while others plan upgrades.

Marc Bianchi with TD Cowen inquired about the magnitude of the expected EBITDA decline for 2026, given flat revenue and pricing headwinds.

Answer

CEO Ron Gusek indicated that pricing was likely off mid-single digits, impacting EBITDA. He also highlighted a significant Q1 2026 weather event that affected approximately two-thirds of Liberty's capacity in Texas and Louisiana for up to five days, further impacting results.

Marc Bianchi asked about the funding strategy for Liberty Energy's 2026 capital expenditures, specifically if the half not covered by project finance would be funded through free cash flow, and sought more precise guidance on 2026 EBITDA expectations.

Answer

CFO Michael Stock clarified that long lead time deposits would eventually move into project financing once assigned to a project, with the remaining spend covered by free cash flow and debt availability. He noted that Q4 2025 EBITDA was an anomaly and expected 2026 EBITDA to be down, primarily driven by the completions business, with power business EBITDA kicking in significantly in 2027. CEO Ron Gusek added that pricing was off mid-single digits relative to H2 2025 and mentioned a meaningful weather event impacting Q1 2026.

Marc Bianchi inquired about the financing strategy for Liberty Energy's new power capacity, including sources of capital, potential customer prepayments, and project-specific debt. He also asked how Liberty plans to handle transient response for data centers.

Answer

CFO Michael Stock detailed that large projects would be funded via project-specific, non-recourse debt (approximately 70% of capital needs) backed by long-term Energy Services Agreements (ESAs) or PPAs, with the balance from cash flow or corporate debt, potentially involving minority infrastructure partners. Smaller projects (sub-100 MW) would be balance sheet funded. CEO Ron Gusek stated that Liberty's electrical engineering team has proprietary, tailored solutions for transient loads, clarifying that this is for permanent, in-situ power generation, not mobile power.

Marc Bianchi from TD Cowen sought clarification on the second-half outlook, asking if the projected activity and price declines would occur entirely in Q3 and what the associated decremental margins would be. He also asked for a breakdown of the 2025 CapEx reduction between the frac and power businesses.

Answer

CEO Ron Gusek and CFO Michael Stock clarified the activity and pricing pressures are separate factors impacting Q3. Stock indicated decremental margins would be slightly elevated from the typical 35% due to fleet count changes. He also stated the $75 million CapEx reduction for 2025 is split roughly evenly between reduced completions spending and delays in power generation deliveries, which he described as a firming up of schedules.

Marc Bianchi sought to quantify the expected revenue increase for the second quarter and asked for a breakdown of the contributing factors, such as seasonality versus specific business line performance.

Answer

CFO Michael Stock characterized the outlook as "slow and steady progress." CEO Ron Gusek attributed the expected Q2 improvement to normal seasonality, with utilization that ramped up through Q1 continuing into Q2 across basins. He noted that even Canadian seasonality is becoming less impactful, leading to a typical sequential trend for the frac business.

Marc Bianchi of TD Cowen inquired about the extent to which the planned 400 megawatts of power capacity are covered by binding customer commitments and asked about the full-year free cash flow outlook and its implications for share repurchases.

Answer

CFO Michael Stock stated that the entire 400 MW is ordered, with binding customer commitments for two-thirds of it currently in negotiation. He clarified that total company free cash flow is expected to be positive, not breakeven. He reiterated that share repurchases are opportunistic and funded by organic cash flow; any potential borrowing would be to fund significant growth, not buybacks.

Marc Bianchi sought clarification on whether total company CapEx would be higher or lower in 2025. He also questioned the Q4 revenue progression, asking why the decline is similar to the activity drop despite pricing weakness, and how Liberty's year-end experience compares to the broader industry.

Answer

CFO Michael Stock stated that completions CapEx will be lower in 2025, and total company CapEx will likely be slightly lower unless a significant power generation opportunity emerges. He attributed the Q4 revenue trend to 'mix issues' and suggested the current pricing pressure is inconsistent with 2025 demand, hinting at a potential recovery. CEO Christopher Wright added that Liberty's experience is likely 'reasonably indicative' of the overall market, though influenced by its specific customer relationships.

Mark Bianchi from TD Cowen asked about Baker Hughes' opportunity in Venezuela, considering recent political changes and potential for increased oil production.

Answer

Chairman and CEO Lorenzo Simonelli and CFO Ahmed Moghal acknowledged the political changes and potential for incremental production, taking a prudent long-term view. They noted Baker Hughes' historical presence, generating $500 million in revenue in Venezuela in 2012, and its continued support for licensed operators as one of the few American service companies. They highlighted a large technology base, including oilfield power generation, over 1,200 oil production systems, and flexible pipe. They anticipate that moderate production increases will require substantial investment in well integrity, off-grid power, equipment replacement, upgrades, and services, creating significant opportunities across both OFSE and IET. Key considerations include employee safety and clarity on the legal and regulatory framework for long-term engagement.

Mark Bianchi from TD Cowen asked Baker Hughes to describe its opportunity in Venezuela, considering recent political changes and potential for increased oil production.

Answer

Chairman and CEO Lorenzo Simonelli discussed the opportunity in Venezuela, noting recent political changes and the need for new investment to unlock incremental production, while taking a prudent long-term view. CFO Ahmed Moghal highlighted Baker Hughes' historical presence (e.g., $500 million revenue in 2012) and its unique position as one of the few American service companies maintaining operations. He detailed the substantial investment required for well integrity, power generation, and equipment upgrades due to aging infrastructure, which would create significant opportunities across both OFSE and IET, contingent on employee safety and regulatory clarity.

Mark Bianchi from TD Cowen asked about the performance of Nova LT orders, noting a strong first half but less activity in Q3. He sought expectations for Nova LT orders in Q4 and into 2026, as well as insights into the lead time for customers placing these orders.

Answer

CFO Ahmed Moghal confirmed a sharp increase in Nova LT orders year-to-date across data centers and industrial markets, expecting over $1 billion in Nova LT orders for 2025, a record year. He noted that oil and gas applications account for roughly one-third, with data centers and broader industrial markets making up the rest. Moghal highlighted a strong pipeline and broad demand for power generation applications. He also mentioned significant increases in manufacturing capacity and targeted investments to enhance Nova LT performance (power range, startup time). Demand for delivery slots extends well into 2028 and beyond, indicating strong market durability. The expanding installed base is expected to drive substantial aftermarket services growth and recurring revenue opportunities.

Marc Bianchi from TD Cowen asked about the performance of Baker Hughes Company's Nova LT turbine orders, noting strong activity in the first half of the year but less in Q3. He requested expectations for Nova LT orders in Q4 and 2026, as well as information on customer lead times.

Answer

CFO Ahmed Moghal confirmed a sharp increase in Nova LT orders year-to-date across data centers and industrial markets, projecting over $1 billion in Nova LT orders for 2025, a record year. He indicated that oil and gas applications account for roughly one-third, with data centers and broader industrial markets making up the rest. Moghal highlighted a strong pipeline and broad demand for power generation applications, with significant investments in manufacturing capacity and product performance enhancements. He noted strong demand for delivery slots extending into 2028 and beyond, underscoring the market's durability and resilience, and the substantial potential for aftermarket services growth from the expanding installed base.

Marc Bianchi from TD Cowen asked about the outlook for the IET segment's book-to-bill ratio in 2025, assuming flattish orders, and inquired about the expected pace of backlog conversion.

Answer

Lorenzo Simonelli, Chairman and CEO, stated that while official 2025 guidance will be given in January, they anticipate a robust level of activity similar to 2024. He indicated that project cycle times are expected to remain consistent, which implies a similar pace of backlog conversion and will help maintain the Remaining Performance Obligation (RPO) at record levels.

Marc Bianchi asked about the current state of pricing pressure in international markets, which had been a concern a few months prior, and how this is factored into SLB's 2026 outlook. He also inquired about the offshore outlook, seeking to understand what factors are different now that give SLB confidence in an improvement, especially given that previous expectations for offshore growth did not fully materialize.

Answer

CEO Olivier Le Peuch acknowledged sustained pricing pressure in highly competitive international markets, particularly where activity had been declining. However, he noted that SLB expects to maintain steady margins in 2026 compared to 2025, supported by ChampionX synergies, margin-accretive digital growth, and technology performance as a differentiator. For offshore, Le Peuch clarified that improved FID (Final Investment Decision) and bookings are expected in 2026, setting the stage for a marked rebound in the 2027-2028 cycle, with some material strengthening in East Asia and FID momentum in Sub-Saharan Africa already underway.

Marc Bianchi from TD Cowen inquired about the current state of pricing pressure in international markets, given the anticipated activity increases in SLB's 2026 outlook, and what expectations are embedded in the guidance. He also asked about the offshore outlook, seeking clarification on what makes the current confidence in improvement different from prior periods when expectations didn't fully materialize.

Answer

CEO Olivier Le Peuch acknowledged sustained pricing pressure in highly competitive international markets, especially during the past 12-18 months of decline, but noted SLB's ability to maintain steady margins in 2026 through ChampionX synergies, digital growth, and technology differentiation. Regarding offshore, Mr. Le Peuch clarified that the current expectation is for improved FIDs and bookings in 2026, setting up a rebound for the 2027-2028 cycle. He pointed to strengthening deepwater activity in East Asia (Indonesia), FIDs in Sub-Saharan Africa (Namibia, Angola, Mozambique), and continuous momentum in the Americas (Brazil, Guyana, Suriname) as drivers, with favorable economics and a strong FID pipeline.

Marc Bianchi asked for a more detailed outlook on the offshore market, particularly regarding anticipated upticks in H2 2026, and sought clarification on the timeline for Halliburton's re-entry into Venezuela, specifically concerning the resolution of commercial/legal terms and payment certainty, and whether IOCs would lead the re-entry or if Halliburton would move independently.

Answer

Jeff Miller, Chairman, President, and CEO, expressed confidence in the offshore market, citing significant work wins, strong performance in Norway, Latin America, and West Africa, and an all-time high completion tool order book, which is biased towards deepwater. Regarding Venezuela, Miller stated that Halliburton could mobilize in weeks to months once commercial and legal terms, including payment certainty, are resolved. He noted that there are paths to working with both IOCs and existing operators, with a strong will to resolve these issues quickly.

Marc Bianchi asked for a more detailed outlook on the offshore market, specifically regarding an anticipated uptick in the second half of 2026 and how it compares to previous unmaterialized upticks. He also inquired about the timeline for Halliburton's re-entry into Venezuela, the resolution of payment certainty, and whether IOCs or Halliburton would lead the return.

Answer

Jeff Miller, Chairman, President, and CEO, highlighted Halliburton's strong offshore business, citing significant work wins in Norway, Latin America, and West Africa, along with an all-time high completion tool order book biased towards deep water. For Venezuela, he stated that mobilization could occur in weeks to months once payment certainty and commercial/legal terms are resolved, with opportunities to work for both IOCs and existing operators.

Marc Bianchi asked for clarification on the exclusivity of the international collaboration agreement between Halliburton and VoltaGrid. He also inquired about Halliburton's capital obligation for VoltaGrid projects in 2026, specifically if there's a percentage commitment beyond the stated $1 billion CapEx, to help gauge potential financial requirements.

Answer

Jeffrey Miller, Chairman, President, and CEO, stated that the international collaboration agreement with VoltaGrid is 'exclusive in parts' and 'with certainty over a pretty good period of time' where targeted, expressing confidence in Halliburton as the primary partner. Regarding capital, Mr. Miller confirmed that Halliburton will invest alongside VoltaGrid on these projects. He noted that these projects are 'imminently capitalizable' and that capital raising is not an impediment. He added that if VoltaGrid announces international capital investment, Halliburton is 'more than likely' part of that.

Marc Gregory Bianchi inquired about the exclusivity of Halliburton's international collaboration agreement with VoltaGrid and sought clarification on Halliburton's obligated percentage of spend for VoltaGrid's international projects in 2026, beyond the $1 billion CapEx.

Answer

Jeffrey Miller, Chairman, President, and CEO, stated that the agreement is 'exclusive in parts' and 'with certainty over a pretty good period of time,' expressing confidence in Halliburton being the primary partner. He indicated that Halliburton would be 'investing alongside' VoltaGrid in these 'imminently capitalizable' projects, implying significant participation without specifying a precise percentage.

Marc Bianchi of TD Cowen noted that the company's guidance implies a significant Q4 step-down and asked for more visibility on this, including the relative impact on international versus North America. He also asked if Completion and Production (C&P) margins could remain above double digits.

Answer

EVP & CFO Eric Carre provided directional Q4 guidance, expecting flattish overall revenue with C&P revenue declining and Drilling and Evaluation (D&E) revenue increasing. He anticipates further C&P margin softening due to U.S. frac market weakness but continued strengthening in D&E margins. Chairman, President & CEO Jeff Miller confirmed he expects C&P margins to hold above double digits.

Marc Bianchi of TD Cowen noted that the company's guidance implies a significant step-down in Q4 and asked for visibility on this decline, questioning if it would be more pronounced internationally or in North America. He also asked if Completion and Production (C&P) margins could remain above double digits by year-end.

Answer

EVP & CFO Eric Carre confirmed that while a precise Q4 guide is premature, the company directionally expects flattish revenue at best, with a decline in C&P revenue and an increase in D&E revenue. He anticipates C&P margins will soften further due to U.S. frac 'white space,' while D&E margins will continue to strengthen. Chairman, President & CEO Jeff Miller directly affirmed that C&P margins are expected to hold above double digits as the company exits the year.

Marc Bianchi asked for clarification on the expected EBITDA progression from Q3 to Q4, specifically regarding the impact of additional tariff costs (232, 25%) on cost of sales, and the status of pipe in transit from Asia that was shipped before the second round of 232 tariffs.

Answer

Chairman and CEO Paolo Rocca stated that Q4 EBITDA is expected to be lower by a single-digit percentage, primarily due to an estimated $40 million impact from tariffs on steel bars entering the U.S. that will be recognized in cost of sales. He clarified this refers to adjusted EBITDA, excluding the anti-dumping gain. President of U.S. Operations Guillermo Moreno confirmed that the full effect of the additional 25% tariffs implemented in June is expected to be seen in Q4, with imports anticipated to decrease further in subsequent quarters.

Marc Bianchi asked about the additional tariff cost headwind in Q4 related to the 25% Section 232 tariff, previously estimated at $70 million quarterly, and if this is the correct way to project EBITDA progression from Q3 to Q4, considering potential offsets.

Answer

Paolo Rocca, Chairman and CEO, clarified that Q4 adjusted EBITDA is expected to be lower by a single-digit percentage, primarily due to an estimated $40 million impact from tariffs on steel bars entering cost of sales. He noted that margins are expected to remain in the 20-25% range, slightly lower than Q3. Marc Bianchi also sought an update on pipe shipped from Asia before the second round of 232 tariffs, still in transit, and its market integration. Guillermo Moreno, President of U.S. Operations, confirmed that the full effect of the additional 25% tariffs implemented in June is expected in Q4, with imports understood to be decreasing and further reductions anticipated.

Marc Bianchi sought clarification on the Q3 sales outlook, asked about the potential to mitigate the full tariff impact through supply chain adjustments, and inquired about the effect of business mix changes on margins.

Answer

Chairman & CEO Paolo Rocca confirmed the Q3 outlook was for a high single-digit decline in sales, not volume. He explained that while expanding U.S. steel production can help, it won't eliminate the tariff impact. COO Gabriel Podskubka added that the temporary pause in the profitable fracking business and lower shipments of high-margin offshore pipe would negatively affect the Q3 margin mix.

Marc Bianchi followed up on the share buyback discussion, asking if previous comments from a September analyst event still held true. He also asked for an update on Mexico, specifically the expected pace of activity recovery from Pemex and how this is reflected in the first-half 2025 outlook.

Answer

Chairman and CEO Paolo Rocca confirmed the overall view on buybacks hasn't changed, but the Board will re-evaluate based on new factors, including policies from the new U.S. administration and potential M&A opportunities. On Mexico, he described Pemex's sharp reduction in investment and activity as 'unsustainable' and expects a policy reset in the second half of 2025, though recovery will take time due to financial constraints.

Marc Bianchi inquired about the expected progression of EBITDA margins in the second half of the year, considering the forecasted 10-15% volume decline and weaker pricing. He also sought clarification on whether the decline referred to volume or revenue.

Answer

Chairman & CEO Paolo Rocca clarified that the 10-15% decline forecast is for sales volume. He projected that the EBITDA margin for the second half would be around the lower end of the previously guided 20-25% range. President of U.S. Operations Luca Zanotti added that high import levels have delayed price stabilization in the U.S., but he expects this to improve as imports recede.

Mark Bianchi asked about the mix of services (installation vs. servicing installed base) and why the 2026 service growth rate might appear to decelerate if it's in line with overall subsea growth. He also inquired about the longer-term impact of integrated awards on servicing opportunities and the vintaging of the installed base. He followed up on the Q4 subsea revenue guide, noting high backlog coverage but potential extra vessel downtime beyond normal seasonality, asking for clarification and progression into Q1.

Answer

Doug Pferdehirt, Chair and CEO, clarified that subsea services growth is not decelerating and benefits from a compounding effect of a larger installed base, breaking down services into installation, inspection/maintenance/repair, refurbishment, and intervention. He noted the substantial growth of the subsea services business. Alf Melin, EVP and CFO, confirmed the Q4 revenue decline is largely due to vessel utilization and normal seasonal activity, particularly in the North Sea, affecting offshore revenue generation, but reiterated that the full-year revenue expectation remains above the midpoint.

Mark Bianchi asked about the mix of TechnipFMC's subsea services (installation vs. installed base servicing), the growth rate for services in 2026, and the impact of integrated awards on future servicing opportunities. He also inquired about the fourth-quarter subsea revenue guide and the effect of vessel downtime.

Answer

Chair and CEO Douglas Pferdehirt clarified that subsea services growth is substantial and not decelerating, breaking down the mix into installation, inspection/maintenance/repair, refurbishment, and intervention services. EVP and CFO Alf Melin explained that Q4 subsea revenue decline is due to seasonal vessel utilization, particularly in the North Sea, but full-year revenue is expected above the midpoint of guidance.

Marc Bianchi of TD Cowen asked for more detail on the Subsea Services success, questioning if revenue was also strong and if its growth is accelerating beyond the overall Subsea segment. He also asked about the lower-than-guided corporate expense.

Answer

CEO & Chair Douglas Pferdehirt confirmed that strong services inbound leads to strong revenue and reiterated the $1.8 billion services revenue target for the year, in line with overall Subsea growth. EVP & CFO Alf Melin explained that the lower corporate expense in the first half was due to timing, with spending on programs like the ERP upgrade expected to increase in the second half.

Marc Bianchi asked at what commodity price level customer conversations begin to be impacted and whether the outlook for subsea services has changed due to potential cuts in discretionary spending.

Answer

CEO Douglas Pferdehirt responded that lower prices have not yet impacted client conversations for long-cycle offshore projects, which have low breakevens (sub-$40 or sub-$30) and are prioritized over onshore investments. He described the subsea services business as highly resilient and not discretionary, as it addresses essential maintenance, repair, and well intervention needs, making it less sensitive to short-term price swings.

Marc Bianchi from TD Cowen questioned the Surface Technologies outlook, noting the pronounced Q1 decline and sharp full-year recovery, and asked for the rationale behind the 20% increase in 2025 CapEx guidance.

Answer

CFO Alf Melin attributed the Q1 Surface weakness to North American uncertainty and project timing, with a full-year recovery driven by strong Middle East growth. He explained the CapEx increase is primarily for a multi-year ERP system upgrade, noting that total spending remains below the company's long-term guidance range as a percentage of revenue.

Marc Bianchi questioned how representative the 2025 Subsea margin outlook is for 2026 and beyond, given the backlog composition. He also asked about the expected conversion of EBITDA to free cash flow in light of recent tax and earnings updates.

Answer

CFO Alf Melin and CEO Douglas Pferdehirt indicated that margins should continue to benefit beyond 2025 as new, accretive orders replace the remaining legacy projects in the backlog. On cash conversion, Mr. Melin reiterated the company's target of converting at least 50% of EBITDA to free cash flow but stated that specific 2025 free cash flow guidance would be provided with Q4 earnings.

Marc Bianchi of TD Cowen inquired about the scale of the expected operating expense increase in late 2025 and whether it was tied to new plans or the existing strategy for 12 modules. He also asked about the potential impact of Fluor Corporation's stock conversion and possible sale on NuScale's go-to-market strategy and partnerships.

Answer

CFO Ramsey Hamady confirmed that the planned OpEx increase for Q3 and Q4 is a methodical step aligned with the existing strategy to develop 12 modules and invest in supply chain commercialization, not for building modules speculatively. Regarding Fluor, Hamady stated that while he cannot comment on their specific plans, NuScale's go-to-market strategy remains consistent and unchanged regardless of Fluor's ownership decisions.

Marc Bianchi asked for a definition of the 'firm customer order' NuScale expects by year-end 2025 and inquired about potential streamlining of the NRC licensing process following recent White House news.

Answer

President and CEO John Hopkins defined a 'firm order' as moving beyond MOUs to negotiated term sheets and power purchase agreements, noting customers are now visiting manufacturing facilities. Regarding regulatory streamlining, Hopkins stated that while some process improvements are possible, the fundamental rigor of safety reviews will remain. He expressed confidence in their current progress with the NRC for the 77-megawatt design approval, which is on track for July.

Marc Bianchi inquired if NuScale was involved in recent competitor announcements with tech companies, asked for details on a $20 million customer deposit, and sought clarity on the timeline and cost transparency for the RoPower FEED study.

Answer

CFO Ramsey Hamady and executive Clayton Scott clarified that their commercial partner, ENTRA1 Energy, is progressing different types of discussions with tech companies. President and CEO John Hopkins added that competitor deals validate the market trend. Hamady confirmed the $20 million deposit relates to progress with RoPower. Hopkins explained the RoPower FEED process is distinct from the prior UAMPS project, with a final investment decision expected in about a year.

Marc Bianchi of TD Cowen asked about the consistent outperformance of North America margins versus guidance, the exit rig count for the international segment's Q4 guidance, and the future trajectory for international margins.

Answer

CFO J. Kevin Vann and SVP Michael Lennox attributed the margin beat to exceptional execution by employees on cost and performance goals. CEO John Lindsay confirmed the international exit rig count for Q4 is expected to be 62. Regarding margins, Kevin Vann stated the current quarter is an inflection point, with positive momentum expected from improving FlexRig profitability in Saudi and growth in other regions like South America and Australia.

Marc Bianchi of TD Cowen requested an update on the expected run-rate contribution from the eight FlexRigs in Saudi Arabia and asked for the activity and margin outlook for the North America and Offshore segments beyond the third quarter.

Answer

SVP and CFO Kevin Vann confirmed the historical guidance of around $25 million annually from the eight Saudi FlexRigs, suggesting this could increase due to operational synergies with the legacy KCAD team. Regarding the outlook, President and CEO John Lindsay noted that while partnerships are strong, lower oil prices are creating uncertainty in North America. Kevin Vann added that June is a "wild card" and guidance was moderated due to price volatility and tariff uncertainty. For Offshore, he described the business as steady but acknowledged that new business could be moderated by global oil price uncertainty.

Marc Bianchi sought clarification on the tariff impact, asking if the gross figure included mitigation efforts and if guidance assumed any benefits. He also inquired about Q1-to-Q2 seasonality and any unusual cash flow items to consider.

Answer

CEO Jillian Evanko clarified the estimated $50 million annual gross tariff impact does not include mitigation efforts, and the company is confident it can manage the impact within its existing guidance. She confirmed typical Q1-to-Q2 seasonality is expected. Both she and CFO Joseph Brinkman noted normal Q2 cash outlays include a semi-annual interest payment and higher tax payments.

Marc Bianchi requested the percentage of 2024 orders from LNG and the outlook for 2025, while also seeking clarification on margin impacts from inefficiencies at the 'Teddy 2' facility.

Answer

CEO Jillian Evanko estimated LNG orders were 20-25% of the 2024 total and projected a similar mix for 2025, calling it a conservative view. She clarified that the Teddy 2 facility costs in H2 2024 were due to non-repeating supplier issues and that the Specialty Products full-year gross margin would have been approximately 29% without them, offering a cleaner baseline for 2025.

Marc Bianchi requested context on the $23 billion commercial pipeline and nearly $2 billion in commitments, questioning the order progression for Q4 and early 2025 given the softness in Q3 Specialty Products orders.

Answer

CEO Jillian Evanko stated that demand remains strong across most end markets, with the exception of China's industrial gas sector. She attributed the Q3 Specialty Products order weakness to project timing, not structural issues, highlighting a verbally awarded $40M+ mining order. She noted the pipeline is growing with wider adoption of IPSMR technology and expects the Q4 book-to-bill ratio to be 1.0x or greater.

Marc Bianchi asked for the expected cadence of EBITDA and free cash flow in the second half of the year, particularly the progression from Q3 to Q4.

Answer

CEO Jillian Evanko projected sequential EBITDA improvement through the back half, avoiding a significant 'hockey stick' jump in Q4. For cash flow, she anticipates both Q3 and Q4 will be positive, with Q4 being stronger than Q3, and confirmed that Q3 free cash flow is expected to be an improvement over Q2.

Marc Bianchi asked for an explanation of the expected margin improvement in the Underground Utility and Infrastructure Solutions segment in 2025, following a weaker margin performance in 2024.

Answer

President & CEO Earl Austin attributed the expected margin recovery to several factors: an anticipated improvement in the industrial business, a shift in Canada from large pipeline projects to core LDC work, the accretive nature of recent acquisitions, and a rebound in capital spending by gas utility customers. He added that while he expects improvement, he is not yet satisfied and believes the segment can ultimately reach upper-single or even double-digit margins.

Marc Bianchi of TD Cowen asked for an on-the-ground perspective on labor and supply chain challenges for renewable developers, inquiring if the situation has improved or worsened recently.

Answer

President and CEO Earl "Duke" Austin reported that key supply chain items like transformers and breakers remain constrained; the situation hasn't worsened but also hasn't improved, having 'stayed the same.' He expressed high confidence in Quanta's ability to manage these issues for its partners. On the labor front, he was unequivocal, stating Quanta's workforce capacity has consistently outpaced any project constraints and could handle a significant ramp-up in demand.