Managing Director for Natural Resources at Water Tower Research. Before we begin our discussion, I'd like to remind participants that our discussion today could include forward-looking statements as of today, April 10, 2025. NESR's disclosures regarding such statements can be found under the Investor Relations tab of its corporate homepage. NESR is the largest publicly listed pure-play diversified oilfield services company that's solely focused on serving national oil company and international oil company customers in most of the major MENA region markets. Saudi Arabia contributes more than 50% of NESR's revenue, and together with Oman, Kuwait, and the UAE, the four countries contribute about 75%-80% of total revenue. Sherif, I'd like to take the opportunity to thank you for joining us today.
Thank you, sir.
Let's start out. I'm curious how NESR, headquartered in Houston, has been able to build relationships with the largest NOCs and IOCs in the world to access some of the largest and most stable oilfield services markets in the MENA region.
If you look back on the idea or the ideology, it was always to form a very strong local, Middle East, homegrown, if you like, company that serves the entire MENA region and, at the same time, connect the capital market of the U.S. to it. A lot of the time, especially from my background in a multinational company, a lot of the investors wanted to link or wanted to invest into this Middle East region, but there is nothing to buy because there is nothing publicly listed. That is what we created. We said we are going to be national in every country. We are Saudi in Saudi, UAE in UAE, et cetera. We have our office there. We have our local people.
At the same time, we have a representative office in Houston where basically the client and some of the investors and some of the technology can have an easy reach to us. It does not have to fly to Saudi. It does not have to go to UAE. We have a representative office. That is why if you look at it at our, when you call it headquarters, it is not really headquarters. I mean, we have 7,000 people, and we have six people in Houston. We have a very nice office in The Post Oak, and people can come and join. We do a lot of the deals. We do a lot of the M&A, and we have a lot of the technology search, which I am sure you are going to ask me about it, that we do in Houston.
You're really a local MENA-centric oilfield services company who just happens to be headquartered in Houston. That's, I guess, the way to think about it.
Yeah. Representative office in Houston. That's what I keep saying it. Yeah.
Okay.
Yeah.
Let's talk a little bit about the volatility in the market that we've seen in the last couple of weeks. Oil markets have turned lower in response to OPEC +'s decision on April 3 last week to return about 411,000 barrels of oil to the market beginning in May of 2025 and some of the economic uncertainty around the administration's on-again, off-again tariff strategy. Can you talk about how the markets that NESR operates in react to price volatility?
This is actually one part of the fundamental why we formed the company, that this is a market that is very stable, that is very long-term, that is characterized with very long-term contracts, which means in the cyclical business like the oil and gas, which happened four times in my lifetime, we don't get affected as much as the U.S. We get affected, but not as much. In some cases, we don't get affected at all, actually, because it's activity-linked. If you look today on the current environment, that cycle, which is characterized by drop of oil, drop of demand, however, activity is the same. Why? Because all these OPEC countries want to maintain a certain capacity, and they want to increase their capacity.
You have excess capacity where people can, what we call, open and close a tap, which is Saudi Arabia really is the leader on that. They have 3 million barrels today they can play on, which means they can open and close, and the rest of the guys want to have the same. That is why you have growth in Kuwait. Why do they do that? Because they want to have that capacity to be able to play. I can close and open the tap, which means for us, it is good because my activity is not affected. Today, my activity is not affected at all, actually, right? I am serving the same region. The only thing, if you saw, we grew, for example, what we always say, we are going to double the growth of the region because we are small. We can grow faster.
If the region was growing at 10%, we grew 20%. At 5%-6%, we grew 12%-15%. The same thing is going to happen in 2025 over 2024, where the region is going to grow maybe 3%-5%. We're definitely going to grow in the 10% region. That's why we have that. Sorry, go ahead.
You're referring to CapEx growth in the region and revenue growth for NESR.
Correct. Absolutely.
Okay. Just work.
That is why you see the whole price war, or you call it tariffs, whatever. In the U.S., that is why the audience, when they are from the U.S., they do not understand because that is unconventional. Unconventional is you have to keep drilling, keep producing, and the CapEx burning money. It is not the same in conventional in the Middle East. You have a well that produced 10,000 barrels per day. It keeps producing. Your activity, yes, will get affected a bit as a service company, but the intensity is different. In the U.S., you have to shut down because you lose money. You lose cash. Below $50 in the Perm, I mean, the rig count in the U.S. is going to drop to half if the oil price goes to $50, right? It is not the same in the Middle East.
Right. One thing I wanted to ask you about, since just given your history operating there, OPEC said in their announcement that they will continue to monitor market conditions.
Yes.
From your perspective, do you have any color on how they might react to Brent around a $60 level with the return they've talked about?
In my personal view, they are not going to keep pumping if the oil keeps dropping. In a sense, basically, and that's why they put the disclaimer, if you like, right? Obviously, there is a geopolitical kind of messaging between the U.S. and GCC that is obvious to show support to the U.S. administration. That's why you have the oil and the flow of production. If it starts to go below $60, then goes to $50, they cannot afford it. They will not just pump oil because they want to look good. They will have to shut down. That's why I think they put a very clear, depending on the market condition, they are going to stop that flow, minimize it, restrict it to what it used to be to ensure that the price does not just collapse.
I mean, at $40 oil, these countries, all the countries will have a serious problem. Obviously, the U.S. will have to shut down, right? Because at $40, nobody makes money in the U.S., right? In shale. In the Middle East as well, we'll have a problem because their budget is based on a much higher number with a commitment of social spend between all the countries. They cannot afford it.
It sounds like from their remarks, they're committed to market stability.
Correct.
Let's just close out on tariffs. Since NESR operates in the Middle East, do you all have any exposure to tariffs that have been put on by the U.S.?
Zero. I mean, I have no impact whatsoever. The difference would be, obviously, you have the U.S. and the GCC or the Saudi, UAE, et cetera, almost have no customs, no tariff, nothing. I mean, now, obviously, they have this minimum 10%. But from my perspective, it's so small. It's negligible. If you think about it, if you buy equipment, 8% of your numbers, and that becomes 10%. So it's like nothing, 1%, right? Cost, right? It's not really an issue. I think the stuff that we come outside the U.S. through the GCC, nothing has changed. From Europe, nothing has changed. We obviously procure a lot locally. That's the whole idea. No, there's no effect at all almost on our business as NESR.
Just on restoring production, if they move ahead and bring production back into the market, does that translate into capital spending? That means business for NESR, or does that translate into, as you said earlier, opening the tap, or is it some combination of the two?
I mean, if you think about it, if they increase production and they want to increase capacity even more and they go to, again, the same, if you like, the flooding the market, right, which was a strategy that did not work before. Let's say that for the sake of argument, this happened. Meaning what? Meaning I'm going to have more work, right? My activity will increase. I still don't like it. Why? Because the client will not make any money, or their money, their margin will be small. Even if I have more activity, they will have to come and squeeze me. The way it works, they don't squeeze me the same way they squeeze the U.S. because the U.S. becomes very bad in a downturn because people work actually for loss.
In the Middle East, what they will ask you, "I have a contract with you for five to seven years. I want a discount because of that price. I have to honor the contract, but I need to give a discount because now there is a flood of the market of equipment, and they know that they have to squeeze." You're going to get a squeeze on price. Your margin will, but activity, you will not have a problem. On the contrary, you'll have actually more activity.
Am I right in taking away that lower oil price and ultimately you'd rather have your customers be companies like Saudi Aramco and Kuwait Oil Company than U.S. unconventional producers?
No brainer. And in every downturn, that's exactly what happened. I mean, if I look at, again, the big oilfield diversified company, we in a serious downturn, and people actually were shocked about that. In one of the worst downturns, some of this multinational company made money only from seven countries in the whole world. The six GCC plus Russia. Everything else lose money. Deepwater lose money. Europe lose money. U.S. lose a ton of money. Yeah, absolutely. Our focus area is the best.
You compete with the likes of Schlumberger and Halliburton. As a smaller company, how does NESR carve out a niche and compete with larger global diversified oilfield services companies?
I mean, our philosophy or DNA from the start was we have to operate in a top quartile, which is what I call the top three in service quality, service delivery, HSE, health and safety, operation efficiency, et cetera, right? I have to be that good, right? Now the client, think about it as a client, right? Today, you are Mr. Big NOC, and you have all these, if you like, foreigner or multinational company that you are very happy to work with, by the way, for a lot of years. You want to diversify your supply chain, right? You have this national champion or local company that performs exactly the same level or even better in those services. Their people are local. Their quality is impeccable, et cetera.
You start to say, "Okay, let's give them 5%, 10% of the work, 20% of the work. They still perform even better. They are cost-effective. They are not much, but they are maybe a couple of percentage points cheaper, and they are more effective, and they are local. No brainer. I give them as much work as I can." Being small like us is easier. If I have overall a market share today of 5%-10%, I can still keep growing at this double digit because I'm small. If I become 50% market share, I will not outgrow them. I will have to grow with the market and drop with the market.
Today, because I perform so well in quality and I am national and I perform even better with a bit of a cheaper price or similar price, the client is very happy to keep giving me work. The proof of that, it's just not talk. Today, we are the largest service company in four segments and from nothing, right? Today, I am the number one, I think, in coil, in slick line, top three in cementing. That's where we want to be. Top three in market share in our area. The other part that is what I call lucky, that we can be choosy, meaning in a segment of the market where the pricing is very bad, I can afford not to participate because I know I won't make a difference in quality and the price is already very bad.
I cannot even compete with the price. Actually, I do not even penetrate that market. Again, being small, you can.
Your local company who competes in the higher margin parts of the market, and that helps drive your revenues faster than overall and your margins for that matter, faster than the overall industry in those local markets. Am I summarizing it correctly?
Yes, absolutely.
In 2024, your revenue grew about 14% and your gross profit margin expanded by a little over 300 basis points. Adjusted EBITDA grew 18% in 2024, and the adjusted EBITDA margin expanded by over 90 basis points. Can you maybe expand or build on that of how you all have been able to turn out very solid growth and margin expansion in a market where, as you said earlier, customers are trying to claw back some margin?
If I look to be quite frank, and a lot of it is people just don't know, right, because they don't have visibility on that market. This is the margin of the Middle East, right? We are not like doing so much better than others. No. This is the margin. If people look at the big guys, that's their margins, right? It's an acceptable margin. By the way, this went down significantly from the vast history. Because again, people talk about the U.S., right? They are not used to it. We used to do normal 40%-50% margins, right? Because again, if you look at that from a holistic view, the total cost of operation of OFS versus the price of oil is very low.
If you are today a customer, right, and let's say you produce at a total cost of $6, $7 per barrel, the OFS service cost is maybe two, right? If the oil price is 100, why do you care the two to be one and a half? I mean, what you care is that this two part of their cost has good technology, has good delivery, trained the people, takes part of the whole geopolitical and the whole environment and ecosystem, more important than the two become one and a half because it's irrelevant for your total cost, right? Now, obviously, that margin decline from the client or the cost of operation becomes bigger. You still want the price to be better, but you don't squeeze as much because the other social impact of the service industry is more important, right?
I think we are part of that ecosystem. Again, I'm not better than the others. We are like kind of that is the same margin. We are better of being growing. That's why I want to grow faster, which I can. We can maintain those margins fixed because that's how we can operate at a much larger scale. Today, as I said, when we formed the company and we combined, we said we're going to double the company every two to three years, which we managed to do that, I mean, more or less. What we need to do is we think we can go and reach the $2 billion mark, which is very important for us. I think we can reach that even in a market with tariffs, lower demand, and all this stuff.
We can still reach that, which is if you are big, it's almost impossible to do.
You talked earlier about having an office in Houston that helps provide access to Middle Eastern markets for people who may not otherwise have it. NESR's grown through strategic acquisitions and co-investments with technology innovators, which have brought capabilities to the markets that you serve. Can you talk a little bit about how investors should think about the open technology platform that NESR talks about and how that translates into bringing technologies and growing the addressable market?
Yes. One very important aspect of the innovation of our industry was the access to research, access to university, access to client to be able to test the technology, and obviously being strong financially that you can spend on this R&D, right? If people try to think about what is that cycle, you're talking about 8-10 years. Some of the technology innovation, right? I mean, by the way, the oil and gas industry has some very cool stuff, right? I mean, it's NASA that took some of our innovation. There is a lot of technology because you are downhole at 20,000 feet in the ground with temperature of 400 degrees, and all the electronics has to work.
If you have your iPhone and it goes a bit in the pool or something, it doesn't work, or you cannot go to the steam room with it, right? Today, can NESR do all this? Absolutely not, right? No way, right? We adopted a very different approach to all the service industry. We said we're going to be an open platform. I have the best infrastructure today in the Middle East. I'm exactly the same, like the best two service company from structure, research center, offices, yard, customs clearance. I know everything about the Middle East. Now there is a lot of innovator here, which is basically between the U.S. and I would say Canada and Europe that have a lot of cool stuff, right?
Like very innovative technology, very, very, but small, small like a venture capital, small guys with a lot of very good ideas, right? What they need, they need access. They need some funding, and they need obviously knowledge to understand how does this work. I provide them all this. They have the cool technology. We team together, and I tell them, "Guys, you can keep your IP because I know that's what the most you're going to be so scared that I still no, we are open. We don't hide you. We are not an agent. No, we actually come and take your hand, and I take the CEOs, and I give them access to some of the most prominent people in the Middle East." We tell, "After I do my due diligence, and I believe that their technology is good," right?
I'm not, sorry to say, a taxi driver on Uber, right? No, I go technically, I have very good solid technical people with hundreds of years of technology knowledge. We test, we check, we make sure. Once we vet this company and we say this is very good, either I invest in them, which I have today eight investment in like a venture capital. I become, I have a board seat. I take ownership. I change some of even their path to technology and become part of the company, but they stay independent. Obviously, they have the access. The company is very well established, right? Very well established. They do not need me. They do not need me in funding. They do not need me in technology, but they need me in access. I do as well a partnership.
You see, we have the both model, and today we have almost 20 of those. The client from the other side, if I loves it because the client, let's say you are an ADNOC or KOC, they know this company. They heard about it. They would love to see this company come. If they go to the big guys, they will never allow them. They come to me, and I allow them, and they love it because now I give them that open source without saying, "If you don't take it from me, I will not have it." No, I will bring, I will help them. I will set them up if you guys want them. It worked very well so far. We have, as I said, like 20 of those between investment and partnership. I think that serves both of us and serves the client.
As a part of that strategy, you built and operate a research and development center in Saudi Arabia and recently signed an MoU with Kuwait Oil Company to set up a research facility in Ahmadi Innovation Valley. How critical are having research facilities in Saudi Arabia and building one now in Kuwait to that strategy of providing a bridge or developing technology locally that your customers need?
Absolutely crucial. Why? Because if you want to elevate yourself from being a local outfit to a national company with a vision to be as good and as strong as the big guys that had everything, you have commitment, you develop people, you train them, you have research, you go with the academia, you are long term, you have the financial muscle to spend money, they look at you totally different, right? That is why I go back to the same vision since the start of the company, why local company did not succeed in the Middle East for the last 75 years? Because of lack of that kind of vision of long term and establishment, the anchor of your research, knowledge, people, if you like pedigree or you see what I mean?
If I have PhD guys that are working in Saudi Arabia on a project that is for five years, the client knows that I'm here to stay. The client knows I am doing that because I'm investing for the future, and I believe in Saudi Arabia, and I believe in this. That's why I'm hiring local people in research because that's basically money. I don't make any money out of it. It's a cost. It's like a levy, right? That sort of commitment gets you to the table to a different degree than the rest. I always like it when I'm in Saudi or Kuwait and the client says the big four, the big five, I'm from that crowd, right?
The AIV we did in Kuwait, which is Ahmadi Innovation Valley, which is orchestrated by my dear friend, the CEO of KOC, who is very visionary. We were selected companies that will make a difference. Selected meaning I'm going to, again, bring some technology, bring some people, and will be able to even invest and build that facility so I can house those people to come and develop something that is what I call fit for purpose for the reservoir of Kuwait. That will translate in the longer term in a lot of activity and a lot of stuff. If you are very short term, if I talk to this, for example, to a banker and I tell him this is the return and he tells me, "Are you crazy? Why are you spending all this money?
When are you going to get your return?" I tell him, "No, no, this is very long. If you look at it, what is the percentage? This is like my R&D budget that I do, but I do it nationally.
You're essentially fostering a local entrepreneurial culture to develop new technologies specifically geared toward the reservoir issues that your customers are dealing with country by country.
Yes. Obviously, you have to have the skill, and you have to have that kind of agreement with the leadership of the country. You cannot do this in everyone because you will never be able to succeed.
Natural gas is getting more attention in some of the MENA countries as they look for ways to displace oil from their power generation system. How is NESR positioned to benefit from that trend, and especially in Saudi Arabia where Aramco aims to significantly expand production capacity at their Jafurah unconventional gas field?
If you look at the Middle East and the vision of their leadership, they want to move to what they call 50% renewable, 50% gas for their internal consumption. The drive in the Middle East for gas is different than the rest of the world in the sense that they are doing this for internal consumption. That's why it's regardless if the gas price goes to Henry Hub at a dollar, they're still going to continue with the project, zero effect. The best proof is Saudi Arabia with Jafurah. Even if they dropped the oil rigs, they dropped all the stuff, they did not touch the unconventional. It's a vision to maintain that you do not burn crude for power and become environmentally friendly with climate.
Even with COP27, COP28, which is again long term of the Middle East, not just because now people don't like ESG as much, I'll drop it, I'll go burn coal. No, I have that commitment for the climate and for the internal consumption to be gas and renewable because I always said gas is not a transition fuel, it's a fuel to stay. That's where we become part of that equation because obviously we service the customer for that gas. Our exposure to offshore, onshore gas, oil, it's the same with the client spectrum. We work on all. Obviously, we are actually more leveraged to gas, especially in Saudi. We will benefit more because we will be not affected by the drop if they drop more rigs for oil.
Does some of the requirements or services that you supply for or that customers need for gas, does it differ much from what they need for conventional oil? Is there any margin impact?
No. Not at all. The only thing you have, if you look at this from a surface or if you are a generic, you don't know what is oil and gas business. If you are in the service business, it doesn't make any difference. The only thing on the unconventional versus the conventional that you need a lot of frac for the unconventional. The tight formation of oil or gas, obviously nobody's doing unconventional oil in the Middle East because there's a lot of conventional oil. The gas, because they need it again for internal consumption, yes, the profile is very similar to the Permian, which is multi-pad wells, a lot of very fast drilling, manufacturing mode, which is factory. You have a lot of frac. Margins are lower, but activity is higher.
Along those lines, we talked about bringing technologies to the region. You all or NESR introduced the Roya drilling platform, I think in 2024, and have won some contracts for directional drilling. Is that one of the instances that was developed through your technology platform? And are there other technologies that you see being used maybe in the U.S. or Canada that you think could be next to be introduced into Saudi Arabia or Kuwait or one of the other countries you work in?
Yeah, this is unique, Roya, in the sense of that's the only technology that we developed, basically, right? As I said, we do a lot of people develop the technology already. We team up with, we give them some money, et cetera. In that instance, is it a different? Obviously, it was people that came to us with ideas, which we liked. We said, "Okay, let's put money with one of our very close private equity." We said, "We are going to sponsor basically this, and we are going to build and change direction." We entered from the R&D side from the beginning and brand the tool, test them, et cetera, right? That's very important. Why is that? Because we looked outside, we didn't find anything.
There is nothing in the market today that can compete with the big, I would say big three on the same level. If you take back from what I said from the beginning, I do not want to be a second generation or poor performer or low technology. That is why we said, "Let's invent this stuff with our partners, the company that we put a lot of money on and spend the money." That is why we think it is going to be a big differentiator. The beauty now is we want the contracts for it. It is a matter of deployment. Today what I am doing, we are doing what we call a deliberate extensive testing and deployment, which means I deploy when I know it passed stage A, stage B, stage C, stage D.
I make it a very scientific deployment to ensure the success of the tool.
I call it what I call a commercial success. Today we know it's a technology success. We know we are deploying already. We drilled 70,000 ft in the U.S. Now we need to make sure we are in Saudi, in Kuwait, in Oman. We are going to deploy in those three countries over the next 18 months to make sure that good to go, it's beautiful, we can gain a lot of share, and then we go expand outside those.
Can you describe the adoption process as you test that system in each country? Let's say Saudi Aramco says, "We like this, it works." Does Kuwait run its own adoption system and testing in Oman?
Each one does his own field testing. Each one does his own TTR, what I call trial test. If you are not present there, it's almost impossible to do it, right? That's the barrier of entry in some of those technologies. Being established there, obviously, makes a difference. In a way, I have to say, I have to be honest, I like it because if it's easy, everybody will do it, right? In a way, it's a long process. Now, the development of the technology is very complicated, what we built, which is the rotary steerable and LWD, because there's a lot of electronics, a lot of moving parts, and it takes time, right? It's not something that you can repeat, right? In big companies, this is again, 8-10 years. We spend now, what, five years on it.
We have tools and we deploy it. I think we can have a very nice story to tell towards the end of the year.
I think so the market share for that system comes from bigger companies?
Yes, only big companies. I call it big three only, to be honest. The rest is irrelevant.
I think you said at least in your slide deck that that could be a $2 billion or the $2.5 billion per year type of market. That's for total steerable in Saudi Arabia?
No, no. That's the total market in MENA for that market. That's why I keep saying 10% of that is $250 million, yeah.
Okay. How long does it take to commercialize a product like that? How long do you think it will take to run through the rest of your commercialization work with Saudi Aramco? I think you said maybe end of the year?
Yes. I already have been working on this for, yeah. I mean, I can call it commercial today, but I don't because I call it until I am satisfied with the extensive testing, then I call it still what I call E&P tool, right? I mean, I would call it 100% commercial. It's on Amazon, you can buy. Then I say it's good to go.
Lastly on that, can you share any color on what you think the revenue pathway would look like over the next several years as that product is adopted more widely?
Yeah, our target is to make $150 million-$200 million next year.
Okay. One of the other, you mentioned shifting away from oil and power partly for environmental issues. In 2024, NESR consolidated its ESG impact segment into NESR Environmental and Decarbonization Applications, which you call NEDA. Can you talk about how NEDA can help your customers and countries further their ambitions of continuing to be the lowest carbon intensity oil supplier to global markets?
Yeah. I am very passionate about that. We started this before ESG was in fame, because we believe it, right? We believe that if you are part of that ecosystem in a country, part of your responsibility is the people, the local knowledge, and the climate, right? Today, if I look at the energy sector, they do a lot of stuff of, again, lowest carbon footprint per barrel. Outside, we produce a lot of water. We still emit. We still flare. We should stop that, right? I think in COP27, when the industry started to become part of that dialogue, which was good, you had the COP28 with the methane pledge, 2030 zero, and you had the water. It is a good story.
We have a very strong enabler of those tools that I want to provide to the client to tell him, "I can make this economically," right? Because I know at the end of the day, and again, let's just be frank and straight, if I'm going to pay more because I love the climate, it's not going to happen. I want to make sure that the client knows, by the way, today you dump water in the sea, right? It should only be, let's say, 4 PPM or whatever it is, the rule of every place. I can take that water instead of you dumping it and cleaning it to that level to be able to dump it. I'll take it, recycle it, use it for all the villages around you, and you're going to give them water to do their agriculture, drink, and build trees.
Today it costs you how much? $0.30. I'm going to charge you $0.30. 30 cents. Right? Right. Sorry, we have echo, right?
Yes.
You're okay? Okay. Now all the clients, if you are a client, no brainer, you're going to give me the contract. Unless you are an evil person or something. I mean, you tell me, "Okay, Sherif, 30 cents, I pay 30 cents, take it." What is the problem today? It does not cost you 30 cents. It costs you 30 cents. My solution or the solution of the industry costs 80 cents, right? That is why nobody does it because it is economically non-feasible. What I am doing with NEDA, which again means call to action in Arabic, is say, "Guys, I am going to enable technology, and I will close the dot with other industry to make that circular economy feasible." I know nobody else is doing that, right?
We took technology from outside the oil and gas, adopted inside, and created some other market for the, if you like, for selling some of our product to them. The entire holistic story becomes economical. This takes time, obviously. We've been developing it, but we have an amazing client, which is again Saudi Aramco, right? They are a real believer of climate, a real believer of, "Can we make a difference?" Today we did two pilots with them on water. We are doing a pilot on mineral recovery. We're going to even do something on lithium, right? Imagine if I can put all this together, this can be a bigger business than my oil and gas business.
It is really geared to serve Saudi Arabia and Saudi Aramco's goal of diversifying the economy with other industries because everybody needs water. You operate in an area where there is not a lot of fresh water. You close that loop between recycling produced water for use in other industries, and it really fosters growth outside of the traditional oil and gas industry for the country. Am I following it correctly?
Yeah. I would characterize it a bit differently if you allow me. It's not to diversify and be a water business, no. It's to make the water that we dump economical enough to serve your internal. You keep the RO plant water because the desalination has to happen in the Middle East. There's no water, as you said. I do not need to use that desalination water in my oil and gas industry. I prevent taking from the desalination plant internally. I get minerals that I can sell, and I make that project economical. It's really to make the lowest carbon footprint more visible for the oil and gas industry and have an equivalent. I tell you, it's not Saudi Arabia, it's the whole Middle East.
Another project we did in Iraq where basically we took the place where they do not use some of what they call the underground water, which is already very salty. Why cannot I take that and use it for, again, oil and gas and prevent using desalination water for oil and gas? I am decarbonizing, really decarbonizing on a bigger scale the energy sector, the oil and gas sector. I think we are, I would say, I think we are the only one really working on that from that holistic view. If we have a project at a scale, successfully done, I think it is going to be a real game changer in the world.
Can you talk about the path to commercialization on some of those technologies?
Yeah. Pilot, success, economic success, then it's a commercial. I think if I can get the economics to work by next year, I will not have enough supply for the demand I'm going to get. As I told you before, it's going to become a no-brainer. It costs you $0.30 to dump it. It costs $0.30 to give it to me. You're going to give me the $0.30 and you give it to me. There are six barrels of water for every barrel of oil. That business is 6X the oil sector.
You're kind of back to the notion of displacing oil. You're displacing the industry's demand on desalinated water so that stays where it needs to be. And you're closing the loop in the oil industry to keep that water and reuse it.
Correct.
Okay. Very good. Sherif, we're getting toward the bottom of the hour. I'd like to maybe close by you're clearly exposed to some very dynamic markets with customers that are looking for complex solutions to their oil field and gas field operations, but also some of the other issues that they deal with around decarbonization that we spoke about. Can you just kind of maybe summarize for us how you think the exposure that NESR has in the Middle East really positions you to build value and compare that to some of the peers who are more North American centric?
Yeah. Look, if I would simplify it, today this market is $20 billion-$25 billion. It's going to here to stay forever, meaning it's going to be the last produced barrel in the world, for sure, right? You're talking about a factor of 5-6 of cost. So you produce anywhere between 6-10 barrels, $10 per barrel. Worst case is $20, right? Versus anywhere between $30-$70, right? So that cost curve will always be there. The last drop of oil will be there. If you are a believer that the oil demand will start to go down and EV will be a huge success and everything, you're talking about 50 years. That 50 years will be the Middle East. We are exposed in that region. The market service industry, as I said, is $20 billion-$25 billion.
We are $1.5 billion today. Our growth profile to go to $2 billion-$2.5 billion is very clear, very steady. We are in the best neighborhood for oil and gas, the least affected by the cycles, the least sensitive to oil price. Gas is always in demand for internal consumption. We are perceived as performing nationally and locally with a lot of interest to the government and to the oil sector and to the NOC and the IOC as well that's working there. I think the resistance or the viability of our company and resilience to change is very strong. We are here to stay, and we are not part of this, "Oh, you know there is tariff, Trump changed his mind, the price goes down, the five service company went out of business." We do not have that problem.
In that sense, the markets that you operate on are like Boardwalk and Park Place in the Monopoly game?
I wouldn't say at all. I mean, it's not monopoly at all. I mean, it's a multi—it's actually every contract, if you look at the tenders, every tender, and the clients are very smart. They award five or six or seven or eight even suppliers. They give you your market share, obviously based on the price and quality. You have a five-year contract, and based on that, you can maybe become number two, number three, number one. They made the formula price-quality. If your quality is terrible and you're very cheap, you're going to get no work because you're very bad because you cost the client money, right? They want a multi-award, a multi-contract. Once you have that, you're very strong. Today, look at the Middle East.
If you look at a company like Schlumberger, for example, they are 80 years, 90 years in every country. It is actually very stable. They build a lot of infrastructure. They have a lot of local people. Similarly, you have a local company. You have now us, National Champion, which we are unique because, again, publicly listed on the U.S., but operate solely mainly in the 15 countries with a lot of diversity, etc. No, I think it is, again, resilient, long-term, compliant, and we provide some unique technology or unique feature, which we spoke about over the last 45 minutes, that I think makes us resilient and here to stay.
I guess just to close back to your comment earlier about activity levels in the U.S. dropping with oil prices, a lot of contracts I think that companies here work with are pad to pad or in some cases well to well. You have a five-year type contract. You have a lot more duration in your business than probably some of your North American centered companies have to deal with.
Oh, absolutely. I mean, I have what I call a backlog or a very good view, or you call it a funnel. I know exactly the worst case scenario if this happened, what happened? I'm going to lose, for example, 20% of my business because they're going to shut it down. The other is to stay, right? I know I have a very good visibility of what's happening. When I used to work in my older life in North America, and I used to talk to the client, they told me, "Sherif, next week don't come." That's it. That's as simple as that. When you finish the well, don't come. Just park home.
I talked to some of my dear friends, the CEOs of companies here in the U.S. in the last conference, and they told me, "Yeah, at $50, we're going to shut down 50% of our rig fleet." They can do that as fast as shutting down the pad, finish the pad, and end of story, and release the rig at the end of the well. You do not have that. You have a very stable situation, but again, you have to think about it. The client does that because the client is the country. The whole issue is you have supply chain, you have employment. It's totally different. The country is dependent on that business. I mean, all the export and all the money comes from oil and gas.
I mean, oil and gas in the U.S. is a small, tiny part of GDP, but it's like 80% of these guys. There is nothing else to do, right? It is fundamental for their business and to survive.
Sherif, I think we'll leave it there today. It's interesting to talk to you about NESR's business, but it's also the concept that you do operate in markets that have a lot of visibility into your future cash flow and earnings power. With growing technology, there's room to expand that. I'd like to thank you for taking the time to join us, and we look forward to hosting another Fireside Chat with you in the near future.
Thank you. Thank you very much. Appreciate it.
Thank you.