All right. Well, hello, and thank you for joining us here today to learn more about Oil States International, which is a publicly traded company on the New York Stock Exchange under the ticker OIS. My name is Matt Autenrieth, and I'm the CFO of the company, and I have my colleague, Brian Mizell, here with me today. He's the Vice President of Investor Relations, Business Development, and Marketing. Before we begin, I'd like to briefly acknowledge that my comments will include forward-looking statements. Please refer to our public filings for the related risk factors. This is an overview of why we think Oil States is a great investment opportunity for you. Oil States is a technology-driven, cash-generative manufacturing company, which provides critical components that enable the production of energy across the globe. This is a mature business with proven technology. It was established in the 1940s.
We have over 2,000 employees today, with manufacturing centers all over the world. I'd like to first frame why I believe Oil States is positioned for a meaningful valuation upside. The current macroeconomic environment is setting the stage for a growth cycle in energy production, coupled with increasing energy demand. The conflict in the Middle East is bringing energy security to front of mind for governments all around the world. This bodes well into our strategy for deepwater offshore development content that we supply in basins like the Middle East, Latin America, and West Africa. The current backlog for our products and technology is near the highest level in a decade. The current valuation and cash flow profile of the business, coupled with a balance sheet that is net debt zero, provides an attractive investment opportunity.
Today, Oil States is trading at around 6 times our 2026 consensus EBITDA, which is more than a 30% discount to our peers. We're a global manufacturing and technology company that has an asset-light business model that supports stockholder returns and strong free cash flow generation. I hope to further illustrate these points as we move through our presentation. This slide is an overview of our three operating segments, all of which serve the global energy sector. The majority of our revenue and EBITDA come from our Offshore Manufactured Products segment. This business has manufacturing operations in the U.S., Brazil, U.K., Indonesia, Thailand, and India. We primarily manufacture and design capital equipment and provide related services that aid in the production of oil and gas from complex deepwater wells. To a lesser extent, we provide certain products for the military, specifically naval applications, as well as other offshore energy projects.
Our Completion and Production Services segment is an equipment rental business tied to the completion of oil and gas wells in major U.S. shale basins, the Gulf of America, the Middle East, and elsewhere in the world on a fly-in/fly-out basis. Our Downhole Technology segment manufactures and distributes highly engineered perforating systems and other single-use consumable products that go down the wellbore and do not return. They're either exploded via frac guns, or they're drilled out where fragments come back up the wellbore later. These are consumable in nature, so they're single-use. Every time you complete a well, you're going to need these products again. On this slide, I'd like to point out how we've strategically realigned our business. In 2023, around 50% of our revenues were from North American shale basins. Today, that's decreased to 25% of our revenues. We've strategically realigned the business for deepwater offshore production.
We've done this through the divestiture of certain product lines in North America that were not cash generative and had high CapEx requirements. We feel that this positions the business to be much more cash generative going forward. On this slide, we'd like to highlight a couple of our key technologies, specifically our FlexJoints. This is a flexible joint that connects rigid riser to a floating production and offloading system. We have a number 1 market share position in the world at 80%-85%. This is a critical component that Oil States is relied on heavily to provide. Also, we have our Managed Pressure Drilling system. This is a new technology that we've developed organically. It enhances the safety of offshore drilling operations to reduce costly rig time that is now in short supply.
The demand for our products is driven by ongoing partnerships with major engineering, procurement, installation, subsea, and drilling contractors all over the world. In this slide, you can see a diversified products portfolio that spans multiple long-cycle offshore markets. We continue to expand this product line through organic research and development activities. I think a good way to think about the types of equipment that we provide is this is hardware that connects everything together in a subsea development. We're providing a lot of the critical components that are deep water, high pressure, critical components that the EPCI contractors use to extract the oil and gas from the wells in the deep sea environment. Here we're highlighting our backlog. March 31st of this year, we had $430 million of backlog. This is near the highest level in a decade. Our backlog conversion to revenue is around 50% today.
The last 12 months, our book-to-bill ratio was 1.2 times. We expect that ratio to be above one again this year. This business is continuing to grow. The backlog is specific to our Offshore Manufactured Products segment. The other two segments do not have backlog or not reported backlog. Here, I'd like to talk about our Completion and Production Services segment. This is a segment where we have done a lot of restructuring over the last couple of years. Three years ago, this segment had EBITDA margins below 15%. At the first quarter of this year, we reported EBITDA margins just under 30%. That's the new run rate for this segment of our business. Again, this is a segment where we've consolidated the footprint here in North America. We've divested non-cash generative product lines.
We still have some of those in assets held for sale on our balance sheet, which we're looking to continue to liquidate this year, much of which we sold last year to generate cash. The primary products that are left here is our Tempress portfolio, which is an extended reach tool. It's a high margin rental business model, and we also have offshore completion services primarily in the Gulf of Mexico, that deliver much superior margins to onshore operations. We operate this business out of the Middle East as well and elsewhere in the world where we fly in equipment and our personnel to complete jobs in other regions. Here we're taking a look at our Downhole Technologies business. This is the consumable products that we manufacture and distribute. About 85% of this business is here in the U.S., the other 15% is international.
We are looking actively to expand this internationally and we think there's room to grow. We're highlighting a couple of our products here, the EPIC Precision and EPIC Flex perforating systems. If you hear about hydraulic fracturing, these are frac guns that go downhole. They have explosives on them, and they blow them up. Right? That's how you stimulate the wellbore, the flow of hydrocarbons into the wellbore. Here, I'd like to highlight our strong financial position. Again, we are net debt zero. We had some convertible bonds that became mature April 1st. Last year, we were dedicating our free cash flow to repurchasing those bonds at par or a discount to par. These bonds matured on April 1st, with the conflict in the Middle East, our stock price increased a little bit, so these actually did convert.
We had $53 million of outstanding principal at conversion, $25 million of cash on our balance sheet, plus $25 million of debt on our revolver was used to complete the refinancing as well as the issuance of 529,000 shares. Now we put a new cash flow-based revolving credit facility in place in January in preparation of this refinancing. That revolving credit facility is a $75 million revolver with a $50 million delayed draw term loan. We expect to have fully repaid the $25 million of borrowings related to this refinancing by the end of the year. Which leads me to our capital allocation strategy. I think it's important for me to express that through cycle, we continue to invest organically through R&D to grow our business and create new products and services for our customers and enhance those that we already have.
Our capital allocation strategy beyond that organic growth is to return value to the shareholders through share repurchases. We'll continue to look at small tuck-in complementary M&A with some technology that may enhance our portfolio. The key to our capital allocation strategy is going to be share repurchases going forward now that we have settled this debt. Now, we made $17 million of share repurchases last year. This year, we have $25 million of share repurchase authorization remaining under our existing plan. Once that is exhausted, we will look to renew that authorization immediately. In summary, I'd like to note that we're well-positioned for sustained value creation. We hold a leading technology position in some of the world's most strategic offshore and international markets, we expect to grow in 2027 and beyond.
Again, we have a near zero net debt leverage profile and trade at a material discount to our peers. We'll continue to maintain a disciplined capital allocation strategy, prioritizing returns to our stockholders through share buybacks. We believe this combination has a significant potential for value creation and a compelling opportunity for our shareholders. At this time, I'd like to open it up for questions and answers. Yes, sir.
Do you compete with the larger players like Halliburton, or are they kind of a different type?
The industry is a little bit incestuous. Halliburton is a very good customer for us. We also do compete with them in certain spaces, but they're more of a customer than a competitor. Yes, sir.
Can you delve just a bit more on the share repurchase thing that you guys have allocated and executed already in terms of what is the current flow, how many shares of that $17 million allocated that's been spent already actually purchased, the $25 million that still you intend to spend, and what sort of break points you guys have in terms of the cost of those shares and your willingness to purchase them?
Sure. Yeah. Specifically right now, we feel like stock's undervalued. We're looking at our peer group trading at nine or 10 times EBITDA, and we're trading at six. At this share price that we're at today, we feel like it's undervalued and we're going to continue to repurchase shares.
Why do you think that is?
Well, I think we're a much smaller company than many of these peers. Our market capitalization today is around $500 million. We had a very strong free cash flow last year with the events in the Middle East. The stock did run up, but it's pulled back some here this year. I think it's a buying opportunity. That's certainly how we view it. Where the disconnect is driven from, I'm not sure.
Are you an acquisition target for some of those larger organizations?
I certainly think we could be.
That's something you guys are actively entertaining?
We would entertain. I do not have anything to disclose currently on that, but certainly a possibility. Yes, sir.
Who is the closest comp to your business in your opinion? It sounds like more of a manufacturing business than a service business. Is that fair?
Yeah. We certainly have services within our business. The Completion and Production segment is a services business. There's also some services within the Offshore Manufactured Product segment. It's about 30% of the revenue there. Really, this is an equipment manufacturing company. With regards to the peers, I think probably our closest kind of lookalike might be like an Innovex. The other capital equipment manufacturing. There's actually one here, Forum, is a good comp for us as well.
For the asset sales stuff, how much is left in that? Is it another year or two years?
We're hoping to clean that up this year.
Okay.
There's a little less than $20 million of asset sales that we're expecting this year.
Okay.
Yeah, it should be cleaned up by the end of the year. Something may fall into next year, a piece of real estate selling or something like that.
Fair amount of it done.
Yes. Yeah. It's near complete. Yes, sir.
What's your maintenance CapEx like, average?
Great question. This is a mature manufacturing business. It's got low capital requirements for maintenance. I would assume around $25 million a year of CapEx. There's some growth in that number, but that's kind of what we plan to spend going forward. We're expecting our operating cash flow to be $60 million plus. There's definitely some free cash in there for these share repurchases that we've mentioned. I will point out that from the Offshore Manufactured Products segment, the manufacturing footprint there is largely the same as it was in the last upcycle that we experienced. We have put a new facility in Batam, Indonesia, which is a lower cost center for our conductor casing business. That segment once had peak revenue of $250 million in a quarter, and we've got roughly the same capacity today.
It would require hiring and things of that nature, but the facilities are there that can support that. You can imagine, if some of these offshore developments move forward, and we've already started to see some of the announcements by Petrobras and others, our absorption, manufacturing absorption, is going to help increase our margins over time.
Sorry.
Sure.
You gave out a number about a second ago, the $60 million number. Is that the free cash flows or?
That's our operating cash flow. Yeah. That was some guidance that we gave earlier in the year. Yes, sir.
Matt, perhaps you could update us on the Middle East. Clearly, as you mentioned earlier, as everyone in the oil business got tailwind from higher oil prices, the gross share prices of certain of their service companies first saw some dislocations in the Middle East.
Certainly. We've got an operation there in the Middle East. We did have some, I'll call it, very short-term disruptions in the Middle East related to the conflict. We've also got operations in and around the region. We're selling products from other manufacturing locations into the region. It did create some logistical disruptions. Several examples come to mind. One, we had goods, and we're being loaded into a vessel in Singapore when this conflict broke out, and we had to unload the product and warehouse it there locally until we could redetermine the new shipping lanes. It certainly has created some near-term disruptions, but I think that the long-term opportunity here, we've disrupted the supply of energy around the world. Excuse me.
We've also eaten away at reserves of crude oil that are going to have to be replenished. Energy security is now becoming very front of mind. A lot of the developments that we cater to in West Africa and Latin America, I believe are going to be moving forward maybe more rapidly than we had previously expected as people look to diversify the energy supply. Yes, sir. Oh, sorry.
You're starting to see that right now? You're seeing like FID.
Petrobras, a very good customer of ours, has already released FIDs for a couple of FPSO developments offshore Brazil. They've also put out a press release that they've contracted or are contracting a rigid riser installation vessel. One of our marquee products is our FlexJoint technology, which is required for a rigid riser to an FPSO. These are all very good signs for us. We serve all of the EPCI installation contractors, a lot of times when these projects are announced, we've already been bidding work to multiple contractors. We're just waiting to find out who wins the job. We know that they're going to come to us for their critical components that we provide. We should see those couple of FPSO developments hit our backlog here in the next year or so.
They've announced that there's probably another 10 coming, so it could provide some substantial growth for us. Yes, sir.
You mentioned you're focusing more on offshore drilling. Is there a reason for that?
We do provide products to offshore drilling, but our focus is production. Field development and production is our primary focus, but we do have some products that cater to the offshore drilling, specifically deep water drill ships. Our Managed Pressure Drilling system is a proven technology that we have sold and rented systems or have a rental system out today, and we've sold a couple of those systems as well. We've announced publicly a partnership with Seadrill. I believe that the demand for that product, that MPD product, will continue to increase. As you see the offshore deepwater drilling rigs, the utilization has climbed to near full capacity, so they're always going to be looking for ways to save rig time, and some of our products allow them to do so.
I don't think the economics with the day rates today are going to support the new build for new rigs coming into the market. We have this finite supply of deepwater drill ships. I think that bodes well to some of our drilling-related products, but I would like to note that most of what we do is production related, and so it's going to new field developments, specifically FPSOs, that's where we're going to see the growth. Yes, sir.
You talked a lot about positive things going on in the company. Maybe can you give us a little information around things maybe the company is not doing as well as they would like and things they're actively working to improve?
Sure, yeah. I'd like to point specifically at our Downhole Technologies segment. This is a business that, due to new market entrants, multiple competitors, small or some privately owned companies that compete with us, that business has struggled. Our goal is to improve the technology such that we can continue to improve the margins. This business has had margins near neutral over the last several quarters. We expect those margins to increase, or our goal is to increase those margins to around 10%. Some of that's going to come from international growth. Today, that business is roughly 85% in the U.S. Expanding it internationally, there's certainly demand there, and we're able to get higher margins than here domestically in the U.S. Yes, sir.
Regarding your backlog, offshore sector, how client-concentrated is that backlog for diversifying?
It's pretty diverse backlog. I will note that we did book some sizable orders in the fourth quarter of last year for military projects, specifically to the US Navy. These are five-year projects, so they're a little bit longer term than some of the more specific oil and gas type projects that we do. That's one of the reasons why I mentioned that our backlog conversion right now over the forward 12 months is around 50%. Historically, with a higher percentage of backlog driven by oil and gas, that number is around 70% conversion over the forward 12 months. As you see us booking some of these larger oil and gas projects into our backlog over the course of the year, that forward 12-month conversion percentage is going to continue to climb up from 50%, where it is today.
Having said that, our backlog is not at risk, which might be what you're looking for there with the customer concentration. It's very rare that we have anything ever come out of backlog. I look at Brian, I can't remember that ever happening. By the time we're booking a project into backlog, these are highly engineered solutions. A lot of that front-end engineering work is already completed, and it would be very rare for anyone to cancel a backlog. Of course, there's change orders that happen all the time, but this is a very secure backlog that I feel like we'll convert on. We may have time for one more. All right. Well, thank you all for joining us today. We appreciate your interest in the company.