On Friday, BTIG initiated coverage on National Energy Services Reunited (NASDAQ: OTC:NESR), assigning a Buy rating and setting a price target of $15.00. The firm highlighted the company's prospects amid increasing oilfield activity in the Middle East, despite broader challenges in global oil markets.
According to BTIG, Middle East oilfield spending is expected to rise by approximately 8% year-over-year in 2024 and continue to grow by another 8-10% in 2025.
The firm's positive outlook is partly based on the anticipation of the Middle East's sustained oil and gas development, particularly in Saudi Arabia, and the growth plans of the UAE to expand oil production capacity.
Additionally, Kuwait's offshore discoveries and increased rig activity suggest a broader uptrend in the region's oilfield services demand. These factors are expected to drive activity in NESR's core market, which accounts for around 85% of its revenue.
BTIG's analysis points to a potential improvement in EBITDA margins for NESR, driven by the Middle East's robust activity. However, the firm maintains a more cautious view of the company's near-term prospects in North Africa, which represents about 10% of NESR's revenue, anticipating a more muted activity outlook.
The coverage comes after NESR's return to the NASDAQ on the previous Tuesday. The company was previously delisted in June 2023 due to non-compliance with SEC filing requirements.
BTIG believes that NESR's leverage in the MENA oilfield activity sector positions it well to generate significant free cash flow in 2025, with a forecasted free cash flow yield of 12%-14%. This financial strength is expected to support NESR's organic and inorganic growth strategies.
InvestingPro Insights
Recent data from InvestingPro adds weight to BTIG's bullish outlook on National Energy Services Reunited (NASDAQ: NESR). The company's market cap stands at $895.89 million, with a P/E ratio of 19.46, indicating investor confidence in its earnings potential. NESR's revenue for the last twelve months as of Q2 2024 reached $1.23 billion, with a notable quarterly revenue growth of 15.93% in Q2 2024, aligning with BTIG's expectations of increased oilfield activity in the Middle East.
InvestingPro Tips highlight that NESR's net income is expected to grow this year, supporting BTIG's positive stance on the company's financial prospects. Additionally, NESR has been profitable over the last twelve months, with analysts predicting continued profitability this year. These factors contribute to the company's potential for generating the significant free cash flow that BTIG anticipates in 2025.
It's worth noting that NESR has shown a high return over the last year, with a remarkable YTD price total return of 53.93% as of the latest data. This performance underscores the market's recognition of NESR's strategic position in the growing Middle East oilfield services sector.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into NESR's investment potential.
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