A Play on Oil Field Construction in the Middle East
Even if the Iran situation deteriorates further, this stock should benefit.
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We have choppy action with a positive bias on Wednesday morning as investors await Nvidia’s (NVDA) report at the close. After three days of selling, conditions are good for a modest oversold bounce, but I am skeptical that it will carry us very far. If you need to raise some cash, this is probably a good time for some repositioning.
It will be interesting to see whether Nvidia can withstand a dangerous sell-the-news setup. It will have to blow the doors off estimates and guidance to generate some chasing. Analysts will do what they always do and declare that the report is solid and raise targets, but that has not helped in three of the last four earnings reports. There will be a strong tendency to use strength for some reductions.
An Energy Services Play in the Middle East
I have been digging for some new buys as the first-quarter earnings season winds down. I mentioned some bottom-fishing in three biotech names yesterday, and today I am adding to an energy services play that is uniquely positioned in the Middle East and should benefit from a wave of new construction and repair.
National Energy Services Reunited (NESR) is an oilfield services company focused on infrastructure between drilling and production. The primary services offered by NESR are hydraulic fracturing, cementing, coiled tubing, well testing, and completions, delivered through a single integrated platform.
What makes NESR distinctive and compelling is geography. The company operates almost exclusively in the Middle East and North Africa, with primary concentration in Saudi Arabia, Oman, the UAE, Iraq, and Kuwait, serving national oil companies rather than the Western majors. NESR sits between the giant international players like Schlumberger (SLB) and Halliburton (HAL) and the smaller local providers, offering high-tech solutions with deep regional connections across 6,000 employees in 16 countries.
Q1 Report Changed the Picture
NESR’s first-quarter 2026 results changed the picture for the stock and crossed an important threshold. Revenue hit a record $404.6 million, up 33.5% year over year, beating consensus near $376 million. Net income of $23.8 million more than doubled, GAAP EPS came in at $0.23, and adjusted EPS of $0.26 beat the $0.21 consensus by 24%. Adjusted EBITDA reached $76.7 million.
Analyst price targets moved higher across the board, including Barclays to $35 and UBS to $32. That concentration of upward revisions indicates to me there were material beats to the analysts’ models.
The primary growth driver for NESR is the Jafurah unconventional gas field in eastern Saudi Arabia, where a multi-billion-dollar five-year contract signed in late 2025 elevated NESR from a participating provider to a primary integrated provider. Saudi Aramco expects total lifecycle investment in Jafurah to exceed $100 billion, which translates into thousands of frac stages across hundreds of wells. Management is targeting a $2 billion annual revenue run rate by end of 2026.
The other major announcement on the call was the first-ever capital return program: a quarterly $0.10 dividend starting Q4 2026 (1.6% yield at $25) plus a $50 million share repurchase authorization. This is a significant event indicating a maturing company and re-rates the equity from pure growth to growth-plus-yield, supported by a 0.66x net debt-to-EBITDA ratio, well below the 1.0x target.
The primary risks are customer concentration with Saudi Aramco and MENA geopolitical exposure, but the end of the Iran conflict should trigger a wave of oil production increases in the MENA region, and NESR is ideally situated to benefit.
My Game Plan
My game plan is to add to my NESR position today on the technical setup. The stock hit a high on the earnings news and has pulled back slightly to support around $25.
I am looking to take a shot at breaking recent highs at $27 on news of progress in Iran. Even if the next event is a bombing, that would be a positive for NESR. Fundamental support is present in the form of the operational trajectory, dividend initiation, and analyst response.
The next key catalysts are the Q2 report to confirm the Jafurah ramp cadence and the actual dividend declaration in Q4 2026.
I expect NESR to attract some investor attention seeking safety outside of technology.
At the time of publication, Rev Shark was long NVDA and NESR.
