Expro Gr Hldgs Q3 2026 Earnings Call Transcript

Expro Gr Hldgs (NYSE:XPRO) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Expro Gr Hldgs reported Q3 2026 revenue of $440 million and adjusted EBITDA of $91 million, with a 21% margin, driven by increased activity and enhanced drilling operations.

The company raised its 2026 guidance for adjusted free cash flow to $140-150 million despite some operational delays due to loop currents in the U.S. Gulf and weather impacts.

Expro Gr Hldgs is optimistic about offshore and international investments, particularly in deepwater projects, and expects mid-teen EBITDA growth in 2027.

The company launched new technologies like Maestro and Articulok, enhancing operational efficiency and securing multiple nominations at the 2026 Gulf Energy Information Excellence Awards.

Expro Gr Hldgs merged its APAC region with MENA to form the AMINA region to optimize operations and expects some financial benefits from this realignment.

The company closed Q3 with $260 million in total liquidity, maintaining a strong financial position with less than half a turn of net leverage.

Despite some deferred activities to 2027, the company remains focused on expanding margins and increasing free cash flow, with planned capital allocation including M&A, reinvestment, and shareholder returns.

Full Transcript

OPERATOR

After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star-one to raise your hand. To withdraw your question, press star-one again. I will now hand the conference over to Dave Wilson, Vice President, Investor Relations. Mr. Wilson, please go ahead.

Dave Wilson (Vice President, Investor Relations)

Thank you, operator. Good morning, everyone, and welcome to Expro Gr Hldgs third quarter 2026 earnings call. I’m joined today by Mike Dart, CEO, and Sergio Mywarm, CFO. Both Mike and Sergio will have some prepared remarks, after which we’ll open the call for questions. In association with today’s call, we have an accompanying presentation on our third quarter results, which is posted on the Expro Gr Hldgs website, expro.com, under the Investors section.

Before we begin today’s call, I’ll remind everyone that some of today’s comments may refer to or contain forward-looking statements. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These statements speak only as of today’s date, and the company assumes no responsibility to update such forward-looking statements.

The company has included in its SEC filings cautionary language identifying important risk factors that could cause actual results to differ materially from those set forth in any forward-looking statements. Please note any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measures in our third quarter 2026 earnings release, which was issued this morning. With that said, I’ll turn it over to Mike.

Mike Jardon (Chief Executive Officer)

Thanks, Dave. Good morning, everyone, and welcome to Expro Gr Hldgs’s third quarter call. Before we begin our discussion around the third quarter results, I would like to mention the people recently impacted by the sinking of the Prospector 5 jackup rig in Gabon. We had a few folks assigned to the rig, all of which were thankfully safely evacuated. This incident serves as an unpleasant reminder of the inherent danger in the work this industry does in order to provide affordable and readily available energy to the world.

It also highlights why safety remains a persistent focus for those of us involved in the energy industry. Again, our thoughts and prayers go out to those affected by this accident. With regards to our third quarter, I’ll start off by reviewing the financial results found in today’s press release. I will then comment briefly on the overall macro environment, then address our fourth quarter and full year guidance, and finally conclude with some operational highlights for the quarter. Following my comments, Sergio will then address Expro Gr Hldgs’s new operating and financial reporting structure as well as the Company’s capital allocation during the quarter.

Let’s begin on slide number three. For the third quarter, as expected, the company saw a sizable increase in both revenue and adjusted EBITDA. The company generated $440 million of revenue and $91 million of adjusted EBITDA, representing a 21% margin. Adjusted free cash flow for the quarter was $52 million. Overall revenues were up 12% sequentially and adjusted EBITDA was up 20%. These increases were driven by higher activity in Expro Gr Hldgs’s underlying business lines as well as the inclusion of enhanced drilling operations during the quarter.

For the 9 months ending September 30, the company has done well, particularly in our efforts to increase our free cash flow generation. The recent third quarter represents a near record for free cash flow generation. Based upon these results and our projection for the fourth quarter, we are raising our annual 2026 guidance for adjusted free cash flow expectations, which will now be in the range of 140 million to 150 million. While we are pleased with the sequential increases in our third quarter results, we note that they are in the lower half of the guidance range.

This is primarily due to our NLA region, where some of our subsea-related activity late in the quarter was impacted by the ongoing loop currents in the U.S. Gulf. I’ll touch on this, as well as the impact on our fourth quarter expectations, in a moment. Prior to addressing our fourth quarter guidance, I want to share a few thoughts on how we currently see the market. We continue to observe a market that is particularly supportive of offshore and international investments, especially in the coming years. This view really has not changed at all this year, as we saw the genesis of this late last year. The leading indicators for the offshore industry, such as project FIDs, subsea tree orders, and floating rig utilization, have all been moving in the right direction.

Accordingly, they have served as the basis of the optimism in the market. The Middle East conflict remains one with global ramifications, as does, too, the Russia-Ukraine conflict. Collectively, these conflicts are expected to continue to have a meaningful global impact on overall energy markets, commodity prices, and trade flows. The associated volatility and uncertainty have reinforced the strategic importance of energy security and dependable supply sources.

This has prompted operators and governments to reassess supply chains and diversity of investment across multiple regions, particularly offshore, which has added to the long-term optimism surrounding this market. Deepwater remains one of the most attractive areas for incremental upstream investment and is expected to capture a significant share of future capital allocation. This trend aligns closely with Expro Gr Hldgs’s core strengths and global footprint, as operators prioritize large, high-quality offshore developments that can deliver competitive returns and long-term production.

Offshore is a long-cycle business and one where we believe we are still in the early innings of a developing upcycle. Looking further ahead, we believe the outlook remains favorable through the end of the decade, as breakeven prices are much lower today than they were a few years ago. Both offshore and international markets are expected to be healthy, as producers continue to focus on recovery optimization, production enhancement, and faster execution, more so rather than rig-led expansion.

This growing emphasis on operational efficiency and brownfield optimization represents a significant opportunity for Expro Gr Hldgs, given our differentiated technologies and expertise in maximizing production performance from existing assets. Turning to slide 4, where we are providing our fourth quarter and our updated 2026 financial guidance, as I mentioned, we have experienced an operational and a financial sequential step change from the second quarter across the core business as well as the inclusion of our recently announced enhanced drilling acquisition, and we expect further sizable sequential increases in the coming fourth quarter with regards to our expected EBITDA generation.

While the bulk of the contributors to the anticipated sequential increase in the fourth quarter are still in place, there has been some activity that has been pushed to the right. This has resulted in adjusted EBITDA expectations for the fourth quarter to be tempered by approximately $20 million. However, you will note that we continue to make solid progress towards our ultimate goal of double-digit free cash flow margins. The activity that has been pushed to the right centers on some high-margin subsea operations in North and Latin America.

The delays in the subsea work in NLA are the result of loop currents in the U.S. Gulf that impacted our operations late in the third quarter and early in the fourth quarter. Additionally, the recent hurricane in the U.S. Gulf has temporarily affected the NLA operations. On top of the weather and environmental factors impacting the U.S. Gulf activity, there has been a delay in well intervention integrity work in Colombia, which we expect to impact fourth quarter results as well.

With regards to the Middle East, while uncertainty and volatility remains, our operations in the Middle East and North Africa regions have continued to prove resilient as well. The main effect on the company from the Middle East conflict has been that our originally anticipated—that is, budgeted—activity growth in 2026 in the region did not materialize as we had expected at the start of the year. However, despite the disruptions, we expect that the combined 2026 financial results from these regions to look similar to last year’s. We continue to focus on factors that are within our control and will maintain the disciplined mindset of deployment. We remain steadfast in our commitment to expand margins, increase free cash flow generation, and return capital to shareholders. Looking a bit ahead to 2027, we’re in the early phase of working through our budget, but initially we expect mid-teen growth in our adjusted EBITDA in 2027. We will refine these expectations as we—and our customers, more importantly—conclude the budgeting process for next year.

And for the time being, we are assuming status quo in the Middle East for the remainder of 2026 and well into 2027. Now, moving on to our customer technology highlights for the quarter on slide number five, Expro Gr Hldgs recently launched Maestro, which is a modular well test platform designed to support safer, more efficient operations while retaining human oversight of critical decisions. This product is very indicative of Expro Gr Hldgs’s focus on technology, where it combines automation, remote control, and real-time visibility and decision support. Expro Gr Hldgs’s Maestro technology and process helps reduce operational complexity across both onshore as well as offshore environments.

A full deployment of Maestro has shown to reduce red zone exposure by up to 67%. Another of Expro Gr Hldgs’s technology that gained traction in the third quarter was Articulok. Across the North Sea, Articulok has been utilized in well construction, intervention, and subsea recovery projects and at water depths in excess of 3,300 ft. This technology reduces fatigue and bending loads and, on one campaign, actually enabled safe operations despite harsh weather conditions, where we avoided several days of operational delays.

Now, continuing to highlight Expro Gr Hldgs’s technology, the company secured eight finalist nominations at the 2026 Gulf Energy Information Excellence Awards, demonstrating the breadth and strength of our technology portfolio. The Company’s iTONG won Best Controls, Instrumentation & Automation Technology for Upstream. Expro Gr Hldgs’s success with nominations and award is impressive here, I think, for two main reasons. First, it demonstrates the success of the Company’s continued focus on developing and deploying practical technologies that support safer operations, stronger performance, and the evolving needs of our customers.

And second, the nominations and awards were competitive with those received by much larger oilfield services companies. This once again demonstrates how we often punch above our weight class when it comes to technology and service. Another area I would like to highlight here is the commencement of the Company’s first operations utilizing enhanced drilling technologies in West Africa, expanding the technology usage outside the North Sea and the U.S. Gulf. We remain very excited about the enhanced drilling acquisition and the technology offering.

Not only does it provide tremendous value to its customers, enabling them to access reserves that were previously thought inaccessible, this MPD technology provides value in normal drilling activities by enabling wells to be drilled more efficiently, saving days of total spread costs, and ultimately improving project economics for the customers. We believe this dual gradient CML technology is the industry-leading MPD technology and that it will continue to gain traction in the industry over the next couple of years.

With that, I’ll turn the call over to Sergio for his comments on the quarter.

Sergio (Chief Financial Officer)

Thank you, Mike, and good morning to everyone on the call. Before I begin, I just wanted to quickly highlight that we’re building strong momentum in cash generation, and we’re further increasing our full year 2020 adjusted free cash flow guidance to a range of $140 to $150 million. What excites us is the opportunity to build on that performance in 2027 while our budgeting process is still underway. Early indications are robust, pointing to mid-teens percentage growth in adjusted EBITDA and an increase of more than 20% in adjusted free cash flow year over year.

That combination of earnings growth and even stronger cash flow growth underscores the opportunity ahead as we remain focused on translating improved profitability into cash and long-term value for our shareholders. Now, sticking with our last quarter’s format, I do not intend to comment on the specific detailed results by geographic region; rather, that commentary can be found in both the third quarter earnings release and the appendix of the accompanying presentation. Specifically for Q3, Expro Gr Hldgs’ overall adjusted EBITDA was $91 million with a margin of approximately 21%, which is an increase of almost 140 basis points from the previous quarter. Our adjusted free cash flow was $52 million for the quarter, relatively flat with the previous quarter, but reflecting a good improvement year over year.

Furthermore, we still expect a good improvement in 2026 free cash flow when compared to last year, even as we had to adjust some of our near-term expectations. Moving on to Slide 6, we continue to explore ways to make our business more efficient and optimize our operating structure. As a consequence, during the quarter we decided to merge a smaller region in terms of revenue and EBITDA, our APAC region, into another region, the MENA region, to create the combined AMINA region. We believe this move will enable us to take advantage of economies of scale, using the larger region in terms of operations and infrastructure to also support a smaller one.

The combination also makes operational sense. Both regions provide similar services supporting customers’ operating expenditure, brownfield and greenfield projects, as well as deepwater operations. Additionally, the customer engagement is similar, with some customers in the former APAC region behaving more NOC-like with their oilfield service vendors. This combination of regions will enhance the support for operations in Asia rather than take away from it, as there will be more continuity through our product line offerings.

Initially, we don’t see this as a major cost-saving exercise, though we do expect some small financial benefits in the near term. And finally, now each region will represent approximately one-third of the total revenue of the company overall. Now turning to Slide 7, we remain focused on expanding our margins, and as we have mentioned previously, this journey will not necessarily be in a straight line. As Mike mentioned, some of our high-margin work in the fourth quarter has been pushed to the right, and as a result our margin expectations for the fourth quarter have been moderated as well. We still are committed to expanding our margins. We remain focused on cost efficiency and increasing our customer wallet share at higher margins.

Additionally, we continue to internationalize services and technologies acquired through M&A. In the medium term, we still see improvement in our financial performance, some of which will be the result of market factors, but others will be driven by the Expro Gr Hldgs-specific actions I just highlighted. A look at Slide 8 shows what we are doing with our free cash flow on a relative basis indexed back to 2022. Expro Gr Hldgs has one of the best free cash flow growth profiles in the industry. It is evidence that our focus on free cash flow is bearing fruit and it has had a positive, impactful change to the company’s financial performance. And while we’re extremely proud of that, we acknowledge more work needs to be done, and we intend to continue to strive to improve our free cash flow profile.

Now quickly turning to liquidity position, we have included this on Slide 9. The company has closed the quarter with $260 million in total liquidity. That includes $172 million in cash on the balance sheet. At quarter end, we had $259 million outstanding on our revolving credit facility, which was an increase of approximately $180 million from the previous quarter. This was a result of using the RCF to fund the enhanced drilling acquisition, less the amount of repayments made on the RCF during the quarter.

This puts Expro Gr Hldgs at a net debt position of just $87 million at quarter end. So we’re still in a very strong financial position with less than half a turn of net leverage, and by maintaining a strong balance sheet, the company is well positioned to execute on its other capital allocation priorities. These are on Slide 10, and rather than go into detail reiterating our capital allocation framework, I will quickly highlight the four equally important capital deployment priorities. As I just discussed, one is maintaining a strong balance sheet. Again, by doing so, we maintain the financial flexibility and resiliency to act on our other capital allocation priorities. Another is M&A, where we focus on opportunities that offer clear industrial logic, scalable technologies and synergies, and the potential to expand our presence in attractive markets.

M&A is an integral part of our overall strategy, and we have a good track record in that regard. We continue to look at a variety of opportunities, from small bolt-on to things that would have a much more transformative impact to the company. The third is investing in the business. We utilize CapEx to maintain and drive high-return organic investments and do not spend CapEx speculatively. Every CapEx dollar is geared towards specific projects with known return profiles that meet or exceed our standards.

And finally, return of capital to shareholders. As we have already stated, year to date in 2026 we’ve repurchased approximately 3.2 million shares for roughly $52 million. While we have already returned above or at least one-third of adjusted free cash flow commitments, we will remain opportunistic with share repurchases through the balance of this year. Before turning the call back over to Mike, I do want to address the financial outlook for the fourth quarter of 2026, as Mike previously addressed in Slide 4. Given Expro Gr Hldgs’ relative size yet broad breadth of exposure globally, the company’s overall results can be impacted by industry factors isolated to a specific geographic region or regions from time to time. These industry factors are impacting our expected fourth quarter results, and they do not relate to Expro Gr Hldgs’ level of performance, loss of market share, or loss of contract.

Rather, they serve as a reminder of some of the challenges in a long-cycle business. It is often difficult to predict; many sizable fourth-quarter contributors, such as a production solutions project in North Africa, the tubular sales in NLA, and equipment sales in the Middle East and Asia, are still on track. Others, as Mike mentioned, have been pushed out, namely some high-margin subsea operations in NLA and the well intervention and integrity work in Colombia.

It is important to point out that despite these temporary headwinds, our updated fourth quarter guidance still reflects what would be a record quarter for the company, another indicator that we’re moving in the right direction. With regards to work getting pushed to the right, these projects remain in our order backlog for execution in 2027, with their value, profitability, and associated cash flow still retained. These changes affect the timing but not the value of our results, with the deferred activity now expected to contribute in 2027. Regarding the Middle East, we’re maintaining our status quo view of the region for the fourth quarter and have kept that view as a baseline for 2027.

With that, I’ll turn the call back to Mike for a few closing comments.

Mike Jardon (Chief Executive Officer)

Thank you, Sergio. As we conclude our prepared remarks and before opening up for questions, I’d like to conclude with the following comments. As Sergio just mentioned, we’re looking forward to executing on a record performance in this upcoming quarter. We continue to see strengthening in the key indicators that we actively monitor, areas such as FID approvals, subsea tree orders, and overall rig utilization. We believe that our relentless focus on technology development, improving internal and external operating efficiencies, and punching above our weight each and every day will position us very well for the upcoming offshore international growth.

I remain confident in the company’s ability to deliver improving financial results in the future and our employees’ ability to deliver safe, high-quality, value-added services to our customers. With that, we can open up the call for questions.

OPERATOR

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset while asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Keith Beckman with Pickering Energy Partners.

Your line is open. Please go ahead.

Keith Beckman (Analyst at Pickering Energy Partners)

Hey, good morning, and thanks for taking my question. I just kind of wanted to ask around, thinking about free cash flow here. You know, obviously some headwinds here in 4Q, but free cash flow guidance for 2026 was raised regardless of that, and then also 2027, 20% plus growth. Trying to get a sense on maybe some of the internal improvements you guys have been able to make and look like you’re trying to continue to make here into 2027 and maybe mechanically, you know, a little bit more depth.

How should we think about this? Thanks.

Mike Jardon (Chief Executive Officer)

Oh, Keith, thanks for joining. Thanks for the question. I mean, you know, fundamentally it’s, I mean, one of the things I’m extremely proud of is, you know, we really have the organization focused on the things that they can control, and, you know, activity that we’ve had in the U.S. Gulf in Q3 or in Q4, when we’re dealing with some weather challenges or we’re dealing with weather currents, you know, loop currents, you know, the guys can’t control that.

What they can control is, you know, the efficiency on our spend, you know, cost management, cost control; as we introduce new technology that helps drive efficiency, you know, reducing the number of personnel on board or, you know, expanding the customer wallet for additional operations on a given, you know, on a given asset, those kind of things. And we continue to, as we’ve always said, you know, we don’t spend CapEx dollars speculatively; we spend CapEx dollars to projects.

So we just continue to maintain that focus. And, you know, the result of it is making sure that even when we have a, you know, a little bit of softness because of activity, that we can continue to stay focused on the, you know, on the cash generation. So it’s really just the internal efficiencies of people utilization and how do we use more technology and, you know, for back office support and those kind of things. It’s really just kind of the culmination of all of those efforts internally to drive that efficiency.

And also with the efficiency that we have, you know, on a rig—reducing number of personnel, additional services—I mean, all those kind of things, they all kind of combine up there. That’s why we’re continuing to be able to focus on expanding cash generation.

Keith Beckman (Analyst at Pickering Energy Partners)

Okay, awesome. Thank you. And then just following up on that a little bit, how should we be thinking about capital allocation heading into next year where, you know, you just had the $100 million buyback authorization, right? You know, potential growth internally within enhanced, if that’s possible. And then also the last piece potentially, you know, further M&A, and on M&A, like what’s— Is there any examples of acquisitions or product lines that you think would make more sense, and then things that don’t make as much sense, to give a sense out there of what’s possible.

Mike Jardon (Chief Executive Officer)

Sure. I’ll try to tackle a couple of those. I’ll kind of try to peel the onion back a little bit. I mean, fundamentally still to be finalized, because we’re early innings on the budget process. What we tried to highlight was really kind of what our sense is of how 2027 is going to play out. I think we’re probably being a little bit conservative today just given how we see the outlook for next year. I would anticipate we’re still going to be at least one third of our free cash flow returned to shareholders.

I wouldn’t anticipate that to change, but frankly, that’s a discussion we’ll have with the board once we actually go through the budget for 2027. But right now I wouldn’t anticipate that that’s going to change. You know, we continue in terms of M&A, we continue to be, you know, focused on that. We continue to look at things that would help us expand our portfolio and help us expand the, you know, the relevancy we have for customers. I think we’re in a unique position because we have touch points all the way from our customers’ exploration programs, so their appraisal to drilling, to completions, to production, all the way up through abandonment. We have a lot of opportunities to focus on bolt-ons that will—whether it’s a technology expansion or it’s going to be something that just helps us extend the breadth of the services that we have.

We have a lot of options and we continue to look at a number of transactions. It gives me a lot of confidence because we’ve been able to go out and execute on transactions. More importantly, we’ve been able to bring them in. We’ve been able to take the costs out, we’ve been able to achieve the synergies, we’ve been able to integrate those. It just gives me more confidence that we can continue to do those things that make sense, but they’re always going to be led by the industrial logic.

And so nothing pleases me any more than when we get feedback from customers like we did with Enhanced Drilling of, “Wow, that really makes good sense. We’re glad to see you guys expand your portfolio into that.” It tells me the industrial logic was really sound and easy for them to understand. Serge, anything you want to add on either of those?

Sergio (Chief Financial Officer)

No, Mike, I think that’s pretty comprehensive. The other thing is, as Mike mentioned, we look for additional bolt-ons, whether those are technology, but we also look for transformative transactions. It really is guided by the industrial logic or the strategy of the company and how that makes strategic sense. That’s what drives our actions. There’s no other metric that we look at to kind of drive those things.

Keith Beckman (Analyst at Pickering Energy Partners)

Okay, perfect. Awesome. I will hop back in queue. Thanks.

Mike Jardon (Chief Executive Officer)

Thanks, Keith.

OPERATOR

Your next question comes to the line of Eddie Kim with Barclays. Your line is open. Please go ahead.

Eddie Kim (Analyst at Barclays)

Hi, good morning. So you reduced 4Q EBITDA expectations by about $20 million because of Gulf of Mexico subsea work and Colombia intervention activity shifting into next year. How confident are you that essentially all of that EBITDA is going to be recovered next year? And should we think about most of it occurring in the first half of next year, or do you think it slips maybe to the second half of next year?

Mike Jardon (Chief Executive Officer)

Yeah. Eddie, thanks for joining. I guess there is no risk of that activity being lost. It’s really a timing issue. And so, you know, it’s more a matter of when they’re going to execute on those operations. And frankly, we’ve had a greater proportion of our customers being in a completion phase in the U.S. Gulf than in the drilling phase. And for us, our service intensity is a little bit higher when we’re in drilling operations versus completion operations.

So that’s a little bit of the timing effect that we’ve had here in Q3 and Q4. Part of it’s because, as they’re dealing with loop currents and we’re dealing with vessels that have, you know, a limitation on their ability to reposition dynamically, it’s easier to be in the middle of a completion operation and be able to shut things down than it is when you’re in the middle of a drilling operation. So it’s really just kind of the timing of that. I would anticipate all of that activity will still happen next year.

Part of what we’ll sort through with the budget process here now is kind of putting pen to paper on what is the exact timing of how those operations—are they going to happen in January, are they going to happen in April? That’s kind of what the timing is. But overall we won’t lose that activity in any way, shape, or form. And frankly, the thing coming into Q3 and Q4 that I was the most—probably had the highest situational awareness to—is some of the bigger, lumpier kind of project-related things we had. Those were the ones that I was concerned about actually happening here in the fourth quarter in particular. Those are not the ones that we’re having a bit of a challenge with in the fourth quarter. It’s just more the normal operational rhythm of some of the activity.

So those are things that will continue to come back into the fold as we move into ’27, if that makes sense.

Eddie Kim (Analyst at Barclays)

It does, it does. Thanks for that color, Mike. And just my follow-up is just maybe peeling back the onion a bit on the preliminary mid-teens EBITDA growth guidance for next year. That’s about a $50 million increase. $20 million of that shifted from 4Q into 2027. And if I’m not mistaken, you should be getting about a $25 million kind of incremental contribution from the Enhanced Drilling acquisition. So putting all that together, I mean, those two items make up almost the entirety of that increase.

So is it fair to assume that your preliminary guidance of mid-teens growth assumes little to maybe no growth in your underlying business next year, or are there other factors that I should be considering that I’m not?

Sergio (Chief Financial Officer)

Hey Eddie, this is Sergio. No, thanks for the question. Look, I think as Mike said, this is preliminary, right, and we’re still taking a conservative approach here to not to overpromise on any of this, but we are expecting some growth in our base business despite this change from the fourth quarter activity in the U.S. Gulf to 2027. Take that aside, we are expecting some growth in our base business as well, plus the full year activity of Enhanced Drilling.

So again, it’s a conservative approach on our guidance for next year’s EBITDA at this point, but you should expect some growth in our base business as well.

Eddie Kim (Analyst at Barclays)

Understood. Thank you. I’ll turn it back.

Mike Jardon (Chief Executive Officer)

Thanks, Eddie. Thanks, Heidi.

OPERATOR

Your next question comes from the line of Alexa Brenno with Goldman Sachs. Your line is open. Please go ahead.

Alexa Brenno (Analyst at Goldman Sachs)

Hey, good morning team, and thanks for taking our question. Can you just talk a little bit more about that 2027 outlook? What kind of activity is embedded in that? And then as we just think about top line versus margins, how should we think about some of those moving pieces from a regional perspective?

Sergio (Chief Financial Officer)

Hi Alexa, good morning and thank you for the question. Look, we’re not in a position to give you that level of detail today. This is, as Mike mentioned, we’re still in the early innings of our budgeting process. We’re just trying to give a flavor to the market on where we think or the direction that things are moving, but we’re not in a position to give you detailed expectations on regional and top lines and those kinds of things. So I think the best guidance we can give you is what we’ve already provided.

Alexa Brenno (Analyst at Goldman Sachs)

Okay, that’s helpful. And then maybe just a follow-up: as we kind of think about some of these differentiated technologies, can you just talk about potential for incremental market share or pricing? How do you think about those moving pieces?

Mike Jardon (Chief Executive Officer)

Yeah, it’s a great question. It’s, you know, so many of these are—it’s not necessarily going to be a market share gain. What it’s going to allow us to do is to expand the customer wallet. You know, we’re going to add an additional service. You know, we talked about Maestro. Maestro is one in which it will bring some value to us as a company because it’ll reduce our dependency on the number of personnel on a well flow management job, but it also will bring more automation to the customer.

So that doesn’t have a market share impact for us necessarily directly, but what it does do is it allows us to expand our margins because we’re more reliant on technology, we’re able to reduce the footprint, those type things. So that’s really where so much of our—and I kind of alluded to it in our relentless focus on internal and external efficiencies—it’s really in just how do we drive more cash generation, how do we drive more margin expansion. And it’s more so around that than it is—and frankly we will have some market share opportunities—but that’s not the focus of it because in the majority of our product lines today we have very, very high market shares.

So it’s not about market share, it’s about expanding that customer wallet.

Alexa Brenno (Analyst at Goldman Sachs)

Appreciate the color. We’ll turn it back.

Mike Jardon (Chief Executive Officer)

Thank you. Thanks for the question.

OPERATOR

Your next question comes from the line of Josh Jain with Daniel Energy Partners. Your line is open. Please go ahead.

Josh Jain (Analyst at Daniel Energy Partners)

Thanks for taking my questions. I just wanted to follow up on maybe how the environment is different today versus where we were a year ago. And obviously things have changed since the Iran conflict since the beginning of the year. Could you just comment? As we’ve seen day rates for rigs approach $500,000 a day, is there a difference in the sense of urgency that you’re having with customers as you head into contract negotiations or talks into 2027 than you were facing a year ago or even earlier this year?

Mike Jardon (Chief Executive Officer)

Yeah. Josh, thanks for joining. It’s a good question. I would say it’s more constructive today than what it was a year ago. I think there continues to be some more positive sentiment around, you know, rig rate utilization. I kind of alluded to some of the key factors and some of the key metrics that we monitor and watch—the number of FIDs being approved, the dollar value of FIDs being approved, geographically where those FIDs are occurring. I think those have all moved in a good direction.

There continues to be a robust subsea tree backlog, those type things. Rig utilization I think continues to be quite robust. So a lot of these are heading in the right direction. I think what’s a little bit different today is, historically, I would have said by the 3rd of November each year we probably have more clarity on customer projects from almost down to a drilling program or a completion program. Across the board we typically have more details on that than what we have today at November 3rd of 2020. I think part of that is just the uncertainty across the globe. We see that in the choppiness in commodity prices. We see that just kind of geopolitically.

I think that’s introduced a little bit more uncertainty. But I think there continue to be some really positive, good long-term indicators that we are continuing to move to the right. I think 2027 is going to be strong and robust. I think that just sets things up for an even better activity set as we go into 2028, 2029.

Josh Jain (Analyst at Daniel Energy Partners)

Thanks for that detail. And then this one may be for Sergio. The company made the decision to combine MENA and APAC, the geographic regions. As you noted, looking for ways to optimize and enhance efficiency across the organization. Could you just go into some more of the details on the benefits of doing this, when you can expect to see tangible benefits, and is it fair to assume that there’s some sort of cost savings associated with this? Maybe just some more details would be great, and then I’ll turn it back.

Sergio (Chief Financial Officer)

Yeah, Josh. No, I appreciate the question. Yeah, so your assumption is correct. We do expect some financial benefits by combining the region. But I think at the end of the day this creates more efficiencies in the operations of those two regions. There are a lot of common product lines that we serve in both those regions, so that makes the operations more efficient. I think in the long term there’s a lot of additional things that make sense as well to put these two businesses together, as customer behaviors in a lot of ways are very similar in the Asia region and in the former MENA region, as well as some deepwater operations that we have in North Africa and in APAC. So you can actually, or the former APAC, you can actually combine a lot of those activities into fewer people, more clear decisions, and faster reaction to customer needs.

Mike Jardon (Chief Executive Officer)

And Josh, just to add, because this is part of the complexity of, and I’ve had historic exposure to, you know, Asia and Middle East, North Africa alignments. Organizationally, part of the challenge is it is geographically very spread time zones. It’s very complex. We didn’t arrive at this decision lightly. It’s something we’ve been analyzing and looking at for an extended period of time. And fundamentally we made the decision to integrate and move those together, move those forward together, largely because we feel like we can better support our customers. We think we can. That’s a more appropriately sized geographic region for us. We can actually provide overall better support to them and, frankly, better support to our organization as well operationally. So it was much more around how do we continue to drive those kind of efficiencies.

Yes, there’s going to be some cost benefits to this, but it wasn’t the cost benefits that drove us to make this change. It really was around how do we better support our customers. How do we have, as Sergio alluded to earlier, you know, the customer engagements, the customer behaviors across those NOC or NOC-like customers is very similar. We just think we’re going to better be able to have that customer-centric focus by having the two areas come together.

Josh Jain (Analyst at Daniel Energy Partners)

Thanks. I’ll turn it back.

Dave Wilson (Vice President, Investor Relations)

Thanks, Josh.

OPERATOR

There appears to be no more questions in the queue. So that concludes today’s call. You may now disconnect.

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