Earnings call transcript: Arabian Drilling’s Q3 2025 results show revenue decline

Arabian Drilling reported a challenging third quarter for 2025, with revenue falling by 5.8% year-over-year to SAR 2.6 billion and a steep decline in net income by 70.8%. Despite these setbacks, the company’s stock price rose by 2.19% to 93.2 SAR, reflecting investor optimism about future recovery and strategic initiatives. The company’s EPS forecast was not explicitly mentioned, but the earnings call highlighted ongoing cost optimization efforts and a stable net debt position.

Key Takeaways

• Revenue decreased by 5.8% year-on-year, totaling SAR 2.6 billion.
• Net income saw a significant drop of 70.8%.
• Stock price increased by 2.19% following the earnings call.
• Reactivation of five rigs and commencement of the first international contract.
• Cost optimization program yielded SAR 19 million in Q3 savings.

Company Performance

Arabian Drilling’s Q3 2025 performance was marked by a decline in key financial metrics, including a 5.8% drop in revenue and a substantial 70.8% fall in net income. The company’s EBITDA also decreased by 15.1%, although the EBITDA margin was maintained at 37.4% year-to-date. The decrease in active rigs from 48 to 45 and a lower utilization rate of 73.8% contributed to the financial downturn. However, the company managed to maintain a stable net debt level at SAR 2.7 billion, with a net debt to EBITDA ratio of 2x.

Financial Highlights

• Revenue: SAR 2.6 billion (down 5.8% YoY)
• EBITDA: Decreased by 15.1%
• Net Income: Fell by 70.8%
• EBITDA Margin: 37.4% year-to-date
• Net Debt: SAR 2.7 billion

Market Reaction

Following the earnings call, Arabian Drilling’s stock price rose by 2.19% to 93.2 SAR, despite the reported declines in revenue and net income. This positive market reaction suggests investor confidence in the company’s strategic initiatives and future recovery plans. The stock is currently trading within its 52-week range of 72 to 120 SAR.

Outlook & Guidance

Looking ahead, Arabian Drilling expects Q4 2025 revenue to remain unchanged or decline by up to 5%. The company has reduced its CapEx guidance to SAR 800 million for 2025 and anticipates a recovery in utilization rates to 80% by Q2 2026. All 11 offshore rigs are expected to be utilized by that time, indicating a positive outlook for the company’s operational capacity.

Executive Commentary

"We are steering through these challenges and setting Arabian Drilling up for recovery and long-term growth," said CEO Ghassan Mirdad. CFO Farid Mustafayev echoed this sentiment, stating, "Our prudent approach ensures we have the strategic flexibility to undertake growth opportunities."

Risks and Challenges

• Continued revenue decline poses a risk to profitability.
• Lower utilization rates could impact operational efficiency.
• Market volatility may affect stock performance.
• Potential delays in international expansion could hinder growth.
• Macroeconomic pressures and industry dynamics remain uncertain.

Q&A

During the earnings call, analysts inquired about the rig reactivations, which were described as a client-driven strategy. Questions also focused on the company’s dividend policy, with executives expressing a positive outlook for 2026. Additionally, the normalization of day rates and international expansion opportunities were discussed, highlighting Arabian Drilling’s strategic priorities.

Full transcript - Arabian Drilling Co (2381) Q3 2025:

Michael, Conference Moderator: Ladies and gentlemen, thank you for standing by, and I would like to welcome you to the Arabian Drilling Third Quarter 2025 Results Conference call. I’ll now pass the line to the Investor Relations and Communications Director, Mr. Bassem ElShawy. Please go ahead, sir.

Thank you, Michael. Good afternoon, everyone. This is Bassem ElShawy, Director of Investor Relations. I would like to welcome you all to the Arabian Drilling Q3 2025 Earnings Call. Please note that this presentation includes forward-looking statements. We encourage you to review the disclaimer provided in this document at your leisure for more details. I’ll begin today’s session by introducing our presenters. Joining me, Mr. Ghassan Mirdad, our Chief Executive Officer, and Farid Mustafayev, our Chief Financial Officer. Ghassan. Sorry. Ghassan will start by sharing our strategic and operational highlights, and then we will hear from Farid, who will walk us through the financial results in detail. With that, I’ll hand over to Ghassan.

Thank you, Bassem. Assalamu alaikum and good afternoon, and thank you for attending today’s call. Before I start, I would like to take a moment to introduce Farid Mustafayev, who joined Arabian Drilling as the Chief Financial Officer on the 1st of October. This is Farid’s first earnings call with us. He brings over 24 years of global corporate finance experience, including significant leadership roles in the energy sector. We are delighted to welcome Farid to the team and look forward to his contribution as we continue to drive the company forward. I will start by giving you high-level views of financials, which Farid will cover in more detail in the following slides. Let me begin with a brief overview of our performance for the first nine months of 2025. Despite headwinds, Arabian Drilling demonstrated resilience in both revenue and EBITDA margins.

While our total revenue at SAR 2.6 billion declined by 5.8%, reflecting reduced offshore and land activities, this was largely offset by a robust increase in unconventional operation. This shift in our activity mix affected net income and partially cash flow. Thanks to the proactive steps we have taken, we are steering through these challenges and setting Arabian Drilling up for recovery and long-term growth. Looking at quarterly performance, we recorded a modest decline in revenue, while our EBITDA margins held steady at 35.1%. Net income decreased by SAR 60 million, resulting in a net loss of SAR 9.4 million. This was primarily driven by continued decline in rig utilization, which I will cover in more detail in the coming slides, and further impact on a one-off deferred tax provision. Cash flow from operation and net debt levels remained stable and prudently unchanged during the quarter.

Moving to the next slide, I will highlight some of the important metrics. Backlog shy of SAR 11 billion, which represents a 6.8% increase compared to the same period last year. Our utilization rate dropped to 73.8%, with 45 active rigs down from 48 in the previous quarter, which continued to have an effect on our profitability. However, we see strong recovery of utilization by Q1 2026 and expect Q2 2026 to reach a utilization of 80%. This leads me to the last point of this slide and the highlight of our call today. During the past few days, we have made two important announcements. We have received official notice of resumption of two offshore rigs and three land rigs, all scheduled to resume operation in Q1 2026, along with the commencement of the first international contract in the DCC. Our offshore utilization rate will reach 100% by Q2 2026.

Moving to backlog and utilization. Our backlog remains robust, shy of SAR 11 billion, as I mentioned, as of September 2025, up 6.8% year-on-year, indicating a strong client relation and confirms clear visibility for the coming years, with 2.4 years in contract tenor and 3.2 times book-to-bill ratio. Utilization rate declined this quarter following the suspension of three rigs. We do not see any further suspension in Q4 2025. We expect utilization to recover starting Q1 2026 to reach 80% by Q2 2026. Supported by commencement of our first international contract and confirmed rigs reactivation. Now, I will go over 2025 contract renewals. In 2025, we renewed 22 out of 24 rig contracts, which demonstrated the continuous demand for our service thanks to our ability to deliver world-class performance and service quality. Notably, 11 LSTK contract in the gas rigs were extended for one year, as announced in August.

These rigs are part of the 23 contracts scheduled for renewal and tendering in 2026. We are in the final stage of renewing the two outstanding rig contracts to be announced before year-end. I will now hand over to Farid, who will walk us through the financial results in more details. Farid.

Farid Mustafayev, Chief Financial Officer, Arabian Drilling: Assalamu alaikum and good afternoon to everyone. Thank you, Ghassan and Bassem. I’m honored to join the Arabian Drilling team and to be speaking with you today. I look forward to meeting you in person during upcoming investor events. Starting with our year-on-year financial performance, revenue for the period was SAR 2.6 billion, down 5.8%. This was primarily due to rig suspensions and contract terminations in offshore and land. This was partially offset by the deployment of unconventional rigs, which helped mitigate the impact. EBITDA decreased by 15.1%, reflecting the decline in revenue, combined with a shift in our activity mix and the effect of discounted rates across certain contracts. To shed light on the magnitude of this mix change, offshore revenue declined by approximately SAR 400 million, and the suspension of land rigs contributed an additional SAR 300 million to the drop.

These reductions were largely offset by unconventional revenue amounting to SAR 600 million. Despite this significant shift in mix, we successfully maintained a strong EBITDA margin in the high 30s, with the Q3 year-to-date margin standing at 37.4%. Net income fell by 70.8%, in line with the drop in EBITDA, and further impacted by higher depreciation due to the year-to-date effect of deploying unconventional rigs and full quarter impact of acquired service vessels. Capital expenditures were down 60.2%, reflecting the absence of significant investment in unconventional rigs done in 2024. Net debt increased by 2.2% but remains broadly stable and within our comfort range. I’ll provide more detail on this later in the presentation. Operating cash flow declined by 17.1%, consistent with the drop in EBITDA. Now, let’s turn to the quarter-on-quarter performance.

Revenue declined by 3.1%, mainly due to reduced rig activity, with the number of active rigs in Q3 dropping to 45 from 48 in Q2. This was partially offset by the full quarter contribution from the acquired service vessel, which began operation in late May. It’s worth mentioning that a 3% drop is notably lower than our 10% guidance on the back of higher-than-expected operating dates for the rigs which weren’t on suspension. EBITDA decreased slightly by 3%, in line with lower activity levels. However, the EBITDA margin remained stable at 35.1%, demonstrating healthy fall-through despite lower revenue. Net income moved to a single-digit loss at SAR 9 million, reflecting the EBITDA decline and one-off impact from deferred tax. This was driven by the capitalization of service vessels and the resulting increase in our deferred tax liability base.

CapEx was down 50%, consistent with our guidance and the absence of service vessel-related investment that were present in the prior quarter. Net debt was stable and operating cash flow in line with EBITDA performance. Now, let’s look at our segment performance across land and offshore operations. Starting with land, year-to-date revenue is up 16.7%, driven by increased unconventional activity and higher rig moves. Gross profit also improved from 9% to 12.2%, supported by stronger rig move margins and the absence of Q2 2024 impairment. While Q3 saw a slight dip compared to Q2, the overall year-to-date trend remains positive. Looking at offshore, offshore revenue declined 36.4% year-on-year, mainly due to lower utilization and partially due to discounted day rates. Gross profit fell from 37.4% to 23.7%, reflecting a significant drop in activity.

However, quarter-on-quarter profitability showed modest 2% improvement, which was driven by the addition of a new barge and maintenance activities carried out in Q2 and not repeated in Q3. Combined EBITDA margin declined year-over-year, reflecting the shift in segment activity mix, as explained earlier. Let’s now bridge the movement in net income from Q2 to Q3. As mentioned earlier, we reported a net loss of SAR 9 million in Q3, down SAR 16 million quarter-on-quarter. The largest driver was the SAR 27 million revenue decline, mainly due to reduced rig activity and continued suspension during the quarter. We also saw a higher deferred tax provision resulting from the increased fixed asset base following service vessel capitalization. Depreciation and finance costs had relatively minor changes and largely offset each other. On a positive note, we continue to realize benefits from our cost structure optimization program.

SG&A and other cost lines trended down, and in Q3, we delivered SAR 19 million in additional cost savings, some of them one-off, some sustainable. With this, we remain on track to achieve SAR 30 million in annualized savings by the end of 2025. Let’s now take a closer look at the key movements impacting our cash positions this quarter. Cash on hand was relatively low at the quarter end, mainly due to minor collection delays. These were timing-related issues on scheduled payments, and I can confirm they were fully recovered in October. Moreover, overall collections in the weeks following quarter end were quite strong, giving us a solid start to Q4 and positioning us well for a strong close to the year. Looking by key components impacted cash position, let’s start with CapEx.

As we completed our planned investment for the unconventional rigs and service vessels, Q3 saw a significant reduction in CapEx compared to Q2. This is fully in line with our guidance provided in prior quarters. Moving to changes in working capital, let me provide a bit more color. Accounts receivable, as already mentioned, increased during Q3 due to delayed client collections and have since been resolved. Accounts payable decreased, reflecting major CapEx-related payments made in Q3 for the unconventional rigs and service vessel investments. These were due as of the end of Q2. Finance costs this quarter included the semi-annual coupon payments, resulting in SAR 81 million paid this quarter. With regards to debt reimbursement, we made scheduled principal repayments and met our obligations, contributing to the overall cash movement. Let me now wrap up the financial section with a look at our debt profile and capital structure.

Net debt remains stable at SAR 2.7 billion. The marginal year-on-year increase reflects the SAR 300 million bank loan thrown in Q1. Quarter-on-quarter, we saw a slight increase, mainly due to lower cash hand at the end of Q3, as explained earlier. Our net debt to EBITDA ratio is maintained at two times, well within comfortable levels. While we expect a temporary minor peak above two times in the coming quarters, it is expected to normalize thereafter. Importantly, we have no plans to assume additional debt beyond current levels. This prudent approach ensures we have the strategic flexibility to undertake growth opportunities both within and outside the Kingdom. That concludes the financial update. I will now hand over back to Ghassan to present guidance for the next quarter.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Thank you, Farid. For the fourth quarter of 2025, we anticipate that revenue will remain largely unchanged from Q3 2025. Though there is a risk of a decline of up to 5% as the full impact of Q2 temporary suspension rigs is realized. This potential decrease may be partially offset by expected pickup in rig move activity, which has been lower than average in Q3 2025. For CapEx, our guidance for the year was SAR 1 billion at the beginning of 2025. As we progressed through the year, we have trimmed our guidance down to SAR 800-850 million as part of last quarter guidance. Now, we project to record SAR 800 million for the year, including the majority of CapEx for recently announced rig resumption. This is achieved by an excellent effort by the team.

Finally, as we conclude today’s presentation, I would like to share our key priorities for the months ahead. First, reactivation of recalled rigs. We are focused on accelerating redeployment in a safe and efficient manner. Second, the successful commencement of our first international contract. With decades of experience, we are renowned for our high performance with our clients in Saudi Arabia. We are determined to showcase our performance in our first international contract to set the stage for expanding our international footprint even further. Finally, to continue our efforts in cost structure, CapEx, and Opex optimization in order to deliver a strong fall-through as we recover from an 18-month of challenging market dynamics. With this, we end our presentation, and I will now pass it over to Michael to open the floor for questions and answers. Thank you.

Michael, Conference Moderator: Thank you. Thank you very much for the presentation. We will now be moving to the question and answer section of the call. If you would like to ask a question and are dialed in by the telephone, please press Star 2 on your keypad. That’s Star 2 on your keypad and wait for your name to be prompted. If you are dialed in via the web, you may also type your question in the box provided or request to ask a voice question. We’ll now give a moment or so for any questions to come through. Okay, thank you very much. The first question comes from Mr. Giuseppe Vilari from Morgan Stanley. Please go ahead, sir.

Hello. Thank you for the presentation and for the opportunity to ask a question. The first one, if I may, is on the rig reactivations. What do you think is the main driver behind the reactivations, and what’s the outlook for the rigs that are still suspended for 2026? Maybe if you could shed more color on the daily rates as well, that would be great. Secondly, a question on dividends. What’s your expectation now going forward, given that the policy changed a little bit recently? Thank you.

Giuseppe, we had a hard time to understand your question. Your line was breaking up quite a lot. Would you mind just once again, very quickly, just repeat your question?

Sure. Sorry about the line. The first question is on the suspended rigs. What do you think is the main driver for the reactivations, and what’s the outlook for the rigs that are still suspended for 2026? The second question was on dividends. What do you expect looking forward for dividends?

Thank you, Giuseppe. I think that was much clearer. I’ll pass the line back to the team for their answer.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: On the reactivations.

Oh, sorry. You can hear us? Yes.

Michael, Conference Moderator: Yes, Ghassan, please go ahead.

Yeah. Sorry, it seems we were muted. Can you repeat?

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: I’ll repeat. Apologies if I was muted maybe during the answer. On the reason of why the rigs are being called back, this is, I think, a strategy of our client to call back. We have seen out of the 10 suspended rigs, 5 were called back. Those 5, some of them were suspended this year, some of them were suspended last year. There is no specific clear reason why there was a short suspension or a long suspension. It all depends on the client strategy. It is Arabian Drilling and other companies as well being called back. We still do not know the final number. We believe there might be more callbacks, and this can get our other 5 rigs as well to come back as well. On the dividends, we will have to see with the new board whose terms started yesterday.

Things look positive going forward in 2026.

Michael, Conference Moderator: Okay, thank you very much. We’ll be moving to the next question. Next question is from Mr. Faisal AlAzmah from Goldman Sachs. Please go ahead, sir.

Yes, hi. Thank you for the opportunity to ask a question. Maybe just starting off with a question on the number of rigs that we should expect into next year. You have ended Q3 with 37 onshore rigs, and you are redeploying 4. We should expect around 41 for the full year. Do you envision that you might be able to deploy more than 41 next year in Saudi? That is my first question. My second question relates to the pickup in number of rigs on the onshore side versus the offshore side. How do we think about the Aramco plan to increase production, and where is the highest delta? Should we expect more deployment on the onshore side in your view, or do you think these are the number of contracts that they would need for now for 2026 at this stage? Thank you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Maybe I’ll start just to answer the first half of your question about the number of rigs. We’re closing this year overall with 45 active rigs, 37 land and 8 offshore. As we announced, we have 5 rigs recalled to be reactivated, and 3 of them are land and 2 offshore. Next year, we’ll see 40 land and 10 offshore rigs. It was mentioned as well that the total available split right now is 61. Two of them are leased rigs. One of the leased rigs will be returned back to the owner by the end of this year. The start of the year will be 60 rigs. Available will be 60 rigs. With that, and the fact that there is one more offshore rig that will go for operations as per the international contract, the plan is that all 11 offshore rigs will be utilized by Q2 next year.

At the moment, when it comes to land rigs, it will be 40 active land rigs. We don’t have any further details if this number will change going forward. Just to answer the second part, can you hear me? Are you in my back?

Michael, Conference Moderator: Yes, please go ahead. We can hear you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Yes. On the second part of the question. We have five land rigs that are still pending, and some do not have contracts. All of them are in different tenders, in Saudi or out of Saudi. Tenders and opportunities that might be direct award as well in different countries. As of now, they do not have confirmed work, but we are actively making sure that they try to go back to operation. Am I still online?

Michael, Conference Moderator: Yes, we can hear you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Yeah.

Michael, Conference Moderator: Okay, thank you very much. Our next question comes from Ms. Anna Kishmaria from UBS. Please go ahead, ma’am. Your line is open.

Good afternoon. Thank you very much for taking my questions. I have several. First, around the rigs recontracting for next year. You currently have 23 in the pipeline. Can you please comment on whether you expect recontracting on which term? Any color would be very helpful here. The second, it will be like a follow-up to the first question we had. Can you comment on the day rates for the rigs renewal in offshore and on the land side? Do you need to provide any discounts, or is it the similar levels as some other fleet operating? Thank you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Hi, Anna. Thanks for attending today. Just to answer, if you look at historically, we’ve been seeing renewal year on year. The contracts are renewed. We are in a good position to see renewals when they come to the end of the contract. Having said that, we are in different tendering. While the rigs were suspended, our client accepted that we can use them for other contracts within Saudi. To give you an example, for the offshore contract that we won outside of Saudi, it is still contracted with Aramco, but Aramco gave us the privilege that we can use the rig internationally, and then we can come back and use the contract that was suspended on. All I’m saying is the 23 rigs, some of them are suspended, some of them are coming for end of contract, and we’re going for different tenders.

Maybe just to add generally, as communicated, this year, we had in the beginning of the year 24 contracts to be renewed, and 22 are already renewed, and 2 you will hear from us by the end of the year, which shows that we are quite consistent in execution of this renewal. For the next year, yes, we have 23. Eleven of them, they relate just to one contract with LSTK Gas, for which we received extension this year. Next year, the tender is started. It is happening. This makes the biggest part of the next year renewals. If I would like to add, the 11 is in the LSTK Gas, and we dominate the Gas.

We are trying to see how, making sure that we have the whole experience in the Gas and most of the service providers who are trying to penetrate this market, being that we are the only rig contractor, so we have most of the knowledge in the Gas that we can help them to drill faster. On the day rate, the question on the day rate, if we look at the offshore, we’ve seen a discount in the offshore, mainly going to equilibrium. When we started the offshore rigs, there was a peak of demand and low supply, so the prices were very high. Now we are going to equilibrium for the offshore. For the land, they are going back. However, different companies have given slight discount because they are very, very—I mean, our prices. The window of discount is very small.

You see a small discount just to start, just like we did with COVID. We started the first six months with a minor discount, and then after six months, prices go back to normal. Hope I answered your question, Anna.

Thank you very much.

Michael, Conference Moderator: Thank you very much. Our next question comes from Mr. Oliver Connor from Citi. Please go ahead. Your line is open.

Hi. Thank you for taking my question. Another one just on the contracting point. I think you mentioned in the past that you thought there was a risk that Aramco would let some contracts expire more broadly. So even if suspended rigs come back, the rig fleet does not really grow from here. Can you provide some color maybe on where you think the offshore market goes from here vis-à-vis sort of contract renewals more broadly to the market and suspension returns?

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Okay. So my view stays the same, as I’ve been saying before in the previous calls. We’ve seen a huge drop on the offshore rigs in Saudi. We don’t believe that all the rigs will come back on offshore. We’ll see a slight pickup. I mean, we’re around 4-5, maybe 6 rigs. We’re not going to see a huge pickup on the offshore. Out of this level of increase, if we say 5, we picked up 2, which was very good on our side. On the land, however, we will see a big pickup. We’re seeing a huge pickup on the land side from Arabian Drilling and from other contractors as well.

Thank you.

Michael, Conference Moderator: Okay. Thank you very much. Our next question comes from Ildar Kazir from HSBC. Please go ahead. Your line is open.

Thank you so much. I think one of my questions has already been answered, but just to make sure I understand. A couple of rigs this year, I think, generating revenue with a discount. Do you expect that revenue to remain in place going into 2026? Not really. Lastly, one of your rigs secured an extension while being suspended. Can you tell us how long is that extension? Thank you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Yeah. Actually, one of the rigs took a 10-year contract. That was suspended. Two rigs actually took a 10-year contract while they were suspended. This tells you that it’s just a matter of time when they go back. On the discount, we’ve seen some discounts this year, yes, but these as well. These discounts are temporary discounts that we gave for this year, and then prices will go back next year.

So basically, that’s contractual agents going to resume to the contractual level in 2026?

It wasn’t very clear. Could you? Yeah. The last question just now was very—your voice was very low. Can you repeat the question? Yeah.

Yeah. So basically, the two rigs which were given discount this year are returning to the contractual level in 2026.

Sorry, we can’t hear you. You’re very far from your mic. Always some papers that you—or something is—

Apologies. The two rigs which are given discounts this year, they will be reset to the contractual level in 2026.

What I’m saying, two rigs, these are the two rigs that were suspended, yet they were given 10-year contracts. Okay? These are the—when I say two rigs. However, there is some discounts that were given to different rigs. That was temporary discounts, but then going forward, then they will go back to their normal price.

Thank you so much.

Michael, Conference Moderator: Okay. Thank you very much. Just before we move to the next question, we’ll be displaying a small survey question on your screens. Your feedback will be greatly appreciated. Our next question comes from— It’s a text question from Jitheya Bokare from SG Analytics. Why was there a significant drop in gross margin for the onshore segment compared to the previous quarter? Is it only related to the suspension or any other factors contributed? How do you expect gross margin for the fourth quarter?

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Yeah. That was a temporary impact. If we look at land gross profits Q2 to Q3, I believe that’s the question, it dropped from SAR 11 million to SAR 6.2 million. One of the reasons is that this quarter, the rig moves were quite slow, and that contributed basically the most. We also saw this quarter a bit higher costs on certain lines. These are, again, it will be normalized. It will not go to the level in Q2, as in Q2 we had a higher rig activity, but these were the two key reasons: lower rig moves and a bit higher cost than expected.

Michael, Conference Moderator: Okay. Thank you very much. We have a follow-up question from Faisal from Goldman Sachs. Please go ahead. Your line is open.

Yes, hi. Sorry. Thanks for the opportunity to ask another question. Just to follow up on some of the comments that you’ve made. As we think about next year, I mean, obviously, you have five rigs that are going to be redeployed. Two of them are jackups, and three are onshore. Will the pricing mix change? If I’m taking your Q3 EBITDA as a run rate and your Q3 revenue as a run rate, should we just add those five rigs, or should we also assume some price differential that improves for 2026?

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Pricing, I think you can assume the same levels of pricing for offshore as in this year, right? Obviously, EBITDA clearly will improve because right now those rigs are on stack, yeah, and we’re incurring ongoing costs beyond depreciation, the other costs to keep them more stacked. They’re not generating any revenue. Obviously, with them going back next year into operations, we’ll see improvements on EBITDA. Basically, our EBITDA is directly connected to utilization rate. As you see, utilization rate is improving. We will see improvements in EBITDA as well. On offshore on a higher scale and on land on a bit lower scale.

Thank you.

No problem.

Michael, Conference Moderator: Okay. Thank you very much. Next question comes from Rene Salwan from Jadwa Investments. Please go ahead, sir.

Hello. Thank you for the call. I just want to verify if my understanding is correct. You’re saying you have 11 offshore going into next year. That includes two vessels. There are nine jackup rigs. That means one needs to be returning. You had one for sale. What’s happening with that one? Is there any other one that is not accounted for?

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: I couldn’t hear completely the question, but if I understood correctly, you’re referring to 12 now versus 11 next year. Is that right?

I just want to understand. Which offshore rigs are being taken out from before? One is leased that’s been returned. There’s one that was available for sale. What’s happening with that one?

Yes. Okay. Available for sale was not counted in the total fleet since it was categorized as held for sale. We had 12 offshore rigs. Two of them, as you rightly mentioned, are service vessels. If you look just at offshore jackups, it is nine. Two of them, they used to be leased. One leased jackup will remain, and it is amongst those which are recalled. The second one, which was out of contract, the contract was terminated. That rig right now is on the way back to the owner, is selling back to the owner. That is the one which is going out of our list of available offshore rigs, yeah. Just to add on the rig that is held for sale, we expect Q4 to finalize the sale.

Okay. What was the yearly lease on the one that’s being returned?

Yeah. I don’t have that number in my hand right now, but yeah, usually we don’t specify that details as well, yeah.

Okay. Okay. If I understood also correctly, you expect discounts given on two offshore rigs to not be there anymore? If you could just tell us, the two new ones that were contracted, at what rates were they contracted?

Initially, our contracts were in the north of 100.

Yes.

Now all I can tell you is south of 100.

Okay. Okay. Because if I understand correctly, your discount was around SAR 80 million run rate for the year on those two rigs. And you expect that SAR 80 million to come back, or should we expect south of SAR 100 million?

No, I think we expect them not to come back. It was not 80. We communicated SAR 20 million per quarter at the end of Q1, yeah. You can say the impact for the year is SAR 60 million, yeah. As I mentioned, it is the run rate of 2025, yeah, when it comes to pricing.

We do not expect that additional revenue of $20 million per quarter to come back. Is that correct?

Yes. We will not see the prices of north of 100, yes.

Okay. Thank you.

What we’re seeing is. Initially when we started the offshore, there was huge demand with low supply. The prices for a lot of the drilling contractors was high. Now it’s going to equilibrium where the market is today.

Okay. Thank you. Thank you. It’s clear now.

Yeah. Yeah.

Michael, Conference Moderator: Okay. Thank you very much. Just once again, reminder, Star 2 for any additional questions. Star 2. You may also ask a voice or a text question if you are logged in online. Our next question, follow-up question, Ildar Kazir from HSBC. Your line is open, sir, on your phone. Please go ahead.

Thank you again. Could you please repeat what you said about the five rigs which you have available to tender them in the Kingdom and in the region? Are these onshore rigs, if I understood correctly? Just to make sure. Just generally speaking about the offshore market, are you in the position to participate in the new regional tenders, given that a lot of most of your fleet is now going to be fully utilized next year? Thank you.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Very good question. Today we have the suspended rigs at 10, 3 are offshore, and 7 are land. The 3 will start in Q1, 2 with Saudi Aramco and 1 international. That makes our offshore 100%. Then 3 land will start, so we will be remaining with 5 land rigs that can be recalled by the client, but as well, we are tendering them in different tenders, be it in Saudi Arabia or in Kuwait at the same time. This is to answer the question on the rigs. On the offshore, we will still look at expanding. I mean, we look at tenders outside and we will see how we can get rigs if we win a tender, because usually when you win a tender, you have time to deploy. We will see how we can.

Today, there are a lot of rigs in the market that we can lease, bareboat charter, and we use them. That is one of our strategies to expand internationally as well. To answer your question, having 100% utilization will not stop us from growing internationally in the offshore.

Thank you.

Michael, Conference Moderator: Okay. Thank you very much. It looks like we have no further questions at this point. I’ll be passing the line back to Arabian Drilling Management and IR team for the concluding remarks.

Ghassan Mirdad, Chief Executive Officer, Arabian Drilling: Thank you very much, Michael. Thank you very much for all listening to us today, for the call today. I just wanted to say it was, as actually mentioned before, it was a dynamic year. This helped us to look at our cost structure, look at it, and make sure that we can benefit from the time we’re going through. Next year, we already see confirmed recalls. We see a good year ahead of us. With the cost savings and the structure that we made it more agile for our growth, this will benefit our bottom line going forward, inshallah. Thank you very much, and I look forward to seeing you in different investor events and as well for closing the year, inshallah, in strong. Thank you very much.

Thank you.

Michael, Conference Moderator: Thank you very much. This concludes today’s conference call. We’ll now be closing all the lines. Thank you and goodbye.

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