Business Overview
Koil Energy Solutions, Inc. formerly Deep Down, Inc., is a specialized energy services company providing equipment and support services to the global energy and offshore industries. The company focuses on developing innovative solutions for complex customer challenges located between the production facility and the energy source.
Koil Energy’s core service offerings and technological solutions include distribution system installation support, engineering services, umbilical terminations, and its flagship Loose Steel Tube Flying Leads .The LSFL is designed to eliminate residual memory left in traditional flying leads, allowing the bundle to lay flat on the sea floor. Additionally, the company provides equipment refurbishment, subsea isolation valve services, and specialized storage management at its 101,000 square-foot, ISO 9001-certified facility in Houston, Texas.
While the company primarily serves the offshore oil and gas market—specifically deepwater and ultra-deepwater exploration and production—its core competencies are energy-source agnostic and applicable to offshore wind, wave energy, hydrogen, and liquefied natural gas markets. To support international growth, Koil Energy expanded its operational footprint in February 2025 by opening a 180,000 square-foot facility in Macaé, Brazil, aimed at engineering and manufacturing for the Campos Basin.
Key Financial Performance Highlights
Koil Energy’s financial performance in 2025 was marked by significant top-line growth in the fourth quarter, offset by full-year margin compression due to strategic investments and first-half underutilization.
Full-Year 2025 Performance:
- Revenue: Total revenues for the year ended December 31, 2025, increased 6% to $24.05 million, up from $22.73 million in 2024.
- Cost of Sales & Gross Profit: Cost of sales increased 15% to $16.09 million compared to $13.98 million in the prior year. Consequently, gross profit declined by 9% to $7.96 million, resulting in a gross margin of 33%, down from 38% in 2024. This contraction was primarily driven by personnel underutilization in the first half of the year, a $1.35 million increase in direct headcount costs, and $280,000 in additional rent expense associated with the new Brazil facility.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses rose 34% to $8.33 million (35% of revenue) from $6.19 million (27% of revenue) in 2024. The increase was driven by $609,000 in headcount and benefits, a $569,000 allowance for credit losses, and a $350,000 increase in legal expenses related to patents and contracts.
- Profitability: The company reported a net loss of $38,000 for FY 2025, a significant decline from a net income of $2.62 million in 2024. Modified EBITDA stood at $970,000, compared to $3.54 million in the prior year. Adjusted EBITDA for the year was reported at $1.0 million, reflecting heavy investments in growth initiatives.
Fourth Quarter 2025 Performance:
- Revenue: Q4 2025 delivered record revenue of $7.3 million, representing a 22% year-over-year (YoY) increase and a 14% sequential increase from the prior quarter.
- Gross Profit: Gross profit for the quarter was $2.5 million (35% margin), compared to $2.4 million (40% margin) in Q4 2024. Management noted that while gross profit dollars remained stable, the margin decline reflected a less favorable project mix.
- Profitability: Net income for Q4 2025 was $537,000, improving from $343,000 in Q4 2024. Adjusted EBITDA for the quarter reached $704,000, translating to a 10% margin.
Liquidity and Cash Flow:
- The company ended 2025 with $1.54 million in cash, down from $3.42 million at the end of 2024.
- Net cash used in operating activities was $901,000, driven by a $2.44 million increase in working capital to support customer contracts.
- Investing activities consumed $1.53 million, primarily allocated to new equipment, fixed asset overhauls ($1.28 million), and capitalized software development ($263,000).
- Financing activities provided $562,000, primarily from short-term borrowings under a factoring arrangement with Amegy Bank Business Credit, under which $541,000 was outstanding at year-end.
Segment-Wise Performance
Koil Energy operates as a single reportable operating segment but disaggregates its revenue into two primary contract types: Fixed Price Contracts and Service Contracts.
- Fixed Price Contracts (Product Sales): Revenue from fixed price contracts decreased slightly for the full year to $14.05 million from $15.84 million in 2024. This decline occurred because several large, product-heavy contracts did not ramp up until late in the year. However, momentum shifted positively in the fourth quarter, with Q4 product sales increasing 21% YoY.
- Service Contracts: Service revenue delivered robust growth, increasing 45% for the full year to $10.00 million from $6.89 million in 2024. This surge was attributed to increased installation support and pre-commissioning activities for umbilicals and distribution systems across both oil & gas and offshore wind projects. Service revenue continued its strong trajectory in Q4 2025, growing 24% YoY.
Operational Metrics and Key Drivers
Koil Energy’s operational performance is highly correlated with capital expenditure cycles in the offshore exploration and production sector. Several macroeconomic and industry-specific drivers are currently shaping the company’s operational landscape:
- Subsea Resurgence and Greenfield Declines: Years of underinvestment combined with a natural 7% annual decline rate in deepwater fields have created an urgent need for new development. Operators are increasingly allocating capital to deepwater projects, particularly in Brazil, the U.S., and West Africa.
- Subsea Tie-Backs: As a preferred development approach, operators are utilizing subsea tie-backs to connect new wells to existing infrastructure. This strategy offers shorter payback periods and accelerated first-oil timelines—often within two years of final investment decisions. Koil Energy noted increased bidding activity and order intake for tie-back and maintenance projects throughout 2025.
- Subsea Tree Awards: Industry analysts at Westwood Global Energy Group project a 20% increase in subsea tree awards from 247 in 2025 to 296 in 2026. Koil Energy’s product sales correlate closely with these awards, as the company supplies the vital controls infrastructure linking the trees to topside facilities.
Management Commentary and Strategic Updates
Management maintains a highly optimistic outlook regarding the company’s growth trajectory and market positioning. President and CEO Erik Wiik emphasized that the company’s growth initiatives are delivering results, pointing to the record $7.3 million revenue and 10% Adjusted EBITDA margin achieved in Q4 2025.
Throughout 2025, the company purposefully deployed free cash flow to fund long-term growth vectors. Strategic investments included the acquisition of new rental equipment, intellectual property development, the establishment of the Macaé, Brazil operations, and the expansion of international sales efforts. Management asserts that these investments are already yielding positive growth.
Looking ahead, Koil Energy is actively refining its strategic roadmap and establishing ambitious corporate goals extending through 2030. Management plans to present these strategic initiatives to investors at an in-person and online conference in Houston on May 7-8, 2026, coinciding with the Offshore Technology Conference (OTC).
Notable Risks and Challenges
The company’s filings outline several operational, financial, and legal risks that could impact future performance:
- Customer Concentration: While Koil Energy relies on a diverse base of major integrated and national energy companies, revenue concentration remains a factor. In 2025, the company’s two largest customers accounted for 23% and 16% of total revenues (39% combined), representing a decrease in concentration from 2024, when the top two customers accounted for 74% of revenue. The loss of a significant customer or delays in large contracts could adversely affect cash flows.
- Credit Risks and Bad Debt: In Q3 2025, the company recorded a $569,000 allowance for credit losses related to unpaid invoices from OMS International Limited (OMSi), a UK-based subsea engineering firm. Koil Energy filed a civil action in September 2025 and subsequently received a judgment against OMSi in January 2026 for approximately $575,000, which it intends to pursue for recovery.
- Material Weaknesses in Internal Controls: Management concluded that its disclosure controls and internal controls over financial reporting were ineffective as of December 31, 2025, due to material weaknesses related to the accounting for share-based payments. Remediation efforts are ongoing, including the appointment of a new Chief Financial Officer (Kurt Keller), the engagement of external accounting experts, and the implementation of a robust enterprise resource planning (ERP) system.
- Legal Settlements: In June 2025, the company settled a breach of contract lawsuit brought by its former landlord, WW Champion Developments, for $590,000. Because the company had previously accrued a $923,000 liability for this matter, it recognized a $333,000 gain upon resolution. All settlement amounts were fully paid as of January 2026.
- Labor and Macroeconomic Vulnerabilities: The company is dependent on a skilled labor force, and significant wage increases by competing employers could constrain operations. Furthermore, business remains sensitive to the historical volatility of global oil and natural gas prices, which dictate the capital expenditure budgets of its core customer base.