ADNOC hit all the high numbers possible with its 2023 financials. And with rock-solid margins to boot. Image Credit: Supplied

Dubai: ADNOC Drilling’s just had one great year. There’s been the top- and bottom-line numbers, weighing in with $3.05 billion and $1.03 billion. (Needless to say, both came from double-digit year-on-year gains.)

And then there was the expansion, with the addition of 14 new drilling rigs and taking the overall count to 129 rigs. That too helped, with ADNOC Drilling now having ‘one of the world’s largest owned-and-operated fleets’.

Now comes the best part. The ADNOC subsidiary and ADX-lister is angling for more. And it’s got the firepower – debt and equity - to make things happen.

“We have a lot of capacity to lever up – there’s the $1.25 billion in committed revolving facilities that we have signed for – but not utilized yet,” said Youssef Salem, Chief Financial Officer of ADNOC Drilling. “In terms of ability to fund future growth, we have that in spades.

“Plus, we have our own organic funds. If you look at our EBITDA and where our capex is, there’s still significant free cash flow to fund our (medium-term) requirements.”

On the capex side, the plan is to maintain levels of $200 million to $250 million annually.

"The rig fleet expansion will continue, getting to 142 by end of 2024. This is essentially to support ADNOC towards its capacity target of 5 million barrels per day by 2027." - Youssef Salem of ADNOC Drilling

Operational side of things

When the parent company answers to the name of ADNOC and which is in the midst of quite a massive undertaking to generate new finds and raise output, the drilling entity sure has a roadmap of where it’s growth will come from.

“The rig fleet expansion will continue, getting to 142 by end of 2024,” said Salem. “This is essentially to support ADNOC towards its capacity target of 5 million barrels per day by 2027.

“At the time of our IPO, all our rigs were on the conventional side. Since then, we have five rigs working on unconventional, and this too will continue to enable the UAE reach gas self-sufficiency by 2030. (The ADNOC target is to increase unconventional gas production to 1 billion cubic feet per day before 2030.)

“The third arm of our growth is oil field services business, where we have reached 48 rigs out of the total 129 we have. Mind you, not only do we provide the rigs, ADNOC Drilling offers value-added oil field services. That means we get a larger share of the wallet.

“This growth in oil field services will continue, because it’s still a fraction of the 129 rigs we have. We can ramp up quite significantly there.”

2023 dividend
ADNOC Drilling's total dividend for 2023 equals $717 million (16.45 fils per share), representing a 5% year-on-year increase. The final 2023 dividend is expected to be distributed in the first-half of April. The yield works out to 4.5%.

The stock is up 13 per cent in the last 12 months

Alliances and JVs

Last year, ADNOC Drilling signed up for another venture that would give it clout on the oil field services side of the business. In alliance with Abu Dhabi investment powerhouse Alpha Dhabi Holding. It launched Enersol, a joint venture targeting ‘value-accretive tech-enabled oilfield and energy service businesses globally’.

ADNOC Drilling owns 51 per cent in the venture. At the time of the announcement, it said the deal helps ADNOC Drilling’s ‘market-leading position as an integrated drilling services provider, powering its growth and expansion strategy by co-investing up to $1.5 billion across OFS and energy sectors’.

And will that help set up more revenue inflow from outside the UAE?

“Right, this JV will be investing predominantly globally,” said the CFO. “We are taking our oil field services business globally. As to what percentage non-UAE revenues will be, that depends on the level of M&A activity.

“This is because the international expansion, while it has an organic element, a lot will happen inorganically. And that’s through M&A deals.

“The Alpha Dhabi JV at $1.5 billion basically has the potential to double the size of our OFS business.

“Then, you are basically looking at a balanced business flow between in-country (within the UAE) and international.”

That does sound as a good enough incentive for ADNOC Drilling to dig deeper for new growth possibilities...