ADNOC Drilling is offering a 7.5% stake, which has already seen one heavy US investor come on board. Image Credit: ADNOC

ADNOC Drilling Co, the largest national drilling company in the Middle East by rig fleet size, is selling a 7.5 per cent stake through an initial public offering (IPO) and list on Abu Dhabi Securities Exchange on or around October 3. The price was set at Dh2.30, implying an equity value of an impressive $10 billion.

The oil behemoth, ADNOC Group, is seeking to raise about $750 million from its drilling unit’s IPO, in what would rank among one of the largest share sales in the UAE. The drilling unit is planing for a major rig fleet expansion and well drilling programme, positioning itself to take advantage of emerging opportunities across the upstream value chain. The US firm Helmerich & Payne, Inc. announced a strategic collaboration, wherein ADNOC Drilling will purchase eight land rigs from it for $86.5 million.

A timely deal

Following this buyout, the company will make a $100-million cornerstone investment in ADNOC Drilling. The strategic alliance and rig acquisition will support Adnoc’s target of reaching 5 million barrels per day (mbpd) production capacity and gas self-sufficiency for the UAE by 2030, along with plans to unlock its unconventional oil and gas resources.

ADNOC Drilling has achieved 50 per cent EBITDA margin on average during the three-year period from 2018 and maintained robust funds from operations in excess of $1 billion during the same period despite adverse macroeconomic conditions and the oil price shock from the pandemic. Additionally, the company has a sound balance sheet structure with leverage (net debt over EBITDA) of 1.2x as of June 30, one of the lowest in the industry.

Hitting value highs

Last year, ADNOC Drilling had revenues of $2.09 billion, an EBITDA of $959.7 million and profit of $569 million. The decision to float a minority stake is aimed at creating and maximizing value and growth opportunities for Abu Dhabi and the UAE. Importantly, it and will drive investment into the country, building on the UAE’s position as a stable, credible, and highly trusted investment destination as well as ADNOC’s continued success in attracting leading global investors as partners.

Since 2016, ADNOC has driven over $64.5 billion in foreign direct investment to the UAE and could possibly continue to develop additional investment and partnership opportunities. Through this IPO, ADNOC Drilling will be able to raise capital and create a broader investor base, while also supporting the expansion of the UAE’s private sector and capital markets. Recently, the Abu Dhabi stock market surged past the Dh1 trillion market cap, making it one of the best performing ones in the region.

New listings will open further avenues for new entrants to participate in the UAE growth story.