Investor FAQs - Drilling
العربية

Investor FAQs

Investor's Frequently asked questions

ADNOC Drilling (the “Company”, “we”, "us") is the largest national drilling company in the Middle East by rig fleet size, with 107 rigs, out of which 96 are owned rigs as of 30 June 2021, and the sole provider of drilling rig hire services and certain associated rig-related services to the Abu Dhabi National Oil Company (“ADNOC Group”) on agreed contractual terms. We provide our customers with a full suite of drilling services, including rig hire services and certain associated rig related services in Abu Dhabi and oilfield services (such as integrated drilling services, wireline, directional drilling, cementing, pressure pumping, logging and fluids, and hydraulic fracturing). Approximately half of our fleet is less than five years old and 29 of our rigs are performing integrated drilling services to our customers

FAQ Investors

ADNOC Group is an integrated energy company wholly owned by the government of Abu Dhabi. It is one of the world’s largest energy producers and a primary catalyst for the growth and diversification of the Abu Dhabi economy. With a production capacity of approximately 4 million barrels of oil per day and 10.5 billion cubic feet of natural gas per day, it operates across the entire hydrocarbon value chain. It has a network of fully-integrated businesses for exploration, production, storage, refining and trading, as well as the development of a wide range of petrochemical products.

Dividends and Dividend Policy

Our dividend policy is designed to reflect our expectation of strong cash flow and our expected long-term earnings potential, while allowing us to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth.

Explore

Operational and Financial Highlights

We demonstrate superior and reliable EBITDA and net income margins compared to anyone among Onshore players, Offshore players or Oil Field Services (OFS) providers in the industry, at respectively 46% and 27% in 2020. The volatility of our historical financial performance is low.

Explore

Reports, Presentations and Announcements

Quick access to our documents illustrating our operational and financial performance; corporate reports, presentations and regulatory announcements, since our initial listing on the Abu Dhabi Securities Exchange (ADX) on 3 October 2021.

Explore

ADNOC Drilling provides drilling and well construction services to ADNOC Group Upstream companies that are responsible for extracting hydrocarbons from the ground, both onshore and offshore.  

To enable this, ADNOC Drilling owns and operates rigs, maintaining a multi-purpose fleet that can operate on land, at sea, and on islands at sea as well as a workforce of 8,000 employees.  

Our operations are supplemented by technology that facilitates efficient well drilling and our services include advanced methods such as hydraulic fracturing. We control the entire drilling process from start-to-finish. 

ADNOC Drilling has a unique profile which is unmatched in the industry. We believe we truly differentiate vs. others given:

  • Our single customer exposure – ADNOC
  • Long term commitment in the contract which is unique in the industry
  • Fixed, ADNOC underwritten margins as compared to significantly volatile margins of other players in the sector
  • Significant growth ahead of us
  • And finally, we have unique financial policy in place focused on low leverage whilst preserving an attractive dividend yield

  • We are the dominant player in Abu Dhabi drilling market enjoying >90% in UAE onshore contractors market share (followed by KCA, Sakson, Nabors and Petrogulf) and >60% market share in contracted jack-ups in the UAE (followed by Shelf Drilling, Ocean Oilfield, Noble Drilling, Saipem).
  • In the Oil Field Services market, we will have 50% market share in the UAE by 2022. Other than ADNOC Drilling, the key players in the OFS industry in the UAE are Baker Hughes, Schlumberger, and Halliburton and other standalone drilling operators.

  • Our rig acquisition strategy is undertaken when long-term sustained demand is committed by the client. ADNOC Upstream provides us with 10-year rig requirements / drilling plans on an annual basis which is incorporated in our rig acquisition strategy.

  • Our contracts are secured through a base term commitment of 15 years ensuring stable rig operation and day rate generation and we therefore enjoy a unique and differentiated contractual position compared to the standard industry contracts of 3-5 years.

  • ADNOC will always aim to meet the rig requirements by ADNOC upstream and OpCos.

  • In case we face a difficulty in securing the required rigs, we would look to obtain it through rig rentals or subcontracting.

  • Our contracts are secured through a base term commitment of 15 years ensuring stable rig operation and day rate generation and we therefore enjoy a unique and differentiated contractual position compared to the standard industry contracts of 3-5 years.

  • Yes, building or acquiring a rig is an intensive process and can take up-to 1-2 years (and potentially more in the case of jack-ups).

  • Therefore the rigs which we plan to deliver in the coming 2-3 years are already under development or in the pipeline and will be added to the fleet or replace the existing ones once ready as per your business plan.

  • However, it is also possible to opportunistically acquire rigs on market as we have done in the past very successfully.

  • Overall Oil Field Services market size in UAE in 2020 is around $1 billion, yet this includes all other minor services that ADNOC Drilling is not participating in, example of that is artificial lifting, seismic activities, also the Northern Emirates market.
  • Yet the market size that ADNOC Drilling is participating in 2020 is around $700 million in our core market. The OFS Market is expected to grow by around 4% yearly from an absolute stand point yet need to factor pricing variances in the overall growth.
  • Expected OFS share by 2025 is around 43%.
  • We are targeting a market share of 45% in 2021 and 50% in 2022 in Abu Dhabi and given the strong expansion of activity over the coming years, we expect to grow substantially.

We managed to quickly ramp up from 0% IDS unconventional market share to 66% in 2020. We had first frac on well XN-19 with two stages in July 2020. And achieved highest number of horizontal frac stages executed so far in UAE in a lateral well (GU 03). Completed eight wells with frac job executed on five wells with a total of 67 stages completed.

  • ADNOC Drilling's contract position is unique and differentiated vs the broader drilling industry.

  • ADNOC Drilling provides ADNOC Upstream OpCos with rig hire services and rig-related services (“Rig Services”).

  • ADNOC is required to procure that the ADNOC Upstream OpCos undertake to procure any Rig Services solely from ADNOC Drilling.

  • Except as may otherwise be set out in any current operating company contract entered into with an ADNOC Upstream OpCo, during the “Initial Rig Base Term” (being 15 years), the rates charged by ADNOC Drilling for the Rig Services provide the recovery of an agreed IRR (to be determined by ADNOC Drilling at its sole discretion).

  • Further, within 15 years the contract provides protection for non-operation of the rigs i.e. 90% of the operating rate charged to its customers.

  • After the 15 years is complete, we continue to operate the rigs at a minimum EBIT margin of 15-17%.

  • ADNOC Drilling is entitled to review the rates it charges to ensure the IRR is maintained, provided that, the rates relating to the provision of services for (i) offshore rigs are reviewed at least on an annual basis, and (ii) onshore rigs are reviewed at least every three years.

  • We only purchase a new rig when we have a 15-years base-term commitment from our clients, ADNOC Onshore and Offshore. In comparison, the industry standard contracts 3-5 years max.

  • The day rate setting mechanism used in the agreement is a fixed IRR-based margin over our cost of capital.

  • The nature of our contracts provides for long term stable revenue and de-risks our capital investment.

  • 15-year base term is on rig-by-rig basis.

  • We do such a framework to continue.

  • It is worth noting that we have rigs that have been in operations for 40-year+.

  • Therefore, the 15-year base term is designed only to remunerate ADNOC Drilling with a minimum IRR on its investment rather than dictate the useful life of a rig.

  • Within the 15-year base term, the rig framework agreement provides protection for non-operation of the rigs.

  • The non-operating day rate is 90% of the normal operating rate charged to its customers, which provides a lot of protection in comparison to other drillers 

  • This is the one thing that makes us stand out compared to peers.

  • ADNOC Drillings backlog is in line with the life expectancy of ADNOC and Abu Dhabi’s resource base which takes us beyond 2050.

  • This is unique compared to peers which focuses on what the business backlog looks like in six months or one year ahead.

  • This place us in a special and privileged position.

  • Our margin profile is higher compared to the sector and stable, despite the inherent volatility in the commodity price and despite Covid-19.

  • The oil price is not a driver of our business: it is driven by upstream activity in Abu Dhabi which is, given the positioning on the cost curve, less impacted by price developments in the short term and not impacted in the long term.

  • Majority of capex is to be funded through cash from operations, with any shortfalls covered by revolver drawdown.

  • Most capex to be spread across 2022 and 2023.

  • Conservative long-term leverage target of up to 2.0x net debt / EBITDA, although for short periods of time ADNOC Drilling may exceed the target during periods of high expansionary capex.

  • We have best-in-class standards in place and will comply with all regulatory requirements as well.

  • We intend to publish results on a quarterly basis.

  • We have considered several factors in relation to the initial dividend:

  • Rewarding shareholders

  • Maintaining a disciplined capital structure

  • Balance with capital investment in the short term

  • Being able to commit to meaningful dividend growth (5 for 5)

  • H1 dividend will be distributed to pre-IPO investors given the IPO is being contemplated towards the end of Q3 2021.

  • However note that IPO investors will get six months of dividend despite only owning the stock for three months until fiscal-year end (in December).

Yes, dividends are to be paid semi-annually subject to board and shareholder approval at the general meeting.

We truly believe that our targeted best in class approach creates value across the business. Our operations are energy efficient and low carbon intensive. We have successfully managed the environmental risks in the past (including spill management, waste control, air emissions and water use). And all of that is supported by robust governance standards and strong and motivated employee base including highly experienced management.

  • ADNOC Drilling does not have an ESG rating at this point.

  • However, to provide you some details on our ESG strategy, we truly believe that our targeted best-in-class approach creates value across the business.

  • Our operations are energy efficient and low carbon intensive. We have successfully managed the environmental risks in the past (including spill management, waste control, air emissions and water use).

  • And all of that is supported by robust governance standards and strong and motivated employee base including highly experienced management team.

  • We are targeting a 25% reduction in GHG intensity by 2030 from a baseline of 2019. This target is more ambitious than that of any of our peers.

 

ADNOC Drilling

  • ADNOC Group will remain the majority shareholder in the Company post IPO and continue to work with us as it has for the past 50 years.

  • ADNOC Group and ADNOC Drilling have entered into contractual arrangements regarding rig services and integrated drilling services

  • ADNOC Group’s value maximization strategy to take full advantage of all emerging market opportunities across the hydrocarbon value chain

  • The impact of the coronavirus pandemic continues to evolve however we have adopted robust business continuity measures designed to best serve employees, customers, and wider stakeholders across our business segments, and have fully adhered to Abu Dhabi’s COVID-19 protocols.

  • The Offering has been declared Sharia compliant by the Internal Sharia Supervision Committees of HSBC Bank Middle East Limited and First Abu Dhabi Bank.

  • ADNOC Drilling has several competitive strengths that position it as a compelling investment opportunity.

Balance Sheet   2018 2019 2020
Total assets USD million 4,657 5,422 5,478
Non-current assets USD million 3,570 3,412 3,305
Current assets USD million 1,087 2,010 2,172
Total equity USD million 2,851 3,383 3,252
Total liabilities USD million 1,806 2,039 2,226
Non-current liabilities USD million 1,578 1,604 1,615
Current liabilities USD million 229 436 611
Total equity and liabilities USD million 4,657 5,422 5,478
image

Progressive

We harness the UAE’s spirit of innovation to ensure that our business remains at the forefront of the global energy industry.

Explore
image

Collaborative

We harness the UAE’s spirit of innovation to ensure that our business remains at the forefront of the global energy industry.

Explore
image

Respectful

We harness the UAE’s spirit of innovation to ensure that our business remains at the forefront of the global energy industry.

Explore