Adnoc Drilling CEO Eyes Regional Expansion

Adnoc Drilling plans to expand into neighboring countries including Saudi Arabia as early as next year as part of its long-term expansion strategy, the company's chief executive said in an interview.

Listed on the Abu Dhabi Securities Exchange since October, Adnoc Drilling has historically operated within the borders of Abu Dhabi, the largest emirate within the United Arab Emirates and holder of almost all of the UAE's hydrocarbon reserves.

"We started the prequalification processes in Saudi Arabia and Kuwait," CEO Abdulrahman Abdullah al-Seiari told Energy Intelligence this week.

"I would say, there are high chances we will be coming out in 2022 to Saudi Arabia or Kuwait, with a couple of rigs or at least one rig."

Expansion Plans

Entering other countries in the region is part of Adnoc Drilling's broader growth plans, which also include expansion of its fleet of rigs in the coming months.

The company's activity in Abu Dhabi is rising as a result of the plans of its majority owner Abu Dhabi National Oil Co. (Adnoc) to raise oil production capacity to 5 million barrels per day and make the UAE self-sufficient in gas by 2030.

Adnoc sold an 11% stake in its drilling subsidiary in a $1.1 billion initial public offering (IPO) that gave Adnoc Drilling a market capitalization of about $10 billion at the time of its Oct. 3 listing.

A month later, in its first earnings announcement, Adnoc Drilling reported a 9% year-on-year rise in third-quarter net profit to $460 million and an 11% increase in revenues to $571 million.

Al-Seiari said at the time that he expected a continuing recovery in business heading into 2022 after the downturn caused by the Covid-19 pandemic in 2020.

Rig Additions

As part of the IPO, US drilling contractor Helmerich & Payne (H&P) agreed to make a $100 million "cornerstone investment" in Adnoc Drilling.

The investment by H&P followed Baker Hughes' 2018 acquisition of a 5% stake in the company.

The partnership with Baker Hughes enabled Adnoc Drilling to start offering a full range of drilling services, and the relationship with H&P has helped the company complete its transition into an integrated drilling services provider, al-Seiari said.

Under the deal with H&P, Adnoc Drilling also acquired eight of the US company's onshore flex rigs for a total sum of $86.5 million

"Last week, the first H&P flex rig's mast was raised. We will add all these rigs to our fleet throughout 2022. Offshore, we are also adding five jackups, probably within the first quarter of 2022," al-Seiari said during the interview.

Growth Trajectory

Two of the jackups have already been delivered to the UAE and are being set up for operations in Mideast Gulf waters, while another two are presently in dry tow and expected to arrive within "a few weeks," he added.

The fifth jackup rig is expected in early 2022 and all five of them — along with the eight onshore flex rigs — are expected to start operations next year.

"The company has embarked on an exciting growth trajectory that will see the increase in the fleet size by adding those land rigs and jackups, and also the oil-field service offering, expanding our position toward the region with the total drilling solution. That's the uniqueness we believe we can add to the region," al-Seiari said.

Meanwhile, Adnoc is moving ahead with the development of Abu Dhabi's oil and gas reserves during the present decade, despite the global decarbonization trend.

The company believes that its low-cost, low-carbon reserves give it a competitive advantage in a world in which demand for oil will inevitably shrink in the long term.

More recently, Adnoc also announced plans to enter the renewable energy space, a first for the state-owned company.