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Adnoc Drilling and Alpha Dhabi to surpass 3-year $1.5bn target

An oil platform in Rotterdam. Adnoc Drilling and Alpha Dhabi are seeking investment opportunities in Europe and beyond Pexels/AP
  • Three-year $1.5bn target
  • $180m stake in Louisiana company
  • ‘Significantly accelerated timeline’

A joint venture between Adnoc Drilling and Alpha Dhabi will surpass its $1.5 billion investment target within the three-year timeframe originally set, and is seeking acquisitions in the US and across Europe.

Adnoc Drilling, a subsidiary of Abu Dhabi National Oil Company, and Alpha Dhabi Holding, one of Abu Dhabi’s biggest investment companies, announced the partnership in November, to invest in tech-enabled IP-owning oilfield services.

Adnoc Drilling’s 51 percent of the venture is worth $765 million.

The partnership made its first purchase in January with a $180 million stake in Louisiana-based Gordon Technologies, which provides measurement technology for drilling in the oil and gas sector, and is set to open up operations in Abu Dhabi in the second quarter of this year.

“We do expect a significantly more accelerated timeline than the original three years we were looking at by virtue of the very strong pipeline we’ve managed to build over the last couple of months since we’ve basically closed the JV,” said Youssef Salem, chief financial officer at Adnoc Drilling.

Lunate Capital Limited is providing asset management support to the joint venture. It is listed on the Abu Dhabi Exchange and licensed and regulated by the Abu Dhabi Global Market Financial Services Regulatory Authority.

Salem refused to be drawn on future investments but told a media event on Thursday that a “significant portion” would be carried out in the US “by mere virtue [of the fact] that this is where a lot of the innovation has happened in recent years”, he said.

He also said they were looking to Europe, but in general are searching in countries where innovation is to the fore and for deals that show positive internal rates of return – a metric used in financial analysis to estimate the profitability of potential investments.

Companies would also need to show cash flow and dividend yields and be in a position to bring the services to the UAE.

Global growth

The global oilfield services market is forecast to grow from around $120 billion last year to $153 billion by 2029, according to Mordor Intelligence.

Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, reported a 29 percent year-on-year increase in net profit to $1 billion earlier this month, supported by its fleet expansion strategy and accelerated growth of oilfield services.

Salem said he expected mid-to-single digit growth quarter-on-quarter throughout this year.

The company plans to add 13 new rigs in 2024, 11 land rigs and two jack-up rigs, with capital expenditure set at between $750 million and $950 million.

Adnoc Drilling has previously revealed plans to expand from its UAE base across the GCC. Saudi Arabia, Kuwait, Qatar and Oman are potential new destinations.

“We are progressing through the pre-qualification process in a number of these markets,” said Salem.

Parent company Adnoc has been on a dealmaking frenzy recently.

 “This is all quite a change for a company which, until 2022, was almost wholly a domestic business,” energy expert Robin Mills said in a column for AGBI.

Neighbours Saudi Aramco and QatarEnergy started their international expansion drives much earlier. 

Mills predicts that “one way or another, more and more global oil and gas assets are going to end up in Gulf hands”.

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