Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, said its second-quarter net income jumped more than 19 per cent, as revenue rose amid plans to expand internationally.
Net profit for the three-month period to the end of June rose to $204.85 million, Adnoc Drilling, a unit of Adnoc, said on Tuesday in a statement to the Abu Dhabi Securities Exchange, where its shares are traded.
Revenue for the April-June quarter rose by 11 per cent to $669m, driven by its onshore and oilfield services businesses as the company continued to support Abu Dhabi’s efforts to increase its production capacity.
Net profit for the first six months of the year rose 34 per cent on an annual basis to $379m. Half-yearly revenue increased 13 per cent at the end of June to $1.27 billion, in line with the company’s annual growth targets.
“We target to grow the company by 10 per cent or more on an annual basis and look for that on a continuous basis,” chief financial officer Esa Ikaheimonen told The National.
The company, which is 84 per cent owned by Adnoc, has a symbiotic relationship with its parent.
Adnoc’s plans to accelerate its capacity development growth will have “a direct impact on growth in our activity” and “may well lead to growth rates that are even significantly higher than the 10 per cent plus”, Mr Ikaheimonen said.
Adnoc Drilling, which raised more than $1.1bn from its public float last year, plans to expand to other markets in the GCC and beyond.
“We are looking at different ways and different options to actually be able to do so, [both] organically and inorganically,” Mr Ikaheimonen said.
“First and foremost, [we are] looking at the regional markets. We know the conditions, we know the technical requirements, we know the geology well here, but we are not necessarily restricted just to a region.”
Adnoc Drilling is one of the largest drilling companies in the world already, and “arguably one of the most capable ones as well, as it offers integration capability”, Mr Ikaheimonen said.
“It is a brilliant starting point for international expansion.”
However, the company’s focus initially will continue to be on “high-quality” home market, he said.
A decision as to when the company will embark on international expansion has yet to be made.
Earnings before interest, taxes, depreciation and amortisation (ebitda) during the first six months of the year climbed 16 per cent annually to $580m, with an ebitda margin of 45.7 per cent, as the company made “exceptional progress” in delivering further cost savings.
“Adnoc Drilling has continued to make strong progress in 2022, delivering on its promises to continue growing the business and maximising returns for our shareholders,” said Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology, managing director and group chief executive of Adnoc and chairman of Adnoc Drilling.
“Excellent half-year results and successful strategic execution are testament to the vital role that the company is playing in enabling significant production capacity growth for Adnoc, as well as the UAE’s objective to achieve gas self-sufficiency.”
The company’s board has also approved an interim dividend, increasing it by 5 per cent to 7.83 fils to bring the first payment of the 2022 financial year to $341m, Dr Al Jaber said.
The company delivered a strong performance across all its business segments during the first six months of the year.
The half-year revenue from onshore operations jumped more than 24 per cent to $702m, largely driven by new rigs added to the fleet.
Offshore jack-up operations revenue remained broadly flat at $288m while offshore island revenue reached $101m, in line with 2021 first-half levels, and oilfield services revenue for the reporting period rose by about 14 per cent to $179m.
“These results were enabled by our clear strategic objectives,” said Abdulrahman Al Seiari, chief executive of Adnoc Drilling.
The company accelerated its rig fleet expansion programme in the first half, with eight rigs added to the fleet.
Adnoc Drilling added five Helmerick & Payne FlexRigs in the first three months while sale and purchase agreements were signed for three premium offshore jack-ups in the second quarter.
In the second half of the year, the company expects to add 10 more rigs to its fleet, Mr Ikaheimonen said.
The company aims to grow the overall fleet size to 122 rigs by the end of 2024.
“Our fleet expansion programme has gained real momentum and is central to our dynamic growth strategy. The rigs we have added to our fleet in H1 2022 will support us in delivering on our resolute commitments to our shareholders,” Mr Al Seiari said.
Rig acquisition is part of Adnoc Drilling’s three-year capital expenditure guidance programme of $2.5bn to $3bn. The capex guidance may increase if the company manages to accelerate growth, and “be a bit more generous in terms of the amount of money we put aside for investments in terms of capital structure”, Mr Ikaheimonen said.
The company has undrawn financing facilities available at its disposal that can “increase our current debt from $1.5bn to about $3bn”.
It has low debt and can raise more financing if needed, he added.
Adnoc Drilling plays a vital role in Adnoc’s efforts to boost its hydrocarbon production capacity.
Earlier this month, the company was awarded two contracts worth Dh7.49bn ($2bn) linked to Adnoc’s Hail and Ghasha development project.
The contracts include Dh4.89bn for integrated drilling services and fluids, and Dh2.6bn for the provision of four island drilling units.
A third contract, valued at Dh2.5bn, was also awarded to Adnoc Logistics & Services for the provision of offshore logistics and marine support services.
The three contracts will cover the Hail and Ghasha drilling campaign for a maximum of 10 years, Adnoc Drilling said at the time.
The company also received two contracts worth $3.4bn from Adnoc in the first week of August.
The deal, valued at $1.5bn and $1.9bn, involves the hiring of eight jack-up rigs to support drilling operations across Adnoc’s offshore fields, which account for about half of the company’s production capacity, Adnoc said.