Abu Dhabi National Oil Company (Adnoc) has signed a deal with New York-listed Helmerich & Payne to become a cornerstone investor in Adnoc Drilling’s initial public offering, with a $100 million investment.
Adnoc's drilling unit will acquire eight FlexRig land rigs from H&P for $86.5m as part of the agreement, the companies said on Wednesday. H&P is a petroleum contract drilling company engaged in oil and gas well drilling and related services.
The deal and rigs acquisition will support Adnoc's target of reaching five million barrels per day production capacity and gas self-sufficiency for the UAE by 2030. It will also help the state-owned oil and gas company to unlock its unconventional oil and gas resources.
"This exciting alliance and value creation opportunity will provide Adnoc Drilling with access to new world-class rigs and services, enabling it to continue to support Adnoc in our ambitious production capacity expansion plans," Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Adnoc managing director and group chief executive, said.
Earlier this week, Adnoc Drilling said it plans to float 7.5 per cent of its shares on the Abu Dhabi Securities Exchange.
Adnoc Drilling shares are expected to start trading in October, subject to market conditions and regulatory approvals. Adnoc can increase the size of the public offering at any time before pricing of the deal, the company said on Monday.
The pricing will be determined through a bookbuilding process, Adnoc said, without giving a date.
US energy services company Baker Hughes, which has a 5 per cent stake in Adnoc Drilling, will retain its shares. Adnoc will remain the majority shareholder following the IPO.
The cornerstone investment by H&P will be at the IPO price and subject to a three-year lock-up period.
H&P looks to benefit from Adnoc Drilling's "robust dividend policy", it said.
Adnoc Drilling will offer a fixed dividend of $325m for the second half of 2021. The company expects to grow its dividend amount at 5 per cent annually over the next five years, from $650m.
The dividend policy reflected "cash flow and its expected long-term earnings potential", Adnoc Drilling said in its earlier disclosure to the ADX.
H&P's investment in Adnoc Drilling is part of the company's international growth strategy "to allocate additional capital outside the US", the company's president and chief executive John Lindsay said.
The partnership with Adnoc Drilling could help the company "create a similar value proposition" that H&P offers to customers in the US and other international locations, he added.
Moelis & Company was the financial advisor for Adnoc, while Morgan Stanley acted on behalf of H&P.
Adnoc Drilling is one of the largest drilling companies in the Middle East, operating 107 onshore, offshore and island rigs, of which 11 are rented. The company, which began operations in 1972, has expanded its fleet of rigs, adding 67 since 2010, in line with the growth in oil and gas production capacity at Adnoc.
This is the second IPO for the Adnoc Group, which listed 10 per cent of the company's distribution business in 2017. Adnoc doubled the amount of its free-floating stock to 20 per cent in September last year following a block placement of 1.25 billion shares, valued at $1 billion, with institutional investors.