How the Adnoc Drilling shares listing will energise the UAE

Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc, explains how the forthcoming minority float will create value and growth

Why are you listing Adnoc Drilling and how does this fit into Adnoc’s broader value maximisation strategy?

Adnoc is a primary catalyst for the UAE’s growth and diversification, and we are relentlessly working to empower the nation’s socioeconomic ambitions as we prepare for the next 50 years. The decision to float a minority stake in Adnoc Drilling on the Abu Dhabi Securities Exchange is aimed at creating and maximising value and growth opportunities for Abu Dhabi and the UAE, in line with the leadership’s directives over the long term.

Following the wise guidance of the UAE Leadership, Adnoc embarked on a value creation strategy to unlock performance, drive growth and maximise value from our assets and resources. This planned listing is fully consistent with this strategy and represents another important milestone in our value maximisation journey. Importantly, it creates substantial value for the UAE and will drive foreign investment into the country, building on Abu Dhabi and the UAE’s position as a stable, credible, and highly trusted investment destination as well as Adnoc’s continued success in attracting leading global investors and industry partners.

The IPO of Adnoc Drilling will also support the expansion of Abu Dhabi’s equity capital markets and reinforce its growing reputation which is underpinned by its advanced infrastructure on par with the highest international standards for securities and equity trading, as well as its robust legal framework and controls. Equally, it will provide a unique opportunity for UAE citizens and residents to directly benefit from Adnoc's success, as shareholders of Adnoc Drilling.

The UAE Leadership recently announced the principles of the 50 - laying out the country’s economic vision and guiding principles for the next fifty years. How does Adnoc’s value maximisation strategy support this initiative?

Adnoc is very grateful for the Leadership’s foresight in outlining the UAE’s Principles of the 50 as the principles energise us and make us even more confident and excited about the future. The principles lay out a blueprint for the UAE’s development path and economic growth for the next 50 years and Adnoc’s value creation strategy fully aligns with and will be guided by these principles.

As a key part of our strategy, we are expanding our partnership and investment base and more proactively managing our portfolio of businesses and capital. Over the past few years, Adnoc has delivered several major transactions and milestones, including the highly successful listing of Adnoc Distribution, to generate greater and more sustainable value for the UAE.

We welcomed some of the world’s most notable investors, such as BlackRock, KKR, GIP, and Brookfield, to the Adnoc family in a series of landmark transactions that unlocked significant value from our assets and reinforced the UAE’s position as a stable and reliable investment destination. In fact, since 2016, Adnoc has driven over $64.5 billion in foreign direct investment to the UAE, and we continue to develop additional investment and partnership opportunities across our value chain to increase the value we derive from every barrel of crude we produce.

Earlier this year, marked the start of trading of the Murban Futures Contract on ICE Futures Abu Dhabi, making Murban, our signature crude, a freely traded crude that is more widely available to buyers and traders around the world. This move unlocks greater value for Adnoc and our partners and reinforces Abu Dhabi and the UAE’s status as a leading global energy hub.

The ‘Principles of the 50’ lay out the economic, political, and developmental road map for the next five decades. The industrial sector is a key part of this vision. To what extent will the development of the sector help achieve the wider goals of the UAE?

The Principles of the 50 will accelerate the development of a truly dynamic economy for the next 50 years, and the industrial sector has a vital role to play in this mission. This year, following the Leadership’s directives, we rolled out a comprehensive strategy to empower the industrial sector to become the driving force of a sustainable national economy. And we are expanding strategies that enable domestic manufacturing and enhance the growth of the private sector and strengthen our local industrial base. The UAE boasts a vibrant and enabling industrial ecosystem and we are aiming to further empower their capacity to contribute to our growth.

At Adnoc, we are working in step with the Leadership’s objectives for the industrial sector and making smart investments to expand our downstream business to drive the UAE’s industrial growth and increase in-country value. Through TA’ZIZ, Adnoc’s joint venture with ADQ, we are creating an investment platform to attract domestic and international partners to help accelerate the development of our petrochemicals and derivatives industry in Abu Dhabi. At the same time, we are stimulating the growth of the private sector and local economy through Adnoc’s hugely successful In-Country Value programme. This programme has driven over Dh76 billion back into the UAE’s economy and created more than 2,000 private-sector jobs for UAE nationals since 2018. And we plan to drive an additional Dh160bn back into the UAE’s economy over the next five years, as part of Adnoc’s capital expenditure plan. This inflow will create more skilled job opportunities for UAE nationals, nurture new business opportunities for the private sector, and support the nation’s post-Covid economic growth.

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The IPO of Adnoc Drilling will also support the expansion of Abu Dhabi’s equity capital markets and reinforce its growing reputation which is underpinned by its advanced infrastructure on par with the highest international standards for securities and equity trading, as well as its robust legal framework and controls. Equally, it will provide a unique opportunity for UAE citizens and residents to directly benefit from Adnoc’s success, as shareholders of Adnoc Drilling.
Dr Sultan Al Jaber

The Adnoc Drilling shares listing is an important milestone for both the company and the group. It will create a more efficient, transparent, and profitable company. What is the outlook for Adnoc Drilling after the IPO?

Adnoc Drilling represents a highly compelling investment opportunity, and it offers investors an attractive opportunity to tap into a growth story that is a vital part of the Abu Dhabi energy eco-system. As Adnoc’s sole drilling provider, Adnoc Drilling plays a pivotal role in enabling our objectives to increase our production capacity by 25 per cent to 5 million barrels of oil per day by 2030 and significantly boost our gas output to achieve gas self-sufficiency for the UAE. Basically, these targets will require thousands of more wells to be drilled, providing a robust growth trajectory for Adnoc Drilling. Furthermore, the UAE, with the sixth-largest oil reserves in the world and significant recoverable unconventional oil and gas resources, offers long-term growth potential for future drilling activities.

On top of this, Adnoc Drilling has an attractive financial profile with resilient profit margins. This is supported by its preferential contractual relationship with Adnoc, which helps it to maximise profitability. In addition, Adnoc Drilling’s balance sheet position provides headroom for further capital optimisation that is expected to deliver consistent and attractive returns to shareholders.

On the operational side, Adnoc Drilling boasts almost five decades of strong operational performance. This track record is underpinned by a diverse world-class rig fleet, a highly experienced workforce, and continued investment in state-of-the-art drilling technology. Crucially, the strategic partnership with Baker Hughes has enabled greater drilling efficiencies and faster well completion times as Adnoc Drilling was transformed into the first fully integrated national drilling services company in the Middle East.

Adnoc Drilling’s plans for a major rig fleet expansion and well drilling programme also position it to take full advantage of emerging opportunities across the upstream value chain. Yesterday, we announced a strategic alliance with Helmerich and Payne that will see Adnoc Drilling acquire new world-class rigs, strengthening its competitiveness and enabling it to further capitalise on its leading position as the largest national drilling company in the Middle East by rig fleet size. Adnoc firmly believes the company’s strong market position ensures it is poised for further growth for the benefit of Abu Dhabi, the UAE, and future Adnoc Drilling shareholders. As such, Adnoc Group will remain a committed, long-term majority shareholder in Adnoc Drilling.

Adnoc Group is in the sixth year of its transformation since you became chief executive in early 2016. Where are you in the cycle in terms of unlocking value and increasing efficiency?

We are at the stage where Adnoc is realising the benefits of the transformation we started at the direction of the UAE’s Leadership. In fact, the past year, with the pandemic and volatile market conditions, highlighted just how forward-thinking our Leadership’s guidance was in driving a comprehensive transformation at Adnoc.

As part of this transformation, we have focused on improving our performance, strengthening our agility, and reinforcing efficiency throughout our business. Most importantly, we have focused on reducing our costs and this will continue to be the case, regardless of the market situation. The fact is to remain competitive, you must be a low-cost producer, and we continually focus on ways to enhance our position as one of the lowest cost producers in the world.

Having said that, we also understand that the world is the process of an energy transition where more energy is needed with fewer emissions. In this transition, the world will still need oil and gas for many decades to come, so our mission at Adnoc is to provide that oil and gas as responsibly as possible. Here the UAE has a dual advantage; a leadership that has always put environmental protection first, and a natural advantage, because our geology gives us some of the least carbon-intensive oil in the world. Adnoc is building on this position by reducing our carbon intensity by an additional 25 per cent by 2030.

As the energy transition picks up pace, the growth and development of Adnoc Drilling will help ensure that the market is supplied with some of the most carbon-efficient barrels. The expansion of Adnoc Drilling is key to unlocking the potential of Murban, Abu Dhabi’s signature crude grade, which has less than half the carbon intensity of the industry average.

Updated: September 9th 2021, 7:49 AM
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