Oman energy company OQ’s drilling unit may raise as much as $244m through IPO

Saudi Arabia’s Public Investment Fund to be an anchor investor in the offering

Muscat Stock Exchange. Courtesy Investcorp
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Oman's state energy company OQ could raise as much as 94 million rials ($244 million) from the initial public offering of its drilling unit, Abraj Energy Services, and has brought in Saudi Arabia’s sovereign wealth fund as an anchor investor.

Abraj Energy Services will sell more than 377 million shares, or about 49 per cent of its share capital, and set the offering share price between 242 baizas and 249 baizas a share, it said on Tuesday.

Retail investors will get a discounted price of 224 baizas.

The final offer price will be determined through a book-building process and is expected to be announced on or around March 6.

The company will be listed on the Muscat Stock Exchange on or about March 14, subject to it receiving regulatory approvals, it said.

Saudi Omani Investment Company, a wholly owned entity of the Public Investment Fund, Royal Court Affairs and Schlumberger Oman will be some of the anchor investors in the IPO, with a total commitment of more than 37.5 million rials accounting for 40 per cent of the total offer size.

“Since announcing our intention to float on the MSX, we are extremely pleased to have received strong interest from investors,” said Abraj chief executive Saif Al Hamhami.

“Amid robust sector fundamentals, a favourable market and with our diverse service offerings, including drilling, workover and well services, we believe that Abraj presents an attractive proposition for investors.”

Abraj has a fleet of 25 drilling rigs and five workover rigs, and controls a 29 per cent market share in Oman, the company said.

Its remit also includes well services, comprising fracturing, cementing and coiled tubing operations.

Abraj, which reported a full-year revenue of $323 million in 2021, has an order backlog of $1.5 billion for period between 2023 and 2031, it said.

The white buildings of the Mutrah district line the corniche at Mina Sultan Qaboos in downtown Muscat, the capital of the Sultanate of Oman on Wednesday, Oct. 12, 2011. (Silvia Razgova / The National)

Its earnings before interest, taxes, depreciation and amortisation (ebitda) margin reached 37.5 per cent in the first nine months of last year.

All the shares being sold by OQ are existing shares and the offering will be carried out in two tranches.

While institutional investors — including those around the world, except for those in the US — will be offered a maximum of 85 per cent (category one), retail investors will receive a minimum of 15 per cent of the total offering (category two).

The category one offer is expected to run from February 20 to March 2, while the category two offer will be from February 20 to March 1, the company said.

The deal is the latest in a string of IPOs from the Gulf region, where economies have benefitted from higher oil and gas prices.

Brent crude, the benchmark for two thirds of the world’s oil, was trading at slightly more than $86 a barrel on Tuesday, after falling below $30 in 2020.

In October, Arabian Drilling Company, a Saudi Arabian oilfield services company, raised $712 million from the sale of a 30 per cent stake in an IPO amid strong interest from retail investors.

Adnoc Drilling, which is majority owned by Adnoc, was listed on the Abu Dhabi Securities Exchange in 2021.

In December, shares of Saudi Aramco Base Oil Company, better known as Luberef, began trading on the Tadawul stock exchange after it raised $1.32 billion in its IPO.

While capital markets in the US and Europe have slumped amid inflation woes and fears of a looming recession, equity markets in the GCC and broader Mena region have had a flurry of IPOs.

The Mena market recorded a 500 per cent annual increase in the number of listings during the first six months of last year, with 24 IPOs raising $13.5 billion, according to an EY report.

In the second quarter of 2022, nine IPOs raised about $9 billion.

The UAE was the biggest IPO market in terms of the aggregate value of deals while Saudi Arabia led in terms of volume with five IPO deals in the first six months of last year, EY said.

Between announced and rumoured IPO plans, the GCC region is expected to float 27 to 39 companies this year, Kamco Invest said in a report last month.

Ahli Bank, EFG-Hermes UAE and the National Bank of Oman have been appointed as joint global co-ordinators while Ahli Bank and the National Bank of Oman are issue managers on the OQ IPO.

Updated: February 14, 2023, 8:41 AM