Adnoc Drilling reports 26% rise in first-quarter profit on offshore business strength

Company says dividend expected to increase by at least 10% annually from 2024 to 2028

Adnoc Drilling has been awarded a $1.7 billion contract by parent company Adnoc to provide drilling services. Photo: Adnoc
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Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, has reported a 26 per cent increase in first-quarter profit as its offshore jack-up and oilfield services businesses continue to strengthen.

Net profit for the three months to the end of March rose to $275 million, from $219 million in the same period a year earlier, the company said in a filing on Monday to the Abu Dhabi Securities Exchange, where its shares are traded.

The company’s first-quarter revenue surged 24 per cent year on year to $886 million.

Adnoc Drilling also announced a new dividend policy and said its distribution per share is expected to increase by at least 10 per cent annually from 2024 to 2028.

The company’s board may consider additional dividends depending on growth opportunities and debt levels, it said.

“Confidence in our growth trajectory and cash-flow generation ability going forward has resulted in our board of directors recommending an enhanced progressive dividend policy that will further bolster shareholder returns,” said Adnoc Drilling chief executive Abdulrahman Al Seiari.

“Our multifaceted strategy of enabling Adnoc’s conventional and unconventional production capacity growth to meet the world’s growing demand for energy will further transform the business in 2024 onwards,” he said.

In a separate filing on Monday, Adnoc Drilling said it had been awarded a $1.7 billion contract by parent company Adnoc to provide drilling services for the recovery of unconventional oil and gas resources.

Adnoc Drilling has also set up a company called Turnwell Industries, which will fulfil the contract and explore potential future opportunities in unconventional resources, the company said.

Turnwell will deliver 144 unconventional wells, with a distribution of 50 per cent gas and 50 per cent oil, Mr Al Seiari told The National on Monday.

“It is both that we will be working on … there is a requirement for oil [and] there is requirement for gas. Both will work hand in hand,” he added.

Adnoc, responsible for most of the UAE's crude production, is working to develop its unconventional reserves as it looks to reach an output capacity of five million barrels per day by 2027. It can already produce up to 4.85 million bpd.

Abu Dhabi’s unconventional recoverable oil resources are estimated at 22 billion barrels of very light and sweet crude, comparable with Adnoc’s flagship lower-carbon Murban grade.

Unconventional resources, also key to the UAE's goal of becoming gas self-sufficient by 2030, require advanced extraction methods, such as those used in the US shale industry.

Adnoc Drilling said it would use advanced technology, specifically artificial intelligence, in various aspects of its operations, including smart drilling design, completions engineering and production solutions.

Last year, Adnoc Drilling and Alpha Dhabi Holding, a unit of Abu Dhabi's International Holding Company, set up a joint venture to invest up to $1.5 billion to acquire technology-enabled companies in the oilfield services and energy sectors.

New company

The Adnoc subsidiary, which plans to drill “thousands” of unconventional wells in the second phase of the drilling programme, also signed a term sheet agreement with Schlumberger, the world’s largest oilfield services company, and Patterson-UTI, to form a strategic partnership.

The Adnoc Drilling chief said the partnership with the US-based companies would help “jump-start” the company to where others in the world are with regards to unconventional drilling.

“We have the rigs, we have the services. To be more efficient, you need the new technologies [and] new practices … the US has been doing it for the last two decades,” Mr Al Seiari said.

Advancements in oil and gas technology, particularly in shale exploration, have taken the US to the top global oil producer spot.

The introduction of directional drilling and fracking led to America becoming a net petroleum exporter in 2020 for the first time since at least 1949.

Turnwell, the new subsidiary, will operate as an independent company with its own management team and the company's headquarters or offices would likely be located closer to oil and gas operations, Mr Al Seiari said.

The Adnoc executive did not rule out a potential listing for the company in the future.

“I don't see why not … it will be one of those companies which we believe will be quite successful and to the domain of unconventional [drilling],” Mr Al Seiari said.

“But, it's too early to talk about it at this time.”

Revenue boost

Adnoc Drilling said on Monday that revenue from its onshore business, the largest, rose by 16 per cent on an annual basis to $411 million in the latest reported quarter.

Meanwhile, revenue from the offshore jack-up segment jumped by 51 per cent to $278 million in the first three months of 2024, mainly due to higher activity from additional jack-up rigs, the company said.

Revenue from oilfield services increased by 16 per cent year on year to $146 million in the first quarter, supported by higher demand for drilling fluids and directional drilling.

Updated: May 13, 2024, 10:36 AM