Enersol, a tech-focused investment platform co-owned by Abu Dhabi National Oil Company’s drilling subsidiary and UAE-based Alpha Dhabi, could raise up to $600 million in debt to finance acquisitions next year.
Enersol was established in January 2024 with a mandate to invest $1.5 billion by the end of 2025. So far the company, which is owned 51 per cent by Adnoc Drilling and 49 per cent by UAE-based Alpha Dhabi, has used $700 million of the funding to make four acquisitions.
The company plans to roll over the unused $800 million into its capital spending for next year and will look to tap the debt market for additional capital, Youssef Salem, Adnoc Drilling’s chief financial officer, told The National in an interview in Abu Dhabi during the Adipec conference.
“The remaining $800 million will all be spent next year, but our [Adnoc Drilling’s] share of that is 51 per cent,” Mr Salem said.
“That's the base case. Obviously, there [will be] extended additional opportunities attracted on top of [that].”
In order to finance additional opportunities, Enersol could raise debt, Mr Salem added.
“At each acquisition level, [we tap] into one or two times debt to Ebitda [earnings before interest, taxes, depreciation and amortisation] of that individual company. There's also [an] opportunity over time with Enersol itself to enhance its own cash flows,” he said.
“The average multiple at which we acquire companies is around five to six times, so Enersol Ebitda at full scale will be close to $300 million. So effectively, let's say, two times from that would be effectively $600 million.”
Global investment in oil and gas sectors is set to reach $535 billion and $365 billion, respectively, in 2025, according to the International Energy Agency.
The Paris-based agency forecasts a 6 per cent decline in upstream oil investment – the largest decline since 2016 and the first year-on-year decline since the Covid-19 pandemic.
Enersol has made four acquisitions in energy services companies over 23 months.
Its new chief executive Dean Watson told The National in an interview in Abu Dhabi that Enersol is currently debt-free and had the potential to leverage debt as another source of capital.
The primary use of the debt would be for “organic growth, investing in working capital, and or inorganic activity ... and more acquisitions beyond the $800 million”, Mr Watson said.
The company is also likely to focus more on investments in the operating expenditure side of the drilling business rather than in pure capital expenditure, which, Mr Watson says, is declining.
“What we see is the oilfield services market slightly plateauing from a Capex perspective, but there is growth in oilfield services,” he said.
In June, Enersol became a majority shareholder in US-based Gordon Technology, which specialises in measurement while drilling (MWD) technology. MWD helps oil and gas companies collect and send important real-time data during drilling operations.
In July, Enersol said it would acquire a 51 per cent stake in UAE-based NTS Amega – a manufacturer of advanced precision equipment.
Trade war uncertainties and a volatile oil market are behind the plateauing of investments in the US.
Last week, energy services company Baker Hughes reported that the total number of oil and gas rigs in the US remained unchanged at 585 for the third straight week. Overall rig count for the period was 47 rigs, or eight per cent below this time last year.
Mr Watson expected the plateauing to extend into the new year.
“It means we are still going to drill wells, but there's no growth in that,” he said.
“The growth in oilfield services, which is around 2 per cent to 4 per cent [compound annual growth rate] is going to come from OPEX [operating expense] and production.”
However, he remained bullish on the prospects for upstream growth in the Middle East region, noting that there would be “real growth” in Saudi Arabia, Oman and Kuwait.
Meanwhile, Adnoc Drilling’s Mr Salem noted that he did not expect a peak in oil and gas demand in the near future and saw continued growth in the region.
“We don’t see any peak. We see it ever increasing. Everything we've seen so far, all the demand, all the plans, expansionary plans, whether it is conventional oil or expanding offshore or unconventional gas,” he said.
