Adnoc Gas IPO: Energy company raises $2.5bn from year's biggest offering

Company drew more than $124 billion in interest from investors

A general view of Adnoc headquarters in Abu Dhabi. The state oil company sold more than 3.8 billion shares in its gas unit. Reuters

Adnoc raised about Dh9.1 billion ($2.5 billion) from the sale of a 5 per cent stake in its gas business, marking the year's largest initial public offering after the Middle East registered 48 listings in 2022.

The company sold more than 3.8 billion shares, with the IPO drawing strong demand from institutional and retail investors, and generating more than $124 billion in orders. It was about 50 times oversubscribed, the company said on Friday.

The offer final price was set towards the higher end of Dh2.37 of the previously announced range of Dh2.25 to Dh2.43 per share, implying an equity value of about $50 billion for the company.

Earlier this week, the company increased the stake being sold in Adnoc Gas to 5 per cent, from 4 per cent, citing strong investor demand.

Abu Dhabi Pension Fund, Alpha Wave Ventures II, LP, IHC Capital Holding, OneIM Fund I LP and entities controlled by ADQ and the Emirates Investment Authority are set to — directly or indirectly — become cornerstone investors in the IPO, subscribing to 34 per cent of the offering with a combined commitment of $850 million.

The listing of the gas processing and marketing unit is the UAE's biggest IPO this year and the company expects to start trading on the Abu Dhabi Securities Exchange on March 13 under the ticker symbol “ADNOCGAS” and international securities identification number, or ISIN, of AEE01195A234.

After admission, the IPO will be the largest listing on the ADX, surpassing that of Borouge, which went public in June 2022 and raised $2 billion.

“We are extremely proud that this IPO witnessed record demand for a UAE and Mena region IPO, with Adnoc Gas being the largest-ever market debut in Abu Dhabi and the largest IPO globally to date this year,” said Khaled Al Zaabi, chief financial officer of the Adnoc group.

“As the next landmark milestone in our ongoing value creation programme, Adnoc Gas is a highly attractive value proposition and underpins Adnoc’s key role as a catalyst and critical enabler of domestic economic growth and the diversification of the UAE financial marketplace.”

Adnoc Gas has access to 95 per cent of the UAE's natural gas reserves, estimated to be the seventh largest globally. It also supplies more than 60 per cent of the UAE's gas needs.

The company can tap into 10 billion standard cubic feet per day of gas-processing capacity. It will operate eight gas-processing sites and a pipeline network of more than 3,250km.

Adnoc Gas plans to pay $3.25 billion in dividends in 2023, split in two payments. It intends to increase the annual dividend amount by 5 per cent from 2024 to 2027.

Adnoc Gas is the fifth company Adnoc has taken public. The parent company will continue to own 90 per cent of the company after the IPO.

With high inflation, uncertainty surrounding the world economy, rising interest rates and the war in Ukraine, Gulf capital markets stood out from their global peers in 2022, benefitting from higher oil prices, a liquidity boost and stronger investor confidence.

Middle East IPOs raised more than $23 billion in 2022 from 48 listings, compared with $7.52 billion raised from 20 offerings in the previous year.

That was the highest share for the Gulf region after 2019, when Saudi Aramco went public in a $29 billion offering, the world’s largest.

The UAE had 12 listings that raised $11 billion last year, apart from the joint Abu Dhabi-Riyadh listing of Mena food franchisee Americana, which reaped $1.8 billion in late 2022.

The GCC will continue to attract IPOs in 2023, despite the challenges facing the global economy, with 27 to 39 companies possibly floating their shares, according to Kuwait's Kamco Invest.

The Abu Dhabi Securities Exchange was the best-performing market in the GCC for a second consecutive year in 2022, gaining more than 20 per cent.

The market capitalisation of the ADX stood at more than Dh2.53 trillion at the close of trading on Thursday.