ADNOC’s pipeline unit closes $3 bln bond for future growth

Nov 07, 2017
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Abu Dhabi National Oil Company (ADNOC) said its crude oil pipeline subsidiary closed a US$3 billion bond for the group’s future growth plans, marking a major non-sovereign issuance in the region as the state oil and gas giant looks to unlock value from its infrastructure assets.

“The very attractive pricing and substantial international demand for this offering positively reflects the UAE’s stable investment environment, as well as ADNOC’s new and progressive approach to its long-term financing strategy,” said HE Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO.

Proceeds from the issuance will be used by ADNOC to support its ambitious future growth and investment plans, ADNOC said in a statement.

In July, ADNOC said it would expand its strategic partnership model and create new investment opportunities across all areas of its value chain, as well as proactively manage its portfolio of assets and capital.

ADNOC said the bond, issued at the group asset level, is part of this broader approach to unlock value and capital from within its sizeable and diverse pool of infrastructure assets.

It is also looking to create a broader energy infrastructure venture that may include the future bundling of assets such as other oil, gas or refined products pipelines and storage facilities.

“This transaction is a clear and tangible example of the new steps we are taking at ADNOC to proactively manage our portfolio of assets and, in particular, unlock value from our sizeable infrastructure base, as we seek to drive and maximise value across our business. This bond represents an important, initial milestone in our efforts to fully optimise our capital structure in a smarter, more efficient and flexible manner,” Al Jaber added.

“This transaction enables ADNOC, for the first time, to access the international debt capital markets - thus opening an increased range of highly compelling and viable options for the long-term strategic financing of the ADNOC Group. In addition, it demonstrates the expansion of our partnership model and represents an opportunity for institutional and infrastructure investors to partner and invest alongside ADNOC in selected projects,” he said.


Abu Dhabi Crude Oil Pipeline (ADCOP), a fully ADNOC-owned entity, owns nearly 406 kilometre pipeline that carries ADNOC Onshore’s crude from a collection centre in Abu Dhabi to the Fujairah oil export terminal, which provides access to international shipping routes.

The pipeline is a key asset for the UAE’s oil industry and, coupled with the strategic location of Fujairah, allows for a significant proportion of the UAE’s total crude oil production to be transported from Abu Dhabi directly to the Arabian Sea.

The pipeline has been operating since 2012 and in 2016, it had an average throughput of approximately 615 thousand barrels per day, ADNOC said. The pipeline is designed to transport 1.5 million barrels per day of crude oil, with the ability to increase its capacity to 1.8 million barrels per day through the use of drag-reducing agents. The pipeline’s throughput is supported by the stable onshore crude oil production base of ADNOC Onshore, which has an oil concession with more than 37 years remaining to produce oil from 11 onshore oil fields in Abu Dhabi: Bu Hasa, Asab, Sahil, Shah, Bab, Al Dabb’iya, Rumaitha, Shanayel, Huwaila, Qusahwira, Bida Al-Qemzan.


The bond offering consists of two senior secured bond tranches: an $837 million, twelve year bullet bond tranche (Series A) and a US$2,200 million, thirty year fully amortizing bond tranche (Series B). The bond issuance was executed on ‘favourable’ commercial terms with annual coupons of 3.65 per cent and 4.6 per cent for the Series A and B respectively.

“The expected stable oil throughput from ADNOC Onshore allowed ADNOC to issue long dated paper and the dual tranche structure enabled the targeting of different pools of investor demand while matching ADCOP’s cash-flows. The offering was significantly oversubscribed by more than three and a half times, exceeding $11 billion in orders, with strong demand from both international and regional accounts. The bond was rated AA by Fitch and AA by S&P, in line with the rating of Abu Dhabi sovereign bonds, highlighting the financial strength and stability of ADNOC,” it said.

The final geographic allocation for the twelve year tranche was 8 per cent to Asian investors, 42 per cent to European investors, 43 per cent to US investors and 7 per cent to investors from the MENA region. The final investor type allocation for the twelve year tranche was 8 per cent to banks and private banks, 70 per cent to fund managers and 22 per cent to agencies, pensions, insurance and others. The final geographic allocation for the thirty year tranche was 10 per cent to Asian investors, 35 per cent to European investors, 51 per cent to US investors and 4 per cent to investors from the MENA region. The final investor type allocation for the thirty year tranche was 6 per cent to banks and private banks, 80 per cent to fund managers and 14 per cent to agencies, pensions, insurance and others.