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BHGE buys 5 pct stake in ADNOC Drilling for $550 mln

Oct 08, 2018
4 min read
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Baker Hughes, a GE company (BHGE) will acquire a 5 per cent stake in the drilling unit of Abu Dhabi National Oil Company (ADNOC) in a partnership deal that will see ADNOC Drilling grow into a fully integrated drilling and well construction provider. 

BHGE will be the sole provider of certain proprietary drilling equipment and technologies that will support ADNOC Drilling’s growth and development beyond the UAE, following a deal signed on Monday, ADNOC said in a statement. 

The transaction, approved by the board of directors of each company, values ADNOC Drilling at approximately $11 billion and is expected to close in the fourth quarter of 2018, subject to regulatory approvals.

This deal represents the first time that ADNOC has brought an international strategic partner to acquire a direct equity stake in one of its existing services businesses.

The partnership will enable ADNOC to capture more value from every barrel of oil it produces as it plans to grow its conventional drilling activity by 40 percent by 2025 and substantially ramp up the number of its unconventional wells.

The two partners will be able to leverage ADNOC Drilling’s existing rig fleet capacity with limited capital expenditure outlay.

H.E. Dr. Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, said: “We chose BHGE after a rigorous and competitive process as a partner with whom we have a long-standing working relationship and who shares ADNOC’s long-term vision and values. This unique partnership with BHGE comes at an important time in the drilling needs of Abu Dhabi as ADNOC grows its conventional and unconventional hydrocarbon resources and as we see future potential for further regional growth. It will ensure we will be able to better service our upstream growth while capturing and retaining greater value.”

“The combined capabilities and expertise from this partnership will create greater drilling efficiencies and faster well completion times, generate attractive returns and enable the transfer of know-how and access to technology. Importantly, it will also drive job creation and economic growth, as well as maintain a healthy level of competition in the dynamic UAE oilfield services market,” he added.

ADNOC Drilling and BHGE will set up an advisory board with representation from both companies to oversee the implementation and ongoing operations, and BHGE will join ADNOC Drilling’s Board of Directors.

ADNOC Drilling will remain the sole rig provider to ADNOC Group Companies and capitalise on ADNOC’s growing upstream activity by deploying its new integrated offering to capture up to 30 percent of the drilling and completion market over the next three years, as it demonstrates increasing drilling efficiencies and improved customer service levels.

Moelis & Company is acting as exclusive financial advisor to ADNOC and Citi is acting as advisor to BHGE.

“In a unique way, it allows us to drive predictable revenue streams and long-term growth for both companies and lets us invest in a stable, reliable and secure market environment. Supported by BHGE’s leading technology and service portfolio, ADNOC Drilling will enable ADNOC to unlock significant value from their untapped resources, while building local capabilities and accelerating overall market growth,” said BHGE Chairman and chief executive officer Lorenzo Simonelli. “The transaction significantly increases our activity in the region and demonstrates our unique ability to create value for our customers and shareholders through innovative commercial arrangements, partnerships and leading technology solutions.”

The UAE is located in one of the world’s largest hydrocarbon super-basins with significant potential to tap its undeveloped reservoirs and further develop its existing resources. Realizing this potential, alongside the ongoing growth and development of ADNOC Drilling, will provide more opportunities for local third-party service providers to compete for and support ADNOC’s expanding integrated drilling and ancillary service requirements. The transformation of ADNOC Drilling will improve the integration of UAE private sector service providers, as well as create new career opportunities for ADNOC employees and support domestic economic growth. The partnership reinforces ADNOC’s in-country value creation strategy and demonstrates BHGE’s longstanding commitment to the country.