Investor FAQs

ADNOC Drilling has a unique profile which is unmatched in the industry. We believe we truly differentiate vs. others given:

• Our single customer exposure – ADNOC
• Long term commitment in the contract which is unique in the industry
• Fixed, ADNOC underwritten margins as compared to significantly volatile margins of other players in the sector
• Significant growth ahead of us
• And finally, we have unique financial policy in place focused on low leverage whilst preserving an attractive dividend yield

• We are the dominant player in Abu Dhabi drilling market enjoying >90% in UAE onshore contractors market share (followed by KCA, Sakson, Nabors and Petrogulf) and >60% market share in contracted jack-ups in the UAE (followed by Shelf Drilling, Ocean Oilfield, Noble Drilling, Saipem).

• In the Oil Field Services market, we will have 50% market share in the UAE by 2022. Other than ADNOC Drilling, the key players in the OFS industry in the UAE are Baker Hughes, Schlumberger, and Halliburton and other standalone drilling operators.

• Our rig acquisition strategy is undertaken when long-term sustained demand is committed by the client. ADNOC Upstream provides us with 10-year rig requirements / drilling plans on an annual basis which is incorporated in our rig acquisition strategy.

• Our contracts are secured through a base term commitment of 15 years ensuring stable rig operation and day rate generation and we therefore enjoy a unique and differentiated contractual position compared to the standard industry contracts of 3-5 years.

• ADNOC will always aim to meet the rig requirements by ADNOC upstream and OpCos.

• In case we face a difficulty in securing the required rigs, we would look to obtain it through rig rentals or subcontracting.

• Our contracts are secured through a base term commitment of 15 years ensuring stable rig operation and day rate generation and we therefore enjoy a unique and differentiated contractual position compared to the standard industry contracts of 3-5 years.

• Yes, building or acquiring a rig is an intensive process and can take up-to 1-2 years (and potentially more in the case of jack-ups).

• Therefore the rigs which we plan to deliver in the coming 2-3 years are already under development or in the pipeline and will be added to the fleet or replace the existing ones once ready as per your business plan.

• However, it is also possible to opportunistically acquire rigs on market as we have done in the past very successfully.

• Overall Oil Field Services market size in UAE in 2020 is around $1 billion, yet this includes all other minor services that ADNOC Drilling is not participating in, example of that is artificial lifting, seismic activities, also the Northern Emirates market.

• Yet the market size that ADNOC Drilling is participating in 2020 is around $700 million in our core market. The OFS Market is expected to grow by around 4% yearly from an absolute stand point yet need to factor pricing variances in the overall growth.

• Expected OFS share by 2025 is around 43%.

• We are targeting a market share of 45% in 2021 and 50% in 2022 in Abu Dhabi and given the strong expansion of activity over the coming years, we expect to grow substantially.

We managed to quickly ramp up from 0% IDS unconventional market share to 66% in 2020. We had first frac on well XN-19 with two stages in July 2020. And achieved highest number of horizontal frac stages executed so far in UAE in a lateral well (GU 03). Completed eight wells with frac job executed on five wells with a total of 67 stages completed.

• ADNOC Drilling's contract position is unique and differentiated vs the broader drilling industry.

• ADNOC Drilling provides ADNOC Upstream OpCos with rig hire services and rig-related services (“Rig Services”).

• ADNOC is required to procure that the ADNOC Upstream OpCos undertake to procure any Rig Services solely from ADNOC Drilling.

• Except as may otherwise be set out in any current operating company contract entered into with an ADNOC Upstream OpCo, during the “Initial Rig Base Term” (being 15 years), the rates charged by ADNOC Drilling for the Rig Services provide the recovery of an agreed IRR (to be determined by ADNOC Drilling at its sole discretion).

• Further, within 15 years the contract provides protection for non-operation of the rigs i.e. 90% of the operating rate charged to its customers.

• After the 15 years is complete, we continue to operate the rigs at a minimum EBIT margin of 15-17%.

• ADNOC Drilling is entitled to review the rates it charges to ensure the IRR is maintained, provided that, the rates relating to the provision of services for (i) offshore rigs are reviewed at least on an annual basis, and (ii) onshore rigs are reviewed at least every three years.

• We only purchase a new rig when we have a 15-years base-term commitment from our clients, ADNOC Onshore and Offshore. In comparison, the industry standard contracts 3-5 years max.

• The day rate setting mechanism used in the agreement is a fixed IRR-based margin over our cost of capital.

• The nature of our contracts provides for long term stable revenue and de-risks our capital investment.

• 15-year base term is on rig-by-rig basis.

• We do such a framework to continue.

• It is worth noting that we have rigs that have been in operations for 40-year+.

• Therefore, the 15-year base term is designed only to remunerate ADNOC Drilling with a minimum IRR on its investment rather than dictate the useful life of a rig.

• Within the 15-year base term, the rig framework agreement provides protection for non-operation of the rigs.

• The non-operating day rate is 90% of the normal operating rate charged to its customers, which provides a lot of protection in comparison to other drillers 

• This is the one thing that makes us stand out compared to peers.

• ADNOC Drillings backlog is in line with the life expectancy of ADNOC and Abu Dhabi’s resource base which takes us beyond 2050.

• This is unique compared to peers which focuses on what the business backlog looks like in six months or one year ahead.

• This place us in a special and privileged position.

• Our margin profile is higher compared to the sector and stable, despite the inherent volatility in the commodity price and despite Covid-19.

• The oil price is not a driver of our business: it is driven by upstream activity in Abu Dhabi which is, given the positioning on the cost curve, less impacted by price developments in the short term and not impacted in the long term.

• Majority of capex is to be funded through cash from operations, with any shortfalls covered by revolver drawdown.

• Most capex to be spread across 2022 and 2023.

• Conservative long-term leverage target of up to 2.0x net debt / EBITDA, although for short periods of time ADNOC Drilling may exceed the target during periods of high expansionary capex.

• We have best-in-class standards in place and will comply with all regulatory requirements as well.

• We intend to publish results on a quarterly basis.

• We have considered several factors in relation to the initial dividend:

• Rewarding shareholders

• Maintaining a disciplined capital structure

• Balance with capital investment in the short term

• Being able to commit to meaningful dividend growth (5 for 5)

• H1 dividend will be distributed to pre-IPO investors given the IPO is being contemplated towards the end of Q3 2021.

• However note that IPO investors will get six months of dividend despite only owning the stock for three months until fiscal-year end (in December).

Yes, dividends are to be paid semi-annually subject to board and shareholder approval at the general meeting.

We truly believe that our targeted best in class approach creates value across the business. Our operations are energy efficient and low carbon intensive. We have successfully managed the environmental risks in the past (including spill management, waste control, air emissions and water use). And all of that is supported by robust governance standards and strong and motivated employee base including highly experienced management.

• ADNOC Drilling does not have an ESG rating at this point.

• However, to provide you some details on our ESG strategy, we truly believe that our targeted best-in-class approach creates value across the business.

• Our operations are energy efficient and low carbon intensive. We have successfully managed the environmental risks in the past (including spill management, waste control, air emissions and water use).

• And all of that is supported by robust governance standards and strong and motivated employee base including highly experienced management team.

• We are targeting a 25% reduction in GHG intensity by 2030 from a baseline of 2019. This target is more ambitious than that of any of our peers.