GE arm buys stake in Adnoc unit for $550M
abu dhabi — Baker Hughes, the world’s second-largest oil services company, will take a 5 per cent stake in Abu Dhabi National Oil Company’s (Adnoc) drilling unit for $550 million under a tie-up announced on Monday.
Baker Hughes, a subsidiary of General Electric Co, becomes the first foreign company to take a stake in one of state-owned Adnoc’s services companies under the agreement, which values Adnoc Drilling at about $11 billion, including $1 billion in debt.
The deal will allow Baker Hughes to cement its presence in the Middle East, the fastest growing region for oil and gas operations, and enable Adnoc Drilling to gain access to the know-how and technical expertise of a global player.
The transaction is expected to close before the end of this year, with operations starting in 2019, Adnoc and BHGE said in a joint statement.
“The partnership forms an important building block of Adnoc’s 2030 smart growth strategy,” said Dr Sultan bin Ahmad Sultan Al Jaber, Minister of State and chief executive of Adnoc Group.
He said 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.” “There are no plans at this point of time to float a stake in Adnoc Drilling,” Al Jaber said.
Adnoc Drilling operates over 90 drilling rigs, making it the Mideast’s largest drilling company. Overall, Adnoc produces some 3 million barrels of crude oil and 10.5 billion cubic feet of natural gas a day.
Baker Hughes’ CEO Lorenzo Simonelli said BHGE will have a representative on the board of Adnoc Drilling and will create a dedicated training team.
“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,” he said.
Since its acquisition by General Electric Co last year, Baker Hughes has sought new business models following a sharp decline in global drilling activity since 2014. That includes offering a suite of services to oil and gas producers from exploration to drilling.
Moelis is acting as the financial adviser to Adnoc on the transaction, while Citi is the adviser to BHGE, the two companies said in the statement.