US rm Baker Hughes pays $400m for minority stake in UAE’s Adnoc Drilling
Oil services provider Baker Hughes has agreed to buy a 5% stake in Abu Dhabi National Oil Company’s (Adnoc) drilling subsidiary, as part of a major partnership that will create a construction-focused oil business.
The agreement will see Adnoc Drilling become “a fully integrated drilling and well construction provider”, worth $11bn (AED40.4bn), and positions the company for major growth, including geographic expansion outside of the UAE.
Adnoc’s deal with Baker Hughes marks the first time that the UAE oil giant has invited an international partner to acquire a direct equity stake in one of its service businesses.
Both parties say the deal will deliver “more competitive well completion times, greater drilling efficiencies, and better well economics” for the firms. Operations will commence in 2019, and the commercial framework accounts for Baker Hughes’s working capital requirements and equipment lead times, including milestone payments.
The partnership will see Adnoc move closer to its target of a 30% reduction in drilling time by the end of 2019.
Meanwhile, Baker Hughes, a General Electric company, will receive a seat on Adnoc Drilling’s board of directors.
An advisory board with representation from both companies will be created to oversee the agreement’s implementation and ongoing operations. The acquisition is still subject to regulatory approvals and is expected to get the green light before the end of the year.
HE Dr Sultan Ahmed Al Jaber, the UAE’s Minister of State and Adnoc Group’s chief executive officer, said the deal will “drive job creation and economic growth, as well as maintain a healthy level of competition in the dynamic UAE oilfield services market”.
Meanwhile, Lorenzo Simonelli, chairman and chief executive officer of the US company, added: “[The agreement] allows us to drive predictable revenue streams and longterm growth for both companies, and lets us invest in a stable, reliable, and secure market environment.”
Adnoc HQ, UAE.