Baker Hughes pays $500m for 5% of Adnoc unit
DEAL VALUING ABU DHABI ENTITY AT AROUND $11B WILL ENABLE GREATER DRILLING EFFICIENCIES
Energy services giant Baker Hughes, a GE company, will acquire a 5 per cent stake in Adnoc Drilling in a deal that values the latter at around $11 billion (Dh40.4 billion), the two companies announced yesterday.
The deal represents the first time Adnoc has brought an international strategic partner to acquire a direct equity stake in one of its existing services businesses. Baker Hughes will be paying $500 million for the stake in Adnoc Drilling.
“The partnership forms an important building block of Adnoc’s 2030 smart growth strategy as we continue to drive operational efficiency and performance, and unlock even more value from every barrel we produce,” said Sultan Ahmad Al Jaber, UAE Minister of State and Adnoc Group CEO.
“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,” he added. “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.”
Adnoc Drilling is the largest of its kind in the Middle East and the sole provider of drilling rigs and associated services to the Adnoc Group.
The latest partnership is expected to generate predictable, long-term revenue streams and growth in the market for both companies through a mutually beneficial commercial structure, pre-defined work plans and future dividends, according to the statement.
Baker Hughes, which is a GE subsidiary, will be sole provider of proprietary equipment and technology for integrated drilling, supporting Adnoc Drilling’s future growth as the company plans to increase its conventional drilling activity by 40 per cent by 2025 and substantially ramp up the number of its unconventional wells.
Adnoc also seeks to reduce drilling time by 30 per cent by the end of 2019.
“We are very pleased to take a minority stake in Adnoc Drilling to jointly develop and further grow the company’s technical capabilities, market access and value,” said Baker Hughes GE (BHGE) chairman and chief executive officer Lorenzo Simonelli.
“In a unique way, it allows us to drive predictable revenue streams and long-term growth for both companies.”
The latest development is expected to be very positive for Adnoc, which is expanding its business globally with new partnerships. “Adnoc is behaving more and more like a global oil company, with new partnerships and the recent IPO of its subsidiary Adnoc distribution. The company is actively pursuing partnerships and technical innovation, which will be very positive for its growth,” Jaafar Al Taie, managing director of UAEbased Manaar Energy Group, told Gulf News by phone.