Baker Hughes, a GE company (BHGE) has agreed to acquire a stake of 5% in Middle East drilling company ADNOC Drilling from UAE’s state-owned Abu Dhabi National Oil Company (ADNOC) for $550m.
The equity investment from BHGE being made under a partnership with ADNOC values ADNOC Drilling at nearly $11bn, after including net debt of nearly $1bn. It is expected to enable and support the growth and development of the ADNOC subsidiary into a fully-integrated drilling and well construction provider.
As per the agreement, BHGE will be the exclusive provider of certain equipment and technologies associated with integrated drilling offering to support the growth of ADNOC Drilling.
BHGE chairman and CEO Lorenzo Simonelli said: “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.
“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 partnership between BHGE and ADNOC is expected to produce more competitive well completion times, enhanced drilling efficiencies and better well economics. Overall, the partnership is intended to help ADNOC in achieving its target of bringing down drilling time by 30% by the end of 2019.
The partners are expected to capitalize on the existing rig fleet capacity of ADNOC Drilling with limited capital expenditure outlay. The partnership is also likely to result in significant new business opportunities, including the possibility to provide integrated drilling services outside of the UAE.
ADNOC Group CEO Sultan Ahmed Al Jaber 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.”
Founded in 1972, ADNOC Drilling provides drilling rigs and associated services to ADNOC Group companies through its fleet of rigs featuring 60 land rigs, 20 jackup rigs, and 11 island rigs.
The deal, which has been approved by the board of directors of the two parties, is likely to be completed in the fourth quarter of 2018, depending on receipt of regulatory approvals and meeting of other customary closing conditions.