The Abu Dhabi National Oil Company (ADNOC) and Baker Hughes (BHGE) signed a strategic partnership agreement that will enable and support the growth and development of ADNOC’s subsidiary, ADNOC Drilling, into a fully integrated drilling and well construction provider. As part of the agreement, BHGE will acquire a 5% stake in ADNOC Drilling. The transaction values ADNOC Drilling at approximately $11 billion. BHGE will be the sole provider of certain proprietary leading-edge and differentiated equipment and technologies related to the integrated drilling offering, supporting ADNOC Drilling’s growth. Together, ADNOC and BHGE will deliver more competitive well completion times, greater drilling efficiencies and better well economics, and will capitalize on new business opportunities as ADNOC Drilling grows through its new expanded offering.
The partnership represents the first time that ADNOC has brought an international strategic partner to acquire a direct equity stake in one of its existing services businesses. Ongoing access and support from BHGE’s technology and equipment portfolio will help accelerate ADNOC Drilling’s ongoing growth and development of a broader product offering, including drilling and well completion services. This partnership structure aligns the interests of both ADNOC and BHGE in driving greater productivity and efficiency while increasing returns.
The partnership is expected to generate predictable, long-term revenue streams and growth in the market for both companies through a mutually beneficial, attractive commercial structure, pre-defined work plans and future dividends. ADNOC Drilling and BHGE will set up an advisory board with representation from both companies to oversee the implementation and ongoing operations, and BHGE will join ADNOC Drilling’s Board of Directors.
The two partners will be able to leverage ADNOC Drilling’s existing rig fleet capacity with limited capital expenditure outlay. The partnership will gain significant new business opportunities, including the potential to offer integrated drilling services beyond the UAE’s borders.
“We are very pleased to be partnering with BHGE in ADNOC Drilling, in line with our wise leadership’s guidance to create and enhance value across our business by forming strategic partnerships,” H.E. Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, 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.”
“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,” Dr Al Jaber 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.”
This partnership is another important step in ADNOC’s group-wide transformation and value-creation program, which addresses the evolving energy landscape. The group’s transformation is supported by a new and expanded approach to strategic partnerships and co-investments, as well as more proactive management of ADNOC’s portfolio of businesses and allocation of capital.
“This partnership brings together BHGE and ADNOC, backed by a close and long-working relationship. 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. In a unique way, it allows us to drive predictable revenue streams and long-term growth for both companies and lets us invest in a stable, reliable and secure market environment. 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,” Lorenzo Simonelli, BHGE Chairman and Chief Executive Officer, said. “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 UAE is located in one of the world’s largest hydrocarbon super-basins with significant potential to tap its undeveloped reservoirs and further develop its existing resources. Realizing this potential, alongside the ongoing growth and development of ADNOC Drilling, will provide more opportunities for local third-party service providers to compete for and support ADNOC’s expanding integrated drilling and ancillary service requirements. The transformation of ADNOC Drilling will improve the integration of UAE private sector service providers, as well as create new career opportunities for ADNOC employees and support domestic economic growth. The partnership reinforces ADNOC’s in-country value creation strategy and demonstrates BHGE’s longstanding commitment to the country.
BHGE will maintain its existing operations and footprint in Abu Dhabi and will continue to leverage its fullstream portfolio to serve ADNOC and other customers in the Middle East region.