UAE’s ADNOC sells 5% stake in drilling unit to Baker Hughes for $550m

Abu Dhabi National Oil Company (ADNOC) said on Monday it had sold a 5 per cent stake in its drilling unit to the world’s second largest oil services company Baker Hughes.

The $550m transaction values ADNOC Drilling at about $11bn and will see Baker Hughes get one seat on the company’s board.

In addition, the firm which was acquired by GE last year, will be the sole provider of certain drilling technologies to the ADNOC unit, with the goal of speeding up well completion times and achieving efficiencies.

ADNOC said the deal would accelerate its growth and included “pre-defined work plans and future dividends” estimated in the range of 7 per cent per year for both shareholders.

It includes a “milestone-based” deferred consideration mechanism beginning in 2023 that will be based on ADNOC’s development programme.

The two sides will also set up an advisory board to oversee operations and have a goal to reduce drilling time by 30 per cent by the end of 2019, the same year the commercial framework will begin.

ADNOC is planning to grow its conventional drilling activity by 40 per cent by 2025 and substantially increase production at unconventional wheels.

The drilling unit will remain the sole rig provider for the wider group and aims to capture up to 30 per cent of the drilling and completion market over the next three years.

It also has “the potential offer integrated drilling services beyond the UAE’s borders”, according to the announcement.

“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,” said ADNOC Group chief executive Sultan Ahmed Al Jaber.

“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.”

The transaction has been approved by the board of both companies and is expected to close in the fourth quarter.

ADNOC said in May it planned to invest nearly $45bn in downstream operations.

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