ADNOC Drilling: Unlocking Unconventional Resources with Cutting-Edge Technology
Updated 7/2/2024 8:00:00 AM
Arab Finance: ADNOC Drilling, a leading player in the regional energy sector, has been making waves with its impressive performance.
In this interview, Youssef Salem, CFO ADNOC Drilling, discusses the company's significant growth strategy and performance.
From exceeding market expectations to a new focus on unconventional resources and international expansion, this interview explores ADNOC Drilling's commitment to innovation, efficiency, and sustainability.
1-Since your initial public offering (IPO) in 2021, ADNOC Drilling has constantly beaten market expectations, culminating in a record first quarter this year. What are the key factors behind this success?
We achieved record first-quarter results this year, marking the third consecutive quarter of surpassing market expectations. This success is a testament to our unwavering commitment to efficiency, value delivery for clients and shareholders, and the expertise of our employees.
Sustainable growth has always been at the core of our strategy. Throughout the years, we have consistently pursued expansion opportunities, strengthened our capabilities and scale, and embraced the latest technologies and innovations. All to address the growing and evolving demands of the market effectively. This fundamental approach remains unchanged.
In 2025, we intend to further drive growth through mergers and acquisitions, and regional and international expansion of our operations, with an increased focus on leveraging the UAE's extensive unconventional oil and gas resources.
As we continue to execute our strategy and deliver the expected results for our shareholders and clients, we are firmly on track to double our net profit compared to 2021.
2-Following your recent results, the ADNOC Drilling Board announced a new progressive dividend policy. What are the motives for this? And why at this time?
The Board of Directors' recommendation for the new dividend policy reflects the company's performance over the past few years and their confidence in our future prospects for the next five years.
Based on this new policy, dividends are expected to grow by at least 10% per annum on a dividend-per-share basis over the next five years (2024–2028). This is subject to shareholder approval at the upcoming general shareholder meeting, the date of which will be announced shortly.
3-You mentioned a new focus on unconventional resources. Could you elaborate on this?
Abu Dhabi has one of the world's largest unconventional energy resources, with 220 billion barrels of unconventional oil and 460 trillion cubic feet of unconventional gas. These abundant resources will require the drilling of thousands of wells to unlock their value.
Recently, ADNOC awarded a transformative $1.7 billion contract to ADNOC Drilling to deliver the first 144 of these wells, solidifying our position as a leading regional provider of energy drilling services and expanding into unconventional energy.
To fulfill this contract and explore future opportunities in unconventional resources, ADNOC Drilling has a partnership with industry experts SLB and Patterson-UTI and has established a new specialized unconventional oil and gas company called Turnwell.
The primary goal of Turnwell is to deliver unconventional oil and gas services both locally and internationally and to grow into the preeminent unconventional energy company in the region by employing the latest technology, specialist services, and innovations in the unconventional energy drilling space.
4-ADNOC Drilling stated it would focus on international presence growth. What has ADNOC Drilling done to achieve this goal? And what are your overall goals for global expansion?
While maintaining a vast pipeline of work in Abu Dhabi, which is a key part of our operations, expanding beyond the UAE is an important part of our future growth strategy.
When ADNOC Drilling went public, we pledged to pursue international opportunities, and we have followed through on that promise.
The company initiated its operations in Jordan last year, successfully completing the first well in the campaign. It is now seeking additional opportunities in Jordan, while exploring prospects in the GCC, particularly in Saudi Arabia, Oman, and Kuwait.
Our presence is also expanding through mergers and acquisitions via our joint venture with Alpha Dhabi, known as Enersol.
5-What is the role of Enersol? And what impact do you see it having on the business?
Enersol is a joint venture between ADNOC Drilling and Alpha Dhabi. It has a $1.5 billion mandate to invest in and acquire global energy technology companies, with the aim of enhancing ADNOC Drilling’s growth and operations.
As part of this initiative, we have already acquired a majority stake in Gordon Technologies, a leading provider of measurement and drilling technology to the oil and gas industry in the US.
We have identified several potential AI and energy technology acquisitions, anticipating many more investments and acquisitions in the coming year.
By investing in next-generation AI technologies, Enersol is set to drive unparalleled and significant strides in carbon emissions reduction, efficiency improvement, and safety across our operations.
6-Across every industry, AI is having a profound impact. How is ADNOC Drilling leveraging AI? And how could it impact the business?
The drilling and services industry has always been at the forefront of technological advancement. AI has the power to rapidly transform and improve the way we operate.
As the company expands operations to meet the evolving needs of customers, AI, digitalization, and other advanced technologies are seen as critical. They have the potential to accelerate our growth trajectory, improve our efficiency, and enhance health, safety, and environment (HSE) performance while also controlling emissions.
ADNOC Drilling collects millions of lines of data daily, covering every aspect of its operational performance. AI extracts and real-time analyzes this data, offering faster, better, and more focused decisions to drive efficiencies and deliver wells to a consistently high standard.
AI is the future of the sector, and through Enersol, we aim to be at the forefront of this digital revolution by acquiring and investing in energy technology providers and enabling the creation of a GCC energy technology hub.
7-Your fleet has grown significantly recently. What is your target?
When ADNOC announced that it would be increasing its production capacity, this directly translated into increased drilling activity.
To support this, we implemented a rapid fleet expansion program, which has grown our fleet from 96 owned and operated rigs to 137.
In the last quarter alone, we have added 22 rigs to our fleet. As a result, ADNOC Drilling now boasts one of the largest owned and operated fleets in the region.
A record number of rigs joined our fleet under our fleet expansion program. This ambitious program aligns with ADNOC's accelerated production capacity growth target and the financial impact on ADNOC Drilling's position.
As we continue with our fleet expansion program, our unique relationship with ADNOC places us in a strong position to support their growth plans. This also demonstrates our commitment to operational excellence, sustainability, and innovation while delivering lasting value to our clients and contributing to the economic development of the UAE.
8-As a leading drilling service provider in the region, how is ADNOC Drilling navigating the current energy transition toward a more sustainable future?
We are committed to reducing our emissions across our operations, starting with reducing emissions per well through more efficient drilling practices.
In 2018, we partnered with Baker Hughes to integrate an integrated drilling service (IDS) as an end-to-end drilling and completions provider for our clients, becoming the first national drilling company to do so.
Since 2019, we have delivered over 686 IDS wells and have 48 IDS rigs, allowing us to capture more value from every well and reducing our emissions profile. In addition, we are minimizing the emissions of the fleet itself.
In 2023, we purchased 16 hybrid land rigs equipped with technology systems to reduce emissions by up to 15% per rig. Among these rigs, 13 are now in operation, with another two joining the fleet in the coming months.
These rigs use a hybrid power technology system that stores energy in a battery for use when continuous power is needed or to provide instant extra power when demand increases.
We have also electrified our central camps and rolled out solar farms at our more remote sites, further driving down our emissions. However, the biggest impact will come from our use of AI and machine learning.
Through our rapid adoption of AI, digitization, and other advanced technologies, we aim to drive growth and efficiency while also enhancing safety, performance, and controlling emissions.
By utilizing the real-time knowledge and information we gain from AI, we can further improve efficiencies across our operations
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